Caesars Entertainment
The top line
Net revenues at $1.7bn, 256% up YoY, 16% on same-store basis but net losses widened to $423m from $176m. Same-store adjusted EBITDA at $548m up 33.7%.
Las Vegas same-store revenues were down 39.5% to $497m; regional gaming was flat on a same-store basis at $1.1bn. Managed, international and interactive was down 21.3% at $90m.
Caesars expects to pay down $2bn of debt during this calendar year helped by William Hill sale, detail likely to be confirmed in Q3/Q4. Contrary to reports, discussions are not in progress on the disposal of a Strip asset.
April showers cash: Talking of the recovery from Covid, CEO Tom Reeg said on the earnings call the business that Caesars had seen in April was “so different from the narrative I have seen out there” and much more positive. He said Caesars had produced over $300m of consolidated EBITDA in April alone which was more than 5% ahead of the 2019 comparative and with margins of over 37% which was over 1,000bps ahead of the same month 2019. Vegas EBITDA margin was almost 47%. Reeg added that “weekends in Las Vegas are sold out for the foreseeable future.” “We’re very optimistic about the remaining three quarters and the returning group and convention business,” he added. Analysts at Deutsche Bank suggested the tone of the conference call was “decidedly more bullish” than previously.
Running down that Hill: After thanking the departing Joe Asher, CEO of William Hill US, for the “foundation he and his team built”, Reeg went on to suggest that in the last football season the business has been playing with “one arm tied behind its back.” Asked whether Caesars had ever considered keeping hold of the non-US elements of William Hill, Reeg said “we’ve not had a moment’s pause in selling.” “One of my pet peeves when I was an investor was companies that didn’t know what they were good at,” he said. “I can’t tell you we are good at running a non-US online business.” Indeed, he also somewhat undersold what they were leaving on the table for the next owner, whether that is a trade buyer or rumoured PE buyer Apollo.
“Frankly, William Hill had a number of lame-duck brands in a number of markets where it didn’t make sense to invest. We will be more aggressive on leverage,” Reeg added. “What we needed was to move forward and take control of our destiny.”
Taking up the online cudgels: Reeg was keen to emphasise how important the company viewed the potential to leverage the player database at its disposal in the online realm. “If you look at what our friends at MGM did in Michigan, achieving leadership where they had a large database, that gave us great confidence moving forward,” he said. “We like the hand that guys like us and MGM have to play,” he added. “We have the largest player database in the business bar none. We should be effectively the low cost producer. And we are throwing off over $100m-a-month in free cash flow (from the whole business) to invest in this business as aggressively as we need to. We aren’t throwing money away to buy market share, but there will be a significant increase in investment.”
Players only love you when they’re playing: The newly rebranded Caesars sports app would be a “competitive business and brand by this coming football season.” “We expect to be a player this fall,” he added. “We’re going to put our heads down and do the work. We feel very, very good where we’re headed.”
