Boyd Gaming’s quarterly earnings are going to look a lot different going forward.
The Las Vegas-based regional casino giant company added five casinos in four states to its portfolio in the last few months. Company CEO Keith Smith said Wednesday integrating the newest properties takes time.
“We’ve been pretty acquisitive over the last few years,” Smith said in an interview following the company’s third quarter earnings conference call. “We understand the integration process and the time it takes to understand what we need to change in order to compete.”
For example, the Valley Forge Casino near Philadelphia, which Boyd acquired on Sept. 17 for $280.5 million, won’t have a sports book until after the first of the year. Boyd, which has a sports betting partnership with FanDuel, has applied for sports wagering license in Pennsylvania. Boyd also plans to launch Internet gaming in Pennsylvania as well.
Ten days ago, Boyd acquired the operations of four properties from Pinnacle Entertainment – the two Ameristar casinos in Kansas City and St. Louis, Missouri and the Belterra gaming brands in Indiana and Ohio – for $575 million. Boyd signed a lease agreement with Gaming and Leisure Properties, a real estate investment trust that is the landlord for the casinos.
It’s too early to say what will happen with those resorts.
The acquisitions gave Boyd access to customers in four of the top 30 metropolitan statistical areas in the U.S. – Philadelphia, Cincinnati, St. Louis, and Kansas City. The company now operates 29 casinos in 10 states – 12 of the properties are in Nevada.
“We significantly bolstered our company’s long-term growth prospects … further expanding our geographic reach and significantly strengthening our robust free cash flow,” Smith said in a statement.
For the quarter that ended Sept. 30, Boyd said its total revenues grew 5.1 percent to $612.2 million. Boyd’s net income of $11.8 million, or 10 cents per share, declined compared to $23.2 million, or 20 cents per share, in the same quarter last year. Boyd said development costs and pre-opening expenses surround the company’s re-launched player loyalty program increased expenses by $15.6 million. Also, the company’s interest expense increased $11.4 million due to the debt that incurred to fund the recent acquisitions.
Boyd’s total cash flow grew 5.8 percent to $148.8 million.
In the company’s operating segments, Boyd’s Las Vegas locals market saw revenue dip by less than 1 percent to $208.8 million, but cash flow increased 6.6 percent to $60 million, the 14th straight quarter of positive cash flow. Downtown Las Vegas revenues grew less than 1 percent to $59.2 million, but cash flow slipped 2 percent to $11.4 million.
In a statement, the company said its downtown casinos performed at “record levels” in the quarter through increased visitation and business volumes. However, the results were offset on losses from its Hawaiian charter service, and disruption from the development of a site controlled by rival downtown casino operator Derek Stevens and construction on Interstate 15.
In an interview, Smith said he is a “big fan” of a downtown Las Vegas developer “stepping up” with a large-scale project. Stevens has said he will build a 777-room hotel-casino on the corner of Fremont Street and Main Street but hasn’t said much else. The site is near two of Boyd’s three downtown casinos.
“It’s great for the market,” Smith said, also giving credit to Golden Nugget owner Tilman Fertitta for expanding his property. “We’ve seen a lot of smaller scale projects, but combined, this is what is driving downtown’s re-emergence.”
Meanwhile, Boyd’s Midwest and South segment benefitted from a full quarter of the company’s new slot route operations in Illinois and 13 days from the Valley Forge Casino to grow revenues 6.5 percent to $344.5 million. Cash flow increased 8.5 percent to $97.8 million.
Smith said the company launched sports betting at its two casinos in Mississippi, which has helped drive additional business into the properties.
“Sports betting is incrementally positive, but to a property like the IP (in Biloxi), it’s not a game-changer,” Smith said. “We’ve seen new customers because of sports betting and it will grow over time.”
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
