Boyd Gaming CEO Keith Smith was asked so many times Tuesday about the regional casino company’s interest in owning a resort on the Las Vegas Strip, that he worried he might have contradicted himself.
With speculation swirling over the $17.3 billion merger between Eldorado Resorts and Caesars Entertainment – and the potential that one or two of Caesars’ nine Strip area resorts could be on the auction block – the attention has long been on Boyd. The company sold its only Strip development in 2013, the site that is now the $4 billion Resorts World Las Vegas project.
Boyd Gaming CEO Keith Smith
The multiple questions from Wall Street analysts about mergers and acquisition activity dominated Boyd second quarter conference call.
“I think we’ve made a comment about M&A on every call,” Smith said. “We view ourselves as a growth company. But anything we’ve looked at is through a disciplined approach and how it fits into our portfolio.”
Over the last eight years, Boyd has acquired 15 casinos in seven different transactions. The company now operates 29 casinos in 10 states, including three in downtown Las Vegas and seven in the Las Vegas locals market.
Gaming analysts asked so many times about the Strip – without mentioning the words Eldorado nor Caesars – that when Instinet-Namora analyst Harry Curtis brought up the issue, he joked that “maybe there is still some life in this horse.”
There wasn’t.
Smith, Boyd’s CEO since 2008, has said on multiple calls the company would get back on the Strip for the right casino and for the right price. He said Tuesday the company is open to increasing its debt to buy a Strip resort – Boyd Gaming had total debt of $3.95 billion as of June 30 – but as long as the debt comes off the books quickly.
“We view the Las Vegas Strip as we do with any acquisition,” Smith said. “We’ll evaluate it, but we’re not going to do anything stupid. We think we are late in the economic cycle. We’re very cognizant of that and the market feels a little quiet right now.”
Second quarter results
In the quarter that ended June 30, Boyd Gaming grew revenues companywide by 37.2 percent to $846.1 million. The company said nearly all the revenue gain – $228.5 million – came from the five casinos and an Illinois slot machine route operation Boyd purchased in 2018.
The acquisitions also contributed $66.8 million in adjusted cash flow during the quarter, which accounted for all Boyd’s 42.3 percent gain in that area.
Boyd’s net income in the second quarter was $48.5 million, a 24.5 percent increase, or 43 cents per share.
“We achieved strong growth at our newly acquired properties, significantly improving upon their solid standalone performances last year,” Smith said in a statement accompanying the earnings.
The company’s largest revenue jump, 67 percent, came in the Midwest/South region, where Boyd’s newest resorts – Ameristar Kansas City and Ameristar St. Charles in Missouri, Belterra Resort in Indiana, Belterra Park in Ohio, and Valley Forge Casino Resort in Pennsylvania – are all located.
“Through ongoing marketing and operational initiatives, we are successfully growing visitation and expanding our customer base across the country,” Smith said. “In all we are pleased with our progress and remain confident we are well-positioned to capitalize on future growth opportunities.”
Sports betting
Boyd launched sports betting at the Philadelphia-area Valley Forge in March through a FanDuel-themed sportsbook. Last week, the daily fantasy sports operator launched an online sports betting application in partnership with Valley Forge that is being operated under the FanDuel name.
Smith said FanDuel and Boyd are planning similar launches with the company’s casinos in two more states that have legalized sports betting by the start of football season. Indiana, the partnership will include the Blue Chip and Belterra; in Iowa, the companies will launch sports betting at the Diamond Jo casinos in Dubuque and northern Iowa.
The companies have negotiated financial arrangements that varies based on the different states and their regulations. Boyd operates its owns sportsbooks in Nevada and Mississippi.
Downtown Las Vegas
Boyd’s three downtown Las Vegas resorts saw revenues jump 5 percent in the quarter while the company’s locals market was relatively flat. Smith said the downtown casinos had record quarter for adjusted cash flow, but he expects the market to slow somewhat as development of the 777-room Circa Casino Resort moves forward.
He told analysts business would be disrupted at both the California and Main Street Station, which are adjacent to the development.
“We’re still very bullish on what the project will mean to downtown,” Smith said. “We think it’s going to drive a tremendous amount of business to downtown.”
Meanwhile, Smith said the company is re-evaluating its own plans for expanding in downtown. Last year, Boyd received approval from the City of Las Vegas to add a hotel tower at the Fremont, which now has 447 rooms.
“We’re looking at all our options,” he said.
Boyd announced earnings after the markets closed Tuesday and shares of the company were up $1.07 or 3.98 percent to end the regular session at $27.94 on the New York Stock Exchange. The shares were up slightly in after-hours trading.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
