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Caesars Entertainment slips to $1.20bn net loss in 2019


Caesars Entertainment Corporation (CEC) reported a slight increase in revenue for 2019, though fair value changes in its convertible notes led to the operator posting a $1.20bn net loss for the year.

Net revenue for the 12 months to December 31 amounted to $8.74bn, up 4.2% from $8.39bn in the previous year.

Caesars said this increase was driven by its acquisition of rival operator Centaur Holdings in July 2018, as well as a strong performance in Las Vegas, Nevada, and favourable hold during the year.

However, Caesars also noted that these positive factors were offset by lower gaming volume at its Atlantic City properties due to increased competition and poor weather across some of its locations.

Las Vegas revenue amounted to $3.92bn, up 4.4% on the previous year, while net revenue from other states across the US also climbed 4.4% to $4.23bn. Caesars also saw grow in other areas of the business, with other revenue climbing 1.2% to $598m.

In terms of spending during the year, operating costs were up 6.1% year-on-year to $8.12bn, with Caesars noting higher costs in several areas across the business. Direct casino costs were the main outgoing, with spend up 5.5% to $2.51bn.

Property, general, administrative and other related expenses climbed 4.44% to $1.88bn, while food and beverage spend was up 1.8% to $1.11bn. However, there was a slight decline in depreciation and amortisation costs, which fell 11.3% to $1.02bn.

Aside from these operating costs, Caesars noted an additional expense totalling $1.38bn, mainly due to a year-over-year change in the fair value of the derivative liability related to CEC Convertible Notes.

Caesars also saw a $44m change in fair value of disputed claims liability related to Caesars Entertainment Operating Company, Inc.’s emergence from bankruptcy in 2017. In addition, there was a $24.0m increase in interest expense as a result of a failed sale-leaseback financing obligation.

This additional spending pushed Caesars to a net loss of $1.20bn for the year, compared to a net income of $303m in the previous 12 months. However, the operator did note a 4.2% year-on-year improvement in adjusted earnings before interest, tax, depreciation and amortisation, which increased from $2.31bn to $2.41bn.

Alongside its full-year results, Caesars also published details about its financial performance in the fourth quarter, during which revenue was up 2.6% year-on-year to $2.17bn, again boosted by its Las Vegas activities.

Operating expenses were lowered from $2.02bn to $1.99bn, but this did not stop Caesars posting a net loss of $304m for the quarter, mainly due to other losses of $627m primarily related to a change in the fair value of the derivative liability related to the conversion option of CEC’s 5.00% convertible senior notes due to mature in 2024.

Despite the loss, president and chief executive Tony Rodio described the quarter’s operational performance as “solid”.

“Caesars’ results were largely driven by the strong demand at our Las Vegas properties, excellent cost controls, and the addition of sports betting in several states which drove increased visitation.

“In addition, our focus on costs and operating efficiencies across the company contributed to the excellent performance.”

Confirmation of the results comes after Caesars earlier this week moved a step closer to being acquired by Eldorado Resorts, after a pending merger between the two parties secure further approval.

The Mississippi Gaming Commission gave the green light to the deal, after both the Pennsylvania Gaming Control Board and the Iowa Racing and Gaming Commission also granted their approval to the deal.