By Nathan SlaughterRecently, the nation's number three gaming company reported mixed, but generally positive, news.
On the downside, business in the firm's key Las Vegas locals segment remains sluggish as the market slowly absorbs the added capacity of two new high-end resorts: Station Casinos Inc. (STN), Red Rock Station and Boyd Gaming Corporation's (BYD) former casino, South Coast [which was recently sold to former partner Michael Gaughan].
Despite heavy promotional spending, revenues generated by Boyd's local casinos slipped to $200 million from $214 million in the same period last year.
However, that weakness was more than offset by robust growth in the firm's central region, where healthy top-line growth of +15% drove EBITDA [earnings before interest, taxes, depreciation, and amortization] up +32% to $65 million. Though last year's hurricanes made for favorable comparisons along the Gulf Coast, the firm's Blue Chip Casino in Indiana turned in another impressive performance -- posting revenue growth of +17% while expanding EBITDA margins by more than 300 basis points.
Meanwhile, the company squeezed record profits of $9.5 million out of its trio of downtown Las Vegas properties -- Fremont, California, and Main Street Station -- thanks in large part to operational streamlining.
Finally, the Borgata -- which is co-owned with MGM Mirage (MGM) -- remains Atlantic City's highest grossing property. Last quarter, the trendy resort raked in more than $70 million in monthly revenues all three months -- something no other Atlantic City casino had ever done once.
Combined, Boyd's third-quarter revenues inched up +1.4% to $531 million, and EBITDA slipped slightly to $150 million. While those results are nothing to get particularly excited about, there are far bigger things on the horizon.
To begin, now that the company has officially parted ways with Michael Gaughan [founder of the Coast casino chain], there is nothing standing in the way of full integration of all of Boyd's properties. In fact, management just unveiled plans to unite all of its casinos under one player loyalty program.
At the moment, the firm's resorts rely on several different rewards programs. By comparison, cross-town rival Harrah's Entertainment Inc. (HET) has already fully integrated all 40 of its casinos [including those acquired from Caesar's] into its popular Total Rewards program. Therefore, players from say, Louisiana, would feel right at home redeeming their accrued points for discounted rooms, meals, and other prizes at one of Harrah's Las Vegas resorts. This cross-market play [where customers visit another of the company's properties away from their "home" casino] has been the key to Harrah's marketing and promotional success.
By joining its different regional programs into a one-card system that is compatible nationwide, Boyd will hopefully follow a similar track -- better leveraging its brand name and stimulating additional cross-market play. And by tapping into a central database of customers, the firm should be in a much better position to encourage players from around the country to visit the Las Vegas hub.
At the same time, Boyd has recently handed over control of the aging Barbary Coast Casino to Harrah's Entertainment in exchange for 24 acres of prime real estate on the Las Vegas Strip. The acquisition will give Boyd 87 valuable acres [a quarter mile] of adjacent footage on the resurgent north end of the strip.
That land, along with $400 million in cash proceeds from the recent South Coast sale, should enable the firm to move full speed ahead with its $4 billion Echelon Place project -- not to mention any additional development opportunities that might still lie ahead.
All things considered, Boyd is quickly becoming a major player in the rapidly consolidating gaming industry, and last quarter's soft results are nothing more than a minor speed bump.
BYD 1-yr chart