Caesars’ losses widen despite revenue growth in Q1

2 May 2019

US casino giant Caesars Entertainment has reported a 7.6% increase in revenue for the first quarter of 2019, though finance-related costs saw the operator's loss for the period increase to $218m (£166.0m/€193.5m).

Net revenue in the three months to March 31 amounted to $2.12bn, compared to $1.97m in the corresponding period last year.

Caesars put this increase down to a $52m rise in revenue from its operations in Las Vegas, where revenue totalled $955m in the quarter. Other US revenue was also up 9.1% to $1.01bn, boosted by the acquisition of US casino and racetrack operator Centaur Holdings in July 2018.

The operator also saw revenue from other areas of the business increase 4.9% from $143m in Q1 of 2018 to $150m this year.

Operating expenses for the quarter were up slightly to $1.88bn, compared to $1.85bn in the opening three months of 2018. Direct costs were responsible for the majority of spending, rising from $562m to $618m.

Casino costs were marginally up from $264m to $269m, while property, general, administrative, and other spending also increased from $427m to $460. Caesars was helped on spending as depreciation and amortisation costs fell from $280m to $247m.

However, despite keeping spending under control, Caesars reported a net loss (attributable to the operator) of $217m, a sharp increase on $21m in the same period last year, while loss before taxes also widened from $21m to $247m.

Caesars mainly put this down to a $322m change in the fair value of derivative liability related to the conversion option of 5.00% convertible senior notes maturing in 2024.

Caesars also cited a $19m increase in interest expense primarily as a result of the failed sale-leaseback financing obligations for Octavius Tower at Caesars Palace and Harrah's Philadelphia Casino and Racetrack, as well as an increase in the floating London Interbank Offered Rate (LIBOR) on the senior secured credit facility of Caesars Resort Collection.

Reflecting on the Q1 results, Eric Hession, executive vice president and chief financial officer at Caesars, was mainly positive, saying the period represented a “solid quarter of growth” in terms of revenue and earnings before interest, taxes, depreciation, amortisation, and restructuring or rent costs.”

“We realised strong contributions from the Las Vegas gaming and hotel businesses, and Centaur, in addition to further operating and corporate efficiencies,” he said.

“These results were partially offset by the impact of competition in Atlantic City, and weather-related property closures. In addition, we generated strong cash flow from operations, which allowed us to pay off our $100m revolver balance."

Publication of the Q1 results comes after Caesars last month announced Anthony Rodio, currently chief executive of Affinity Gaming, as its new CEO.

Rodio will replace Mark Frissora, who has been CEO at Caesars since July 2015. Frissora originally announced his intention to step down as CEO by February 8 this year, only to delay his departure as the search for his successor took longer than anticipated.

Image: Ken Lund