Caesars reports 3Q net loss of USD 359 M despite strong Las Vegas performance

Caesars Entertainment Corporation announced Tuesday third quarter of 2019 results, reporting an increase in net revenues of 2.3% to $2.24 billion, and a loss from operations of $68 million.

Other third-quarter highlights included a net loss attributable to Caesars of $359 million, 53 cents a share. Non-GAAP hold adjusted net revenues increased 0.7% to $2.22 billion, non-GAAP adjusted EBITDA increased by 5.8% to $635 million, and non-GAAP hold adjusted EBITDA increased by 1.3% to $624 million.

"We are pleased to have delivered solid financial results in the third quarter with net revenue growth across all business verticals, despite headwinds across our portfolio," said Tony Rodio, CEO of Caesars Entertainment. "Revenue performance was driven by our Las Vegas region due to increased consumer demand, with particular strength in the hotel business which continues to outpace prior years across properties. Coupled with corporate expense reductions, this led to strong adjusted EBITDA growth as well as margin expansion."

Proposed Sale of the Rio All-Suite Hotel & Casino

In September, Caesars announced an agreement to sell the Rio All-Suite Hotel & Casino for $516.3 million. The sale is expected to close by the end of 2019, and Caesars will continue to operate the Rio for a minimum of two years pursuant to a lease agreement to be executed at the closing. The property will remain part of the Caesars Rewards network during the term of the lease.

Proposed Merger with Eldorado Resorts

Caesars filed a definitive proxy statement with the SEC on October 11, 2019, and the shareholder votes for each of Caesars and Eldorado Resorts. on the merger agreement will occur on November 15, 2019. The two companies have made significant progress on the integration planning process, and the merger remains on track to close in the first half of 2020, subject to all required regulatory approvals.

Financial Results

Caesars views each property as an operating segment and aggregates such properties into three regionally-focused reportable segments: (i) Las Vegas, (ii) Other U.S. and (iii) All Other, which is consistent with how Caesars manages the business.

Net revenues increased $51 million driven by growth in all business verticals, with significant growth in Las Vegas due to healthy consumer demand. Las Vegas gaming revenues grew 17.3% year over year due to favorable hold and higher gaming volumes. Las Vegas hotel strength also came from solid year over year growth this quarter in ADR, which increased 3.7%, and RevPAR, which increased 7.0%. Las Vegas occupancy was 95.6% in the quarter, up from 92.6% in 2018. Other U.S. net revenues declined $6 million year over year due to competition in Atlantic City and Southern Indiana. All Other net revenues decreased $6 million year over year, primarily due to lower gaming volumes in the UK. Across all of the company’s casino properties, hold had a favorable impact of $31 million to $36 million this quarter compared to the prior year, and was $10 million to $15 million above our expectations.

Income/(loss) from operations decreased from income of $232 million to a loss of $68 million primarily due to an increase in operating expenses of $351 million in the third quarter of 2019 compared with 2018 due to recognition of $380 million in impairment charges related to land and buildings at Rio and $19 million additional expenses in 2019 associated with an extra half month of operations associated with the acquisition of Centaur Holdings in the Other U.S. region. These increases were offset in part by a decrease in depreciation and amortization of $43 million due to disposals of property and equipment and accelerated depreciation in the third quarter of 2018 related to certain renovation projects in the prior year. The increase in operating expenses was partially offset by a $51 million increase in net revenues in the third quarter of 2019 compared with 2018.

Net income/(loss) attributable to Caesars decreased from net income of $110 million to a net loss of $359 million primarily due to a $71 million year over year change in the fair value of the derivative liability related to the conversion option of CEC's 5.00% convertible senior notes maturing in 2024, a $12 million change in fair value of disputed claims liability related to Caesars Entertainment Operating Company's emergence from bankruptcy in 2017, as well as a decrease in tax benefit of $89 million. Income from operations also decreased $300 million in the third quarter of 2019 compared with 2018.

Adjusted EBITDA increased $35 million primarily due to the higher revenues generated across all business verticals offset by increased competition in Atlantic City and Southern Indiana. All Other adjusted EBITDA loss increased by $7 million year over year primarily due to lower revenues in our international properties, partially offset by reduced corporate expenses. Across all of our casino properties, hold had a favorable impact of $26 million to $31 million compared to the prior year period, and was $10 million to $15 million above expectations.