With takeover talks dominating the build up to Caesars Entertainment’s fourth quarter results, the Las Vegas giant surprised many analysts with better than expected results.
Caesars delivered an increase in fourth quarter net revenues of 11.3 per cent, or $214m to $2.12bn primarily due to the inclusion of the results of Centaur Holdings, which was bought during the third quarter.
For the full year net revenues increased 72.4 per cent, or $3.52bn, from $4.87bnto $8.39bn due to the inclusion of the results of CEOC and Centaur. Full year net income improved $671m, from a loss of $368m to income of $303m.
Mark Frissora, President and Chief Executive Officer of Caesars Entertainment, said: “In 2018, Caesars delivered a fourth consecutive year of higher net revenues and adjusted EBITDAR, as well as expanded margins. Caesars’ solid performance is due in part to further labor productivity improvements and, in 2018, over $140m of marketing efficiencies. Our casino properties, including in Las Vegas and Indiana, performed well, partially offset by the impact of new competition in Atlantic City. We also launched the first instalments of our asset-lite, branding and licensing strategy by opening the Caesars Bluewaters Dubai Resort, announcing another non-gaming resort scheduled to open next year in Cabo San Lucas as well as a new tribal partnership in Northern California, and our first non-gaming hotel in the US, Caesars Republic, in Scottsdale, Arizona. This year, Caesars will implement more efficiency and growth initiatives, including expanded sports betting. While we will be making additional value-added investments in the business this year, including the Caesars Forum FORUM meeting center on the Las Vegas Strip, our financial priority over the next few years is to further de-lever the sheet,” he added.
“We achieved a record full year adjusted EBITDAR margin marking four years of margin expansion while achieving record customer service scores and making investments in the company’s long-term growth. We once again outperformed our peers in Las Vegas across key performance indicators for the fourth consecutive year which Eric will discuss in more detail.”
Mr. Frissora highlighted that the company successfully expanded the Caesars Entertainment Network through the accretive acquisition of Centaur and execution on its asset light strategy, beginning with the opening of Caesars Bluewater Dubai and with more to come in 2019.
“Also, we made important investments in innovation in our core gaming business and emerging areas like sports betting,” he explained. “In summary, we are successfully executing on the plan that we set out at emergence and we have a clear path forward to creating significant shareholder value.”
Eric Hession added: “Our Las Vegas properties overall performance in the fourth quarter reinforces a story of stability, despite the temporary third quarter results. In 2019, we continue to expect modest growth in Las Vegas. We were quite pleased with our Las Vegas performance in both the fourth quarter and the full year 2018. Our Las Vegas results outperformed our peers in net revenue growth, adjusted EBITDAR growth and adjusted EBITDAR margins for both the fourth quarter and in the full year.”
Other US net revenues totalled $1bn, marking an increase of 9.3 per cent, including Centaur. Atlantic City was the primary driver of the same-store decline due to ‘ongoing competitor pressures from new entrants who have significantly increased levels of promotional activity.’
“We estimate these factors had a $20m impact on EBITDAR in the quarter,” Mr. Hession explained.
The search for Mr. Frissora’s successor is on-going. To support a seamless transition, Mr. Frissora has agreed to remain in his current role until 30 April 2019. Mr. Frissora said the board was searching for a seasoned professional who has worked through ‘turbulent times, adversity and been able to be tested.’
“Someone that has experience in hospitality/gaming and related verticals that we participate in,” he said. “Someone that has a great reputation with investors.”
With regards to the recent 13D filing from entities affiliated with Carl Icahn disclosing ownership of 9.78 per cent of Caesars outstanding shares, Mr. Frissora said: “We regularly engage with our shareholders and consider their ideas and input regarding shareholder value. The board and management have engaged in discussions with Mr. Icahn and his representatives, and we expect to continue a constructive dialogue. We intend to carefully evaluate Mr. Icahn’s suggestions, including his request for board representation and will provide updates in due course.”