Caesars Entertainment, the casino giant that controls such Las Vegas properties as Caesars Palace, Paris and the Flamingo, reported its first-quarter earnings today.
Company: Caesars Entertainment Corp. (NASDAQ: CZR)
Revenue: $2.2 billion, up 8.8 percent from the first quarter of last year.
That includes financial results from the company’s division Caesars Entertainment Operating Co., which filed for bankruptcy on Jan. 15. Caesars disclosed the figure in supplemental information today, but the company has actually deconsolidated the operating division from its main financial results because of the bankruptcy.
Without including the operating division at all, Caesars’ net revenue for the quarter was $1.1 billion, up 21 percent from the same time period a year ago.
Earnings: $7.6 billion, compared with a loss of $386 million last year. That includes a gain of $7.96 billion tied to the deconsolidation of the bankrupt Caesars Entertainment Operating Co. That also includes results from the operating division for the first 15 days of January, until it filed for bankruptcy.
What it means: Aside from the operating division that’s going through bankruptcy, Caesars is divided into several other entities, each of which operate different casinos or other parts of the business. Those divisions had a solid quarter in terms of revenue.
Caesars Entertainment Resort Properties, which runs six U.S. casinos, the Linq Promenade and Octavius Tower at Caesars Palace, reported net revenue of $529 million, up 7.5 percent from the first quarter last year. The division also saw a 6 percent bump in casino revenue, which it attributed to favorable hold in Las Vegas and a boost in volumes in Atlantic City.
Caesars Growth Partners, which runs six U.S. casinos as well as the Caesars Interactive division and the World Series of Poker, reported net revenue of $390 million from its casino properties, up 33.5 percent from last year. Caesars said this was due largely to the openings of the Cromwell and Horseshoe Baltimore last year.
On a conference call with analysts, outgoing Caesars CEO Gary Loveman said the company had its best quarterly performance since 2008. He said Caesars has cut costs, made “new and exciting” investments in its hospitality offerings and continued to make investments in Caesars Interactive.
“The combination of our efforts to increase revenue and further reduce spending led to significant margin expansion in the first quarter, and fuels my optimism for the long-term potential to return and sustain pre-crisis margin levels,” he said.
Chief Financial Officer Eric Hession said on the conference call that the bankrupt operating division generated a 33 percent increase in adjusted earnings before interest, taxes, depreciation and amortization despite a decline in revenue. He said that revenue drop came partly from lower gaming volumes at Caesars Palace, the only Las Vegas property that’s included in the bankruptcy.
In addition, Hession said the Atlantic City market, which has weathered the closure of multiple casinos, is “still broadly weak.” While Caesars is optimistic about its plans to open a new conference center there, “our concerns with the long-term prospects of the market remain,” Hession said.
Atlantic City isn’t the only regional market where Caesars has some concerns. Loveman said the company expects to take a hit at Horseshoe Baltimore because of the curfew instituted amid recent unrest in that city. And a smoking ban in New Orleans threatens to hurt the company’s Harrah’s New Orleans casino.
Incoming Caesars CEO Mark Frissora, who begins in his new position July 1, made his debut on the conference call. He said he moved to Las Vegas and has spent time over the last few months familiarizing himself with the business, meeting employees, visiting Caesars properties and starting to get himself licensed.
“I am excited about the future of Caesars Entertainment,” he said. “Despite the fact that Caesars has faced a tough operating environment, I have been encouraged by the high engagement level of our employees and their strong focus on serving our customers.”
Loveman provided his thoughts on the outlook for Las Vegas at the end of the call, prompted by a question from an analyst. He said he doesn’t share the critical view recently expressed by Wynn Resorts CEO Steve Wynn on that company’s first quarter earnings call.
“Based on what we see in the forward-looking profile for our guests … we are much more encouraged by what we see than perhaps Steve has been in his case. As far as the macroeconomics are concerned, I don’t see anything in the macroeconomic environment that I find discouraging,” Loveman, who has a background in economics, said.
Caesars has said that Loveman will stay on as chairman after Frissora takes over as CEO.