Boyd is counting on its online casino operations in New Jersey to make up for the profit drops reported in other departments.
Investing in internet gambling in the US has proved to be a great business decision for Boyd Gaming. The casino operator is a top player on New Jersey’s online casino market, despite the disappointing profit decline reported for the second financial quarter.
Over the last three months ending June 30, the company’s total revenue added up to $722.5 million, a 2% drop from the numbers reported this time last year. Profits are soaring, as figures have plunged from $11.6 million last year to just $700,000 in 2014. Clearly, the company is suffering after the loss of discontinued operations such as the Dania Jai Alai casino in Florida.
Adjusted earnings went up just $400,000 reaching $160.2 million, but this result wouldn’t have been achieved if it hadn’t been for a $11.2 million tax settlement with Atlantic City, where the operator controls a 50% stake in the top market leader Borgata Hotel Casino & Spa.
Results below expectations
Boyd owns the following properties in Downtown Las Vegas:
• California Hotel and Casino
• Fremont Hotel and Casino
• Main Street Station
In a recent statement, Boyd CEO Keith Smith said: “Our second-quarter results were below expectations, principally due to continued weakness in casual play. Despite a tough operating environment, we remain diligently focused on improving our performance and generating long-term growth.”
Boyd has several operations in Las Vegas, where the Locals segment was off marginally to $148.3 million and the Downtown segment also fell $500,000 to $55.6 million. The Peninsula segment was down nearly 6% to $127.8m.
Meanwhile, the Midwest and South segments were off almost 7% to $209.1 million. This was caused by increased gaming capacity in the Biloxi, Shreveport and central Illinois markets. It seems to be happening all across the US, as an overwhelming majority of casinos have seen their revenues drop lately, mostly due to increased competition.
As for New Jersey, the Borgata brought the company a share of $181.9 million, reflecting an increase of $9 million compared to the same period last year. But it’s mostly thanks to Boyd’s online gambling sites, which represented $6.7 million of the total revenue.
Even after deducting the property tax refund, Borgata reported an 11% increase in adjusted earnings, reaching a total of $30.8 million.
Cashing in on internet gambling in the US
Borgata made a smart move when it decided to take advantage of American gambling laws and obtain a license to run an internet casino in New Jersey. Boyd Gaming and its partner Bwin.party Gaming are responsible for these online operations.
Business is thriving and Borgata generates 28.2% of New Jersey’s total internet gambling revenue. The company is a local market leader and 10 points ahead of the competition. Smith told reporters that 75% of all online customers are newly created player accounts.
“We’ve begun the process of converting those online customers to active Borgata casino customers,” he added.
The online gambling business lost $1.8 million in the second quarter, but then broke even in July. Company management expects the same will happen in the third and fourth quarters, as Boyd is learning that online gaming is seasonal. Players are more active in the fall and winter.
“Our partner sees these trends in Europe. It’s a business we’re learning,” Smith explained.
Plans for the future
Now the company has announced it is moving forward with plans to upgrade its restaurant lineup at the Gold Coast, The Orleans and Suncoast. The properties will be renovated, with some of them being reconfigured to attract a new category of customers.
“We plan to re-position some products to speak to a larger audience,” Smith revealed.
Management is still deciding whether any of them need to be rebranded or whether new brands should be introduced, as last week’s shares of Boyd closed at $11 on the New York Stock Exchange, down 2.40%.
As for the company’s online operations, Boyd is planning on launching a mobile betting product in Nevada, much to the delight of sports wagering fans. A clear deadline has not been set, but the casino investor said players should expect the product to be launched “in the next several weeks”, in time for the upcoming NFL season.