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Eldorado Resorts swings to Q1 loss amid Covid-19 shut-down


Casino operator Eldorado Resorts posted a $175.6m net loss for the first quarter of 2019 after a strong start to the period was hindered by the closure of its venues as a result of the novel coronavirus (Covid-19). 

Eldorado chief executive Tom Reeg explained that the business had enjoyed a very strong start to the year, with revenue for the first two months up 6.6% year-on-year, and earnings before interest, tax, depreciation and amortisation (EBITDA) up 24.7%. 

“However, the strength in January and February was offset by Covid-19 related weakness due to the mandated closure of all our properties by March 18, 2020,” Reeg said. “As a result, Eldorado generated first quarter same-store net revenues of $473.1m and EBITDA of $102.5m, down 17.5% and 33.0% year over year, respectively.”

On a like-for-like basis, revenue for the three months to 31 March would have been down 25.6%, though this fell to 17.5% after the contributions of five properties divested during the prior year were removed. 

Pennsylvania properties Presque Isle Downs and Lady Luck Casino Nemacolin were sold to Churchill Downs on 11 January 2019 and 8 March respectively. Century Casinos then completed a deal to purchase Mountaineer Casino Racetrack and Resort, Isle Casino Cape Girardeau and Lady Luck Casino Caruthersville in December 2019, meaning their figures were removed entirely from the Q1 2019 results.

Revenue was down across all regions, with the biggest fall seen in the southern reporting segment. For that region, comprising seven properties in Flordia, Louisiana and Mississippi, revenue fell 26.9% to $97.1m.

Central region revenue – covering three properties across Illinois, Missouri and Indiana – was down 17.2% to $99.7m, while the midwest region’s contribution across four venues in Iowa and Missouri declined 16.1% to $60.8m. 

The eastern segment, covering the Tropicana Atlantic City and Ohio’s Scioto Downs, still contributed the largest sum, at $108.1m, though this was down 15.6% from Q1 2019. The smallest decline was seen in the west, which includes seven properties in Nevada and Colorado, where revenue fell 10.7%. A further $2.0m was generated from corporate and other sources, up 29.6%.

Looking at the breakdown by revenue stream, casino and pari-mutuel commissions accounted for $339.7m, down 27.8%. Food and beverage revenue was down 25.3% at $56.2m, while hotels contributed $48.4m, down 25.3%. Revenue from other sources came to $28.7m for the quarter, up 14.5%.

While revenue was down for the quarter, total operating expenses rose 10.3% to $588.2m. While expenses related to the gaming and hospitality elements of the business fell, including marketing and promotional expenses, Eldorado recognised a $160.8m impairment charge. 

This related to goodwill and trade names, and resulted from declines in recent performance and the expected impact of future cash flows a result of Covid-19.

After a $1.5m gain on the disposal of assets, plus $9.3m in transaction expenses and a $252,000 loss from unconsolidated affiliates, Eldorado’s operating loss for the quarter amounted to $123.2m, compared to a $123.6m operating profit in Q1 2019.

Once interest expenses and loss on investments totalling $89.6m, Eldorado posted a pre-tax loss of $212.8m. After an income tax benefit of $37.2m, the business’ net loss for the quarter came in at $175.6m, compared to a profit of $38.2m in the prior year.

Reeg said that since the closure of Eldorado’s properties, its focus had been the safety and wellbeing of its employees and patrons. However, he added, the business reduced costs and preserved liquidity, ending Q1 with more than $670m in cash on its balance sheet after drawing $465m from its revolving credit facility in March.

“Our full-time team members received four weeks of pay after operations were suspended and we will continue to pay team member health care benefits through June 30, 2020,” Reeg added. “Compensation for the executive team has been reduced as well.”

He also noted that Eldorado remains actively engaged in satisfying the remaining steps to complete its acquisition of Caesars Entertainment. 

“Our teams also remain focused on the integration process and we remain excited about the long-term opportunity to create value for stakeholders of both companies,” Reeg added. 

Caesars also reported its first quarter results today (11 May), revealing a 13.6% year-on-year decline in revenue to $1.83bn. However, fair value gains saw the business post an $123.0m profit for the quarter.