Borgata, new acquisition help drive Boyd profits

Boyd Gaming Corp. on Tuesday reported a first-quarter profit of
$5.8 million, or 7 cents a share, bolstered by strong performances from the Borgata in Atlantic City and the recently acquired IP Casino Resort Spa in Biloxi, Miss.

Boyd reversed its loss of
$3.5 million, or 4 cents a share, from the same period a year earlier.

The company's casinos outside of Las Vegas led the charge, with many properties increasing cash flow by double digits. The Midwest and South saw a 32 percent increase in revenue and 41 percent increase in cash flow in the quarter that ended March 31.

The IP, which Boyd bought in October for $278 million, contributed $49 million to the company's regional revenues and more than $12 million in cash flow. The property will soon join Boyd's B Connected rewards program, which the company expects to further boost business.

"This was the first full quarter that Boyd owned the IP, and the purchase contributed significantly to the segment," Janney Capital Markets analyst Brian McGill said in a note to investors.

Analysts were impressed by regional properties' performances, particularly the Borgata, which Boyd owns in partnership with MGM Resorts International. Cash flow at the casino was up 22 percent, beating analyst expectations by $5 million. Revenues increased 4.2 percent.

Boyd reported an overall cash flow increase of $133.8 million in the first quarter, better than the $125 million jump expected by analysts.

A new competitor, the Revel Atlantic City, opened April 2. Boyd Gaming Chief Executive Officer Keith Smith said during the earnings call with investors that it would be several quarters before any effects from Revel's opening are apparent.

Analysts are cautiously optimistic about the Borgata's future given its new competition.

Boyd's Las Vegas locals and downtown properties saw flat growth and declining cash flow due to $750,000 in increased fuel charges for the company's Hawaiian charter service, decreased table game hold at several properties and an uptick in promotional spending that increased visitation to locals casinos but failed to boost revenue. Smith said marketing dollars were allocated to test the waters, but the test ended when Boyd didn't see a return on investment.

A bright spot in Boyd's downtown market was the Fremont, which in March saw its highest ever food and beverage revenues due to increased visitation.

"The Smith Center and the Mob Museum opened in the first quarter. These are exciting times in downtown Las Vegas and we expect to see steady growth in traffic as the renaissance continues," Smith said.

The locals and downtown markets have turned in steady performances over the last few quarters, with incremental revenue increases. Smith said trip frequency from Boyd's locals customer base is at its highest level in three years.

"We think the market is continuing to strengthen, not at the pace of the Midwest and South region. The healing process is going to be longer and more extended in Las Vegas," Paul Chakmak, Boyd's executive vice president and chief operating officer, said during the earnings call.

Contact reporter Caitlin McGarry at 387-5273 or cmcgarry@reviewjournal.com.