Boyd Gaming Corp. didn’t jump into a headline-grabbing, large-scale, multi-billion-dollar casino acquisition program over the last two years.
Instead, the Las Vegas-based company was involved four deals covering eight properties that totaled more than $1.44 billion. The transactions, which maintained Boyd’s presence near the top of the regional gaming sector, were viewed as both strategic and opportunistic.
For example, the deals 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.
Boyd Gaming CEO Keith Smith
The current step for Boyd is bringing the casinos under roof. That effort entails an enhanced player tracking/player rewards program covering the company’s 29 casinos in 10 states – 12 of the properties are in Nevada.
Last August, Boyd and gaming equipment provider Aristocrat Technologies announced a management systems agreement that ultimately will link the company’s B Connected program with every Boyd-operated property. The project won’t be completed until later this year.
The move is two-fold for Boyd; enhance efficiency and boost profits.
“We began integrating five new properties into our portfolio during the fourth quarter, significantly enhancing our EBITDAR and free cash flow potential in the quarters ahead,” Boyd Gaming CEO Keith Smith said on the company’s Feb. 21st earnings call.
SunTrust gaming analyst Barry Jonas, in a Feb. 26th research note, said company efforts to boost margins through property integration is early in the game. The tasks include lower reinvestment rates, efficient marketing, and better purchasing power.
“Many of the initiatives are technology driven, but a lot of the change is in how employees approach the business,” Jonas said following meetings with Boyd management after the earnings call. “Many initiatives are in their infancy, and management is encouraged by the momentum.”
Sports betting
The other growth initiative for Boyd is sports betting. The company operates sportsbooks at its casinos in Nevada and Mississippi and expects to open a sportsbook this month at the recently-acquired Valley Forge Casino near Philadelphia in partnership with FanDuel. Boyd also has a sports wagering agreement with MGM Resorts International.
Smith said the MGM market access deal could open Boyd to sports wagering in potentially 15 states, representing 40 percent of the U.S. population. He lauded FanDuel’s success in New Jersey and Boyd expects to have active role in the expansion of mobile sports wagering.
“(Sports betting) created a new avenue to increase the appeal of our properties and expand our pool of customers across the country through the introduction of unique new amenities,” Smith said.
The new technology agreements come with a cost. Jonas expects to see a slight increase in Boyd’s capital expenditures this year, primarily through the systems contract with Aristocrat. But there are other benefits beyond the B Connected program.
“In general, new gaming tech products in the market are starting to appeal to a broader demographic,” Jonas said.
Wire Act changes?
In that sense, Smith told Jonas on the earnings call he wasn’t concerned about the Department of Justice’s reinterpretation of the Federal Wire Act, that could curtail use of the Internet in gaming activities, including online gaming, online lottery sales and mobile sports wagering. Implementation is on hold until June because of federal lawsuits brought by the New Hampshire Lottery and a vendor.
Smith said the Justice Department’s ruling “certainly got our attention” but the way the company reads the opinion, it doesn’t prohibit sports betting within a state’s borders.
“So it doesn’t, in that respect, alter our plans to move forward in Pennsylvania, or moving forward in other states,” Smith said. “It hasn’t slowed down the legislative action around sports betting. So yes, it really hasn’t … changed our focus or frankly our excitement about the opportunity to grow that business.”
Expansion
Boyd is developing a $500 million casino complex near Sacramento, California with the Wilton Rancheria Band of Me-Wuk Indians. The company plans to expound more about the project later this year.
Smith told analysts Boyd still has “an appetite to grow” through acquisitions.
Boyd was silent on the acquisition front for more than five years, until the company bought three Las Vegas-area casinos in two separate deals in 2016.
Union Gaming Group analyst John DeCree expects the company to explore acquisition opportunities in this year.
The (mergers and acquisitions) market has cooled off a touch to start the year, but capital markets are open, and we expect deal volume will pick up in the second half of 2019, giving Boyd another opportunity to grow inorganically,” DeCree said.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter
