For the third consecutive quarter, the Borgata’s New Jersey–based online gaming operation posted a profit.
That’s per Boyd Gaming President and CEO Kevin Smith, who revealed the news during a recent Q1 2015 earnings call, the full transcript of which can be found here.
“Borgata’s online gaming business contributed more than $4 million to the property’s EBITDA gain as last year’s $3 million loss swung to a profit of $1 million during the first quarter of this year,” noted Smith. A presser posted on Boyd Gaming’s Investor Room shows that the differential was slightly larger – $1.1 million gain in Q1 2015 vs. a loss of $3.2. million a year prior.
Last quarter, Boyd SVP and CFO Josh Hirsberg suggested an EBITDA between $3 million to $5 million for Borgata’s online business in 2015. The operation is well on track to meeting, and possibly exceeding, these expectations.
Borgata online gambling exhibits positive trend
As noted by Smith, the launch of the Borgata’s online gambling offerings “included significant start-up marketing cost,” which attributed to the $3.2 million loss incurred in Q1 2014. The first two months of Q2 2014 didn’t bode much better, as the operation posted a $1.8 million loss.
The tide turned in July 2014, when the company reached a “key milestone” by breaking even for the first time. Since, the operation has been profitable, exceeding the short-term expectations set forth by Smith in the company’s Q2 2014 earnings call:
- In Q3 2014, the Borgata’s iGaming segment turned a profit.
- The positive trend continued in Q4 2014, when the operation generated nearly $2 million of EBITDA.
- Although this quarter’s profit margins were smaller, gross revenues for Borgata iGaming were up ($11.7 million for Q1 2015 vs. $10.2 million for Q4 2014).
Borgata leads New Jersey online casino market
Borgata’s march toward profitability was undoubtedly facilitated by the operation’s market-leading position in the New Jersey online casino market.
Although the Borgata, which shares liquidity with nj.partypoker.com, no longer leads PokerScout‘s cash game traffic rankings (largely due to WSOP.com and 888 NJ forging a shared liquidity compact), it continues to lead the way with respects to poker revenues.
In Q1 2015, the Borgata’s online poker business grossed $3.61 million from poker, compared to $2.96 million for sole competitor Caesars.
That said, the duo of the Tropicana and Virgin generated slightly more online casino revenue in Q1 2015 than Borgata / Party ($8.23 million vs. $8.10 million). However, because Tropicana / Virgin only operates within the online casino sphere, Borgata / Party was able to retain its overall market share lead.
In 2014, the Borgata accounted for over 36% of New Jersey’s internet gaming win. Thus far in 2015, it controls just over 33% – still admirable, considering the wealth of operators functioning in the market.
Future outlook for Borgata iGaming
Smith did not make any allusions to the online gaming division’s immediate prospects, although some assumptions can be made:
- The Borgata may have difficulty maintaining profitability in Q2 2015, as the initial spurt of warmer weather tends to draw players away from their computers.
- Q3 may also pose complications for the Borgata, as PokerStars is finally expected to enter the already saturated New Jersey market sometime between July and September.
That being said, PokerStars may not have the dramatic impact on market share that some analysts believe is inevitable. While it’s true that Stars’ poker product will likely be far and away the best in New Jersey, the Borgata has proven no slouch – offering multiple updates to its mobile product in the past several months and hosting several $1 million guaranteed online tournament series.
As for casino, it’s arguable that due to both the Borgata’s position as the East Coast’s premier gambling establishment and Stars’ absence from the United States for more than four years, the Borgata is the more recognizable brand of the two. Don’t expect a changing of the guard.
As was the case during Boyd’s last earnings call, there was no mention of PokerStars this time around. The last mention came in Q3, when Smith addressed the issue in response to an inquiry from Thomas Allen of Morgan Stanley:
With respect to PokerStars, once again we don’t have any insight or any knowledge. As we built the model to operate online gaming in New Jersey, we just assumed they would be involved at some point in time. So that’s the ultimate decision by the New Jersey regulators, then that’s it. We’ll be prepared to deal with it.