Caesars Entertainment Posted $926M Third Quarter Net Loss

Las Vegas business for Caesars Entertainment has been picking up speed, investors were told by the company’s CEO Tom Reeg during the third quarter conference call, a quarter in which the casino giant posted net loss of $926 million compared to net income of $37 million for the same period in 2019.

Financial Statements Contain Noise

Caesars’ CEO further pointed that the released income statements for the third quarter have a lot of noise in them, as the merger between Caesars and Eldorado kept the latter as the surviving entity but under the name of the former. In other words, 2019 numbers and 2020 numbers through July 20 are same-store as they refer to the Reno-based entity, while post-July 20 through the end of the quarter numbers represent the combined company.

Caesars reported same-store adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of $463 million, which “was a little ahead of the wide end of the range of our pre-release during our equity offering”, Tom Reeg noted. Compared to the adjusted EBITDA for the same three months in 2019, the Q3 number is down from $810 million, 43%.

Las Vegas Business Rebounding

For Vegas only, EBITDA was $60 million, Tom Reeg continued, highlighting the fact that this number dragged operating losses from properties which remained close for the whole quarter, Rio, Planet Hollywood and Cromwell. Occupancy rates were just under 60%, with mid 50s during the week and mid to high 90s for the weekends, mainly due to the strength of the Caesars Rewards program, the executive noted.

“If you look at EBITDAR by month for us in Las Vegas, July was $10 million positive and these are aggregate numbers, so include the losses from properties that were shut down. So a $10 million in July, $16 million in August, $34 million in September and October should push $50 million.”

Tom Reeg, CEO, Caesars Entertainment

Regarding the convention part of the business, Tom Reeg told investors that bookings from Q2 to Q4 in the 21 and beyond group exceeded the 2019 pace, boosted by strong numbers in the third quarter. Caesars Forum Convention Center has already booked 172 events, 1.6 million room nights worth over $600 million in room and banquet revenue, and 78% of that business is new to Vegas, Tom Reeg outlined.

Despite that “none of that matters if the public health situation does not improve”, management at Caesars is encouraged by the recent lift on capacity restrictions from Gov. Sisolak and his stance to go to 50% by the beginning of 2021, as that would let the company save some first half 2021 business.

The revenue that is missing is from the 55 and over group, Tom Reeg continued, pointing out this is the most profitable piece of the business.

“These are people that are not going anywhere, and are not spending, and are going to come out of this with significant pent-up demand and spending power and it’s going to be extremely powerful.”

Tom Reeg, CEO, Caesars Entertainment

What Else for the Quarter

On July 20, Caesars and Eldorado completed the $17.3 billion merger to create the largest US casino operator, which also tabled a £2.9 billion takeover bid for UK-based sports book operator William Hill by the end of the quarter. With regards to the offer, Caesars raised just shy of $2 billion on October 1. Also in October, Caesars announced the sale of Tropicana Evansville casino in Indiana for $480 million to Twin River and its real estate trust Gaming and Leisure Properties (GLPI).

On the sports betting side, Caesars extended its partnership with ESPN, getting a co-exclusive link out across all ESPN channels with DraftKings, while in iGaming, the company CEO said the New Jersey casino business continued to ramp up even after physical properties had reopened, running at a rate of $150 million of annual revenue.

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