Las Vegas drives Caesars' net revenues up 7.3% in Q1

Caesars Entertainment Corporation reported Wednesday first quarter of 2019 results, highlighting certain GAAP (generally accepted accounting principles) and non-GAAP financial measures on a consolidated basis. During Q1, the company announced the appointment of Anthony Rodio as CEO and the creation of a Transaction Committee to oversee the company's evaluation of ongoing efforts to create additional shareholder value. Caesars also remarks Harrah's Northern California opening this week, and its multi-state agreement with DraftKings for online sports betting.

"Caesars delivered another solid quarter of revenue and EBITDAR growth, as well as margin improvement," said Eric Hession, Executive Vice President and Chief Financial Officer. "We realized strong contributions from the Las Vegas gaming and hotel businesses, and Centaur, in addition to further operating and corporate efficiencies. 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 $100 million revolver balance."

On April 16, Caesars announced that its Board of Directors had named Anthony Rodio as Chief Executive Officer. He is currently CEO of Affinity Gaming, and he will transition to his new role at Caesars within the next thirty days. He will join the Company's Board of Directors and be based in Las Vegas.

Harrah's Northern California opened for business on April 29, which represents the fourth active tribal management agreement in the Company's portfolio. The new gaming hall is a state-of-the art, 71,000 square-foot entertainment destination nestled in the scenic foothills of Amador County, California.

On February 25, Caesars announced that it had entered into a multi-state agreement with DraftKings, the leading sports-tech entertainment brand in the U.S., under which Caesars offers DraftKings market access for its online gaming products, subject to passage of applicable laws and the parties securing applicable gaming licenses. DraftKings' market access is exclusive to Caesars across certain states in which Caesars operates casino properties.

Additional non-GAAP financial measures have been added to highlight the results of the company. On July 16, 2018, Caesars completed the acquisition of Centaur Holdings. "2018 Data Excluding Centaur" removes the post-acquisition results of Centaur from Caesars' consolidated results. "Hold adjusted" results are adjusted to reflect the hold achieved compared to the expected one.

Financial Results

Caesars considers each property as an operating segment and aggregate such properties into three regionally-focused reportable segments: Las Vegas, Other U.S., and All Other, which includes managed, international and other properties as well as parent and other adjustments to reconcile to consolidated Caesars results.

Net revenues increased by 7.3% to $2.12 billion, which represents $143 million, driven primarily by a $52 million increase in Las Vegas net revenues and an $84 million increase in Other U.S. net revenues resulting from the acquisition of Centaur. Excluding Centaur, Other U.S. net revenues were $884 million for the first quarter of 2019, a decrease of $42 million from 2018 primarily due to increased competition in Atlantic City and inclement weather across some of the firm’s regional properties which resulted in prolonged closures.

Weather negatively impacted Other U.S. net revenues in the first quarter by approximately $32 million, compared to a negative impact of $25 million in the prior year. The increase in Las Vegas net revenues was primarily due to favorable hold, improved slot volumes and higher hotel revenues. Las Vegas average daily rate (ADR) increased by 2.1% while Revenue per available room (RevPar) increased by 4.9%.

Las Vegas occupancy was 95% in the quarter, up from 92.5% in 2018. All Other net revenues increased $7 million year over year. Across all of Caesars’ casino properties, hold had a favorable impact of $30 million to $35 million compared to the prior year and was $3 million to $6 million above its expectations.

Income from operations increased by 92% to $240 million, that is $115 million from prior period, primarily due to growth in the Las Vegas region, as well as the post-acquisition results of Centaur, which contributed $30 million to income from operations in 2019. Excluding Centaur, income from operations increased $85 million primarily as a result of the increase in net revenues in the Las Vegas segment, offset by higher investment around technology and non-union labor costs.

In addition, the increase is driven by lower accelerated depreciation in 2019 compared with 2018 due to the removal and replacement of certain assets in connection with ongoing property renovation projects in the prior year and higher non-recurring charges in the prior year related to additional exit fees recognized for the termination of NV Energy utility contracts and lease termination costs.

Net loss attributable to Caesars increased $183 million to $217 million, and basic loss per share totaled $0.32, primarily due to a $322 million change in the fair value of the derivative liability related to the conversion option of CEC's 5% convertible senior notes maturing in 2024 (the "CEC Convertible Notes") year over year. The increase in net loss was also due to a rise of $19 million in interest expense primarily as a result of the failed sale-leaseback financing obligations established for Octavius Tower at Caesars Palace and Harrah's Philadelphia Casino and Racetrack, which were sold to VICI Properties Inc. in the second half of 2018, as well as due to an increase in the floating London Interbank Offered Rate on the senior secured credit facility of Caesars Resort Collection, LLC. These expense increases were partially offset by the increase in income from operations of $115 million referred above and a tax benefit of $29 million in the first quarter of 2019 compared to a tax provision of $13 million in the prior year.

Adjusted EBITDAR increased $44 million, primarily due to favorable hold and higher hotel revenues in the Las Vegas region. Excluding Centaur, Other U.S. adjusted EBITDAR was $191 million for the first quarter of 2019, down $25 million compared to 2018, primarily due to the heightened competitive and promotional environment in Atlantic City and inclement weather across some of our regional properties.

Weather negatively impacted Other U.S. adjusted EBITDAR in the first quarter by approximately $17 million, compared to a negative impact of $15 million in the prior year. All Other adjusted EBITDAR loss increased by $12 million year over year due to higher investment around technology infrastructure and sports partnerships. Across all of Caesars’ casino properties, hold had a favorable impact of $26 million to $31 million compared to the prior year and was $3 million to $6 million above expectations.