Caesars Reopenings Hindered by Nevada Regulations, Regionals Prove Steady

Posted on: June 16, 2020, 08:52h. 

Last updated on: June 16, 2020, 11:31h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Caesars Entertainment (NASDAQ:CZR) said revenue in Nevada during the recent reopening of gaming venues there declined from the year earlier period. But there was some modest top line growth at its regional properties that came back online following the coronavirus shutdown.

Caesars' Has Regional Growth
New coronavirus regulations hampered Caesars’ Nevada revenue during recent reopenings. But regional properties performed well. (Image: Wall Street Journal)

In a form 8-K filing with the Securities and Exchange Commission (SEC), the Caesars Palace operator said turnover at its Silver State venues that restarted earlier this month slumped 56 percent to 58 percent through June 10. That’s compared with the same period in 2019. The company reopened four Nevada casinos on June 4 and one the following day. Caesars operates a dozen gaming properties in the state.

Caesars’ profit and turnover declines in the Silver State for the aforementioned periods could be attributable to new guidelines imposed by regulators in the wake of COVID-19, including capping players at tables. Those rules include three players per blackjack station, six players at craps tables, and four apiece at poker and roulette tables.

Operating income for the reopened Nevada properties for the period they were operating in June through June 10, 2020 declined approximately 110% to 120% compared to the prior year period,” according to the filing.

The operator’s reopened Nevada properties include Caesars Palace, the Flamingo, and Harrah’s on the Las Vegas Strip, as well as Harrah’s Lake Tahoe and Harrah’s Laughlin. Paris Las Vegas is scheduled to join that group on Thursday, June 18.

Regionals Prove Sturdy

Caesars has one of the largest networks of regional casinos among all US operators. That portfolio provided some support in the initial reopening phase, particularly in Southern states, such as Louisiana and Mississippi.

In the SEC filing, Caesars defines regional venues as the following: Harrah’s Bossier City, Harrah’s Louisiana Downs, Harrah’s Gulf Coast, Horseshoe Tunica, Harrah’s North Kansas City, and Horseshoe Council Bluffs.

The company said from the time those properties came back online, some of which did so in mid-May, through June 10, revenue was flat to higher by two percent. That’s with operating income increasing 60 percent to 70 percent on a year-over-year basis. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) jumped 35 percent to 40 percent at those properties.

Caesars said margins at those venues increased 1,000 basis points, while Nevada margins slid 3,400 basis points.

Several more of Caesars’ regional venues reopened after June 10, including three properties in Indiana and Harrah’s New Orleans.

Eldorado Deal Still Looming

The Form 8-K was filed by Caesars, but includes language indicating Eldorado Resorts (NASDAQ:ERI) is disclosing “certain preliminary operating trends for Caesars’ properties that reopened in May and June 2020.”

Eldorado is finalizing its $17.3 billion takeover of the Harrah’s operator with the aim of completing the deal in the middle of this year.

On Monday, ERI announced a series of cash-generating moves, including a secondary offering of as many as 20.7 million shares and the sale of unused Strip land. That strengthen the operator’s balance sheet and could move the acquisition along.