Eldorado Resorts Reports Second Quarter Net Revenue of $637.1 Million, Operating Income of $102.6 Million, and Adjusted EBITDA of $178.7 Million

RENO, Nev.–(BUSINESS WIRE)–Eldorado Resorts, Inc. (NASDAQ: ERI) (“Eldorado,” “ERI,” or “the Company”) today reported its second quarter 2019 results.

($ in thousands, except per share data)

Total Net Revenue

 

Three Months Ended

 

June 30,

2019

 

2019

Divestitures

 

2019 Pre

Acquisition

 

2019 Total

 

2018

 

2018

Divestitures(1)

 

2018 Pre-

Acquisition(2)

 

2018

Total(3)

 

Change

West

$

127,727

$

$

$

127,727

$

117,880

$

$

27,679

$

145,559

-12.3%

Midwest

 

97,239

 

 

 

97,239

 

100,607

 

 

 

100,607

-3.3%

South

 

116,937

 

 

 

116,937

 

112,242

 

 

18,082

 

130,324

-10.3%

East

 

170,455

 

 

 

170,455

 

125,961

 

45,315

 

95,981

 

176,627

-3.5%

Central

 

122,792

 

 

 

122,792

 

 

 

125,905

 

125,905

-2.5%

Corporate and Other

 

1,971

 

 

 

1,971

 

112

 

 

34

 

146

1250.0%

Total Net Revenue

$

637,121

$

$

$

637,121

$

456,802

$

45,315

$

267,681

$

679,168

-6.2%

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands, except per share data)

Operating Income

 

Three Months Ended

 

June 30,

2019

 

2019

Divestitures

 

2019 Pre-

Acquisition

 

2019 Total

 

2018

 

2018

Divestitures(1)

 

2018 Pre-

Acquisition(2)

 

2018

Total(3)

 

Change

West

$

20,613

$

$

$

20,613

$

21,865

$

$

4,671

$

26,536

-22.3%

Midwest

 

29,012

 

 

 

29,012

 

27,411

 

 

 

27,411

5.8%

South

 

19,023

 

 

 

19,023

 

20,564

 

 

404

 

20,968

-9.3%

East

 

35,213

 

 

 

35,213

 

24,397

 

6,026

 

15,478

 

33,849

4.0%

Central

 

28,033

 

 

 

28,033

 

 

 

25,593

 

25,593

9.5%

Corporate and Other

 

(29,344)

 

 

 

(29,344)

 

(16,823)

 

 

(7,389)

 

(24,212)

21.2%

Total Operating Income

$

102,550

$

$

$

102,550

$

77,414

$

6,026

$

38,757

$

110,145

-6.9%

 
($ in thousands, except per share data)

Adjusted EBITDA

 

Three Months Ended

 

June 30,

2019

 

2019

Divestitures

 

2019 Pre-

Acquisition

 

2019 Total

 

2018

 

2018

Divestitures(1)

 

2018 Pre-

Acquisition(2)

 

2018

Total(3)

 

Change

West

$

34,305

$

$

$

34,305

$

31,758

$

$

7,760

$

39,518

-13.2%

Midwest

 

36,753

 

 

 

36,753

 

35,923

 

 

 

35,923

2.3%

South

 

29,109

 

 

 

29,109

 

28,402

 

 

2,439

 

30,841

-5.6%

East

 

47,418

 

 

 

47,418

 

29,363

 

6,466

 

24,006

 

46,903

1.1%

Central

 

39,602

 

 

 

39,602

 

 

 

33,790

 

33,790

17.2%

Corporate and Other

 

(8,526)

 

 

 

(8,526)

 

(7,431)

 

 

(4,674)

 

(12,105)

-29.6%

Total Adjusted EBITDA(6)

$

178,661

$

$

$

178,661

$

118,015

$

6,466

$

63,321

$

174,870

2.2%

 
Net Income

$

18,936

$

36,796

Basic EPS

$

0.24

$

0.48

Diluted EPS

$

0.24

$

0.47

 
 
 

($ in thousands, except per share data)

Total Net Revenue

 

Six Months Ended

 

June 30,

 

2019

 

2019

Divestitures(4)

 

2019 Pre-

Acquisition

 

2019

Total(5)

 

2018

 

2018

Divestitures(1)

 

2018 Pre

Acquisition(2)

 

2018

Total(3)

 

Change

West

$

245,822

$

$

$

245,822

$

217,459

$

$

56,962

$

274,421

-10.4%

Midwest

 

194,026

 

 

 

194,026

 

201,402

 

 

 

201,402

-3.7%

South

 

249,651

 

 

 

249,651

 

235,042

 

 

37,436

 

272,478

-8.4%

East

 

336,688

 

8,071

 

 

328,617

 

242,852

 

86,986

 

180,432

 

336,298

-2.3%

Central

 

243,264

 

 

 

243,264

 

 

 

250,795

 

250,795

-3.0%

Corporate and Other

 

3,493

 

 

 

3,493

 

239

 

 

65

 

304

1049.0%

Total Net Revenue

$

1,272,944

$

8,071

$

$

1,264,873

$

896,994

$

86,986

$

525,690

$

1,335,698

-5.3%

 

($ in thousands, except per share data)

Operating Income

 

Six Months Ended

 

June 30,

2019

 

2019

Divestitures(4)

 

2019

Pre-Acquisition

 

2019

Total(5)

 

2018

 

2018

Divestitures(1)

 

2018

Pre-Acquisition(2)

 

2018

Total(3)

 

Change

West

$

31,414

$

$

$

31,414

$

32,004

$

$

9,345

$

41,349

-24.0%

Midwest

 

56,845

 

 

 

56,845

 

54,087

 

 

 

54,087

5.1%

South

 

46,538

 

 

 

46,538

 

33,923

 

 

1,790

 

35,713

30.3%

East

 

62,374

 

(91)

 

 

62,465

 

43,528

 

9,028

 

23,882

 

58,382

7.0%

Central

 

55,103

 

 

 

55,103

 

 

 

52,599

 

52,599

4.8%

Corporate and Other

 

(26,120)

 

 

 

(26,120)

 

(31,934)

 

 

(13,339)

 

(45,273)

-42.3%

Total Operating Income

$

226,154

$

(91)

$

$

226,245

$

131,608

$

9,028

$

74,277

$

196,857

14.9%

 

 

($ in thousands, except per share data)

Adjusted EBITDA

 

Six Months Ended

 

June 30,

2019

 

2019

Divestitures(4)

 

2019

Pre-Acquisition

 

2019

Total(5)

 

2018

 

2018

Divestitures(1)

2018

Pre-Acquisition(2)

 

2018

Total(3)

 

Change

West

$

58,348

$

$

$

58,348

$

50,182

$

$

15,526

$

65,708

-11.2%

Midwest

 

73,077

 

 

 

73,077

 

70,438

 

 

 

70,438

3.7%

South

 

67,780

 

 

 

67,780

 

60,619

 

 

5,860

 

66,479

2.0%

East

 

86,922

 

(38)

 

 

86,960

 

55,543

 

11,173

 

40,382

 

84,752

2.6%

Central

 

77,925

 

 

 

77,925

 

 

 

68,921

 

68,921

13.1%

Corporate and Other

 

(18,739)

 

 

 

(18,739)

 

(15,223)

 

 

(9,520)

 

(24,743)

-24.3%

Total Adjusted EBITDA(6)

$

345,313

$

(38)

$

$

345,351

$

221,559

$

11,173

$

121,169

$

331,555

4.2%

 
 

Net Income

$

57,165

 

$

57,651

 

 

 

Basic EPS

$

0.74

 

$

0.74

 

 

 

Diluted EPS

$

0.73

 

$

0.74

 

 

 

(1)

 

Figures are for Presque Isle Downs and Nemacolin for the three and six months ended June 30, 2018.

(2)

 

Figures are for Grand Victoria (“GV”) and Tropicana Entertainment, Inc. (“TEI”) for the three and six months ended June 30, 2018. Such figures are based on unaudited internal financial statements and have not been reviewed by the Company’s auditors and do not conform to GAAP.

(3)

 

Total figures for 2018 include combined results of operations for ERI, TEI and GV and exclude results of operations for Presque Isle Downs and Nemacolin. Such presentation does not conform with GAAP or the Securities and Exchange Commission rules for pro forma presentation; however, we believe that the additional financial information will be helpful to investors in comparing current results with results of prior periods. This is non-GAAP data and should not be considered a substitute for data prepared in accordance with GAAP, but should be viewed in addition to the results of the operations reported by the Company.

(4)

 

Figures are for Presque Isle Downs for the period beginning January 1, 2019 and ending January 11, 2019 and Nemacolin for the period beginning January 1, 2019 and ending March 8, 2019.

(5)

 

Total figures for 2019 exclude results of operations for Presque Isle Downs and Nemacolin.

(6)

 

Adjusted EBITDA is not a GAAP measurement and is presented solely as a supplemental disclosure because the Company believes it is a widely used measure of operating performance in the gaming industry. See “Reconciliation of GAAP Measures to Non-GAAP Measures” below for a definition of Adjusted EBITDA and a quantitative reconciliation of Adjusted EBITDA to operating income (loss), which the Company believes is the most comparable financial measure calculated in accordance with GAAP.

“Eldorado generated record second quarter Adjusted EBITDA of $178.7 million on a 6.9% decline in operating income and 6.2% net revenue decline. Adjusted EBITDA grew 2.2% on a year-over-year basis reflecting further success with our margin enhancement and operating efficiency initiatives coupled with revenue recognition from our new sports betting partnerships, which helped offset property specific impacts across the portfolio, such as the final quarter of construction disruption at our Black Hawk properties and flooding that impacted much of the central United States. We achieved a 190-basis point improvement in our consolidated property-level Adjusted EBITDA margin to 29.5% and a 230-basis point year-over-year increase in the consolidated Adjusted EBITDA margin to 28.0%, both of which are quarterly records,” said Tom Reeg, Chief Executive Officer of Eldorado.

“We expect that our history of completing value-enhancing acquisitions and experience in unlocking value at acquired properties will serve us well as we move forward with the planned acquisition of Caesars Entertainment Corporation. When completed, this proposed transaction will represent the culmination of more than five years of execution on our strategic growth plan to expand our platform and geographic diversification through accretive transactions that have significantly increased our free cash flow. Inclusive of identified cost and revenue synergies of $500 million that we expect to realize in the first year following closing, the proposed transaction is expected to be immediately accretive to our free cash flow. In addition, we believe that there are opportunities to generate synergy upside from the acquired assets and our legacy portfolio that will enable us to reduce leverage following completion of the transaction.

“As we move through the regulatory review process in advance of the expected closing in the first half of 2020, our team is creating a detailed plan to marry best of breed practices from both entities. We believe the national, multi-brand footprint across all major markets created by the combination of Eldorado and Caesars is a strategically, financially and operationally compelling opportunity that is expected to deliver value to shareholders and stakeholders of both companies.”

Balance Sheet and Liquidity

As of June 30, 2019, Eldorado had $3.0 billion of debt outstanding. Total cash and cash equivalents were $183.1 million, excluding restricted cash. No amounts were outstanding under the $500 million Revolving Credit Facility.

“During the second quarter of 2019, Eldorado continued to execute on its long-term plan to efficiently integrate recently acquired assets alongside deleveraging organically and through announced asset sales,” said Bret Yunker, Chief Financial Officer.

Summary of 2019 Second Quarter Region Results

The property results for Grand Victoria and properties owned by TEI have been included in results of operations for the second quarter of 2018, which preceded the date of acquisition of such properties. Such presentation does not conform with GAAP or the Securities and Exchange Commission rules for pro forma presentation; however, we believe that the additional financial information will be helpful to investors in comparing current results with results of prior periods.

West Region (THE ROW, Isle Casino Hotel Black Hawk, Lady Luck Casino Black Hawk, Tropicana Laughlin Hotel and Casino and MontBleu Casino Resort & Spa)

Net revenue for the West Region properties for the quarter ended June 30, 2019 declined approximately 12.3% to $127.7 million compared to $145.6 million in the prior-year period, and operating income decreased to $20.6 million from $26.5 million in the comparable year-ago quarter. West Region second quarter Adjusted EBITDA declined 13.2% to $34.3 million. The results primarily reflect construction disruption at the Black Hawk properties in the 2019 second quarter and the non-recurring benefit to the THE ROW from the women’s bowling championship tournament in the year-ago quarter. Notwithstanding these impacts, the region’s 2019 second quarter Adjusted EBITDA margin declined by just 30 basis points to 26.9%.

Midwest Region (Isle Casino Waterloo, Isle Casino Bettendorf, Isle of Capri Casino Boonville, Isle Casino Cape Girardeau, Lady Luck Casino Caruthersville and Isle of Capri Casino Kansas City)

Net revenue for the Midwest Region properties for the quarter ended June 30, 2019 decreased approximately 3.3% to $97.2 million compared to $100.6 million in the prior-year period, and operating income increased to $29.0 million from $27.4 million in the year-ago quarter. Midwest Region second quarter Adjusted EBITDA rose approximately 2.3% to $36.8 million as the Adjusted EBITDA margin for the segment rose 210 basis points to 37.8%. Adjusted EBITDA was up at five of the six Midwest properties in the second quarter ended June 30, 2019. Adjusted EBITDA for the Midwest Region in the prior-year period was $35.9 million reflecting an Adjusted EBITDA margin of 35.7%.

South Region (Isle Casino Racing Pompano Park, Eldorado Shreveport, Isle of Capri Casino Lula, Lady Luck Casino Vicksburg, Isle of Capri Lake Charles, Trop Casino Greenville and Belle of Baton Rouge Casino & Hotel)

Net revenue for the South Region properties for the quarter ended June 30, 2019 declined approximately 10.3% to $116.9 million compared to $130.3 million in the prior-year period, while operating income decreased to $19.0 million from $21.0 million in the year-ago quarter. South Region 2019 second quarter Adjusted EBITDA declined approximately 5.6% to $29.1 million. The region’s Adjusted EBITDA margin improved 120 basis points to 24.9% in the 2019 second quarter as the Company was successful in managing labor costs to match lower volumes.

East Region (Eldorado Scioto Downs Racino, Mountaineer Casino Racetrack and Resort and Tropicana Casino and Resort, Atlantic City)

Net revenue for the East Region properties for the quarter ended June 30, 2019 declined approximately 3.5% to $170.5 million compared to $176.6 million in the prior-year period, while operating income grew 4.0% to $35.2 million from $33.8 million in the year-ago quarter. East Region 2019 second quarter Adjusted EBITDA rose 1.1% to $47.4 million compared to Adjusted EBITDA of $46.9 million in the prior-year period. The East Region’s Adjusted EBITDA margin improved 130 basis points to 27.8%.

Central Region (Grand Victoria Casino, Tropicana Evansville and Lumière Place)

Net revenue for the Central Region for the quarter ended June 30, 2019 decreased approximately 2.5% to $122.8 million compared to $125.9 million in the prior-year period, while operating income increased to $28.0 million from $25.6 million in the year-ago quarter. Central Region Adjusted EBITDA for the second quarter rose 17.2% to $39.6 million compared to Adjusted EBITDA of $33.8 million in the prior-year period as the Central Region’s Adjusted EBITDA margin improved 540 basis points to 32.3%.

Reconciliation of GAAP Measures to Non-GAAP Measures

Adjusted EBITDA (defined below), a non-GAAP financial measure, has been presented as a supplemental disclosure because it is a widely used measure of performance and basis for valuation of companies in our industry and we believe that this non-GAAP supplemental information will be helpful in understanding the Company’s ongoing operating results. Management has historically used Adjusted EBITDA when evaluating operating performance because we believe that the inclusion or exclusion of certain recurring and non-recurring items is necessary to provide a full understanding of our core operating results and as a means to evaluate period-to-period results. Adjusted EBITDA represents operating income (loss) before depreciation and amortization, stock-based compensation, transaction expenses, severance expense, selling costs associated with the disposition of properties, preopening expenses, costs associated with resolving the historical Tropicana bankruptcy, impairment charges, equity in income (loss) of unconsolidated affiliates, (gain) loss on the sale or disposal of property and equipment, (gain) loss associated with the sales of Presque Isle Downs and Nemacolin and other non-cash regulatory gaming assessments. Adjusted EBITDA also excludes the expense associated with our Master Lease with GLPI as the transaction was accounted for as a financing obligation. Adjusted EBITDA is not a measure of performance or liquidity calculated in accordance with accounting principles generally accepted in the United States (“US GAAP”), is unaudited and should not be considered an alternative to, or more meaningful than, net income (loss) as an indicator of our operating performance. Uses of cash flows that are not reflected in Adjusted EBITDA include capital expenditures, interest payments, income taxes, debt principal repayments, payments under our Master Lease and certain regulatory gaming assessments, which can be significant. As a result, Adjusted EBITDA should not be considered as a measure of our liquidity. Other companies that provide EBITDA information may calculate EBITDA differently than we do. The definition of Adjusted EBITDA may not be the same as the definitions used in any of our debt agreements.

Second Quarter Conference Call

Eldorado will host a conference call at 9:00 a.m. ET today. Senior management will discuss the financial results and host a question and answer session. The dial-in number for the audio conference call is (334)323-0501, conference ID 1393592 (domestic and international callers). Participants can also access a live webcast of the call through the “Events & Presentations” section of Eldorado’s website at http://www.eldoradoresorts.com/ and a replay of the webcast will be archived on the site for 90 days following the live event.

About Eldorado Resorts, Inc.

Eldorado Resorts is a leading casino entertainment company that owns and operates twenty-six properties in twelve states, including Colorado, Florida, Illinois, Indiana, Iowa, Louisiana, Mississippi, Missouri, Nevada, New Jersey, Ohio and West Virginia. In aggregate, Eldorado’s properties feature approximately 26,700 slot machines and VLTs and approximately 750 table games, and over 12,500 hotel rooms. For more information, please visit www.eldoradoresorts.com.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, among others, statements regarding the expected synergies and benefits of a potential combination of Eldorado and Caesars, including the expected accretive effect of the proposed transaction on Eldorado’s results of operations; the anticipated benefits of geographic diversity that would result from the proposed transaction and the expected results of Caesars’ gaming properties; expectations about future business plans, prospective performance and opportunities; required regulatory approvals; the expected timing of the completion of the proposed transaction; and the anticipated financing of the proposed transaction , as well as expectations, future operating results and other information that is not historical information. When used in this press release, the terms or phrases such as “anticipates,” “believes,” “projects,” “plans,” “intends,” “expects,” “might,” “may,” “estimates,” “could,” “should,” “would,” “will likely continue,” and variations of such words or similar expressions are intended to identify forward-looking statements. Although our expectations, beliefs and projections are expressed in good faith and with what we believe is a reasonable basis, there can be no assurance that these expectations, beliefs and projections will be realized. There is no assurance that the proposed transaction will be consummated and there are a number of risks and uncertainties that could cause our actual results to differ materially from those expressed in the forward-looking statements made herein. Such risks, uncertainties and other important factors include, but are not limited to: (a) risks related to the combination of Caesars and Eldorado and the integration of their respective businesses and assets; (b) the possibility that the proposed transactions do not close when expected or at all because required regulatory, shareholder or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all; (c) the risk that the financing required to fund the proposed transaction is not obtained on the terms anticipated or at all; (d) potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed transaction; (e) potential litigation challenging the proposed transaction; (f) the possibility that the anticipated benefits of the proposed transaction, including cost savings and expected synergies, are not realized when expected or at all, including as a result of the impact of, or issues arising from, the integration of the two companies; (g) conditions imposed on the companies in order to obtain required regulatory approvals; (h) uncertainties in the global economy and credit markets and its potential impact on our ability to finance the proposed transaction; (i) the possibility that the proposed transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; (j) diversion of management’s attention from ongoing business operations and opportunities; (k) the ability to retain certain key employees of Eldorado or Caesars; (l) risks associated with increased leverage from the proposed transaction; (m) changes in the value of Eldorado’s common stock between the date of the merger agreement and the closing of the proposed transaction; (n) competitive responses to the proposed transaction; (o) legislative, regulatory and economic developments; (p) uncertainties as to the timing of the consummation of the proposed transaction and the ability of each party to consummate the proposed transaction; and (q) other risks and uncertainties described in our reports on Form 10-K, Form 10-Q and Form 8-K.

In light of these and other risks, uncertainties and assumptions, the forward-looking events discussed in this press release might not occur. These forward-looking statements speak only as of the date of this press release, even if subsequently made available on our website or otherwise, and we do not intend to update publicly any forward-looking statement to reflect events or circumstances that occur after the date on which the statement is made, except as may be required by law.

Additional Information

This communication does not constitute an offer to buy or solicitation of an offer to sell any securities. In connection with Eldorado’s previously announced transaction with Caesars Entertainment Corporation (“Caesars”), Eldorado intends to file with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 (the “registration statement”) that will include a joint proxy statement of Eldorado and Caesars that also constitutes a prospectus of Eldorado and Caesars (the “joint proxy statement/prospectus”). Each of Eldorado and Caesars will provide the joint proxy statement/prospectus to their respective stockholders. Eldorado and Caesars also plan to file other relevant documents with the SEC regarding the proposed transaction. This document is not a substitute for the joint proxy statement/prospectus or registration statement or any other document which Eldorado or Caesars may file with the SEC in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. You may obtain a copy of the joint proxy statement/prospectus (when it becomes available), the registration statement (when it becomes available) and other relevant documents filed by Eldorado and Caesars without charge at the SEC’s website, www.sec.gov, or by directing a request when such a filing is made to (1) Eldorado Resorts, Inc. by mail at 100 West Liberty Street, Suite 1150, Reno, Nevada 89501, Attention: Investor Relations, by telephone at (775) 328-0112 or by going to the Investor page on Eldorado’s corporate website at www.eldoradoresorts.com; or (2) Caesars Entertainment Corporation by mail at Caesars Palace, One Caesars Palace Drive, Las Vegas, Nevada 89109, Attention: Investor Relations, by telephone at (800) 319-0047, or by going to the Investors page on Caesars’ corporate website at investor.caesars.com.

Certain Information Regarding Participants

Eldorado, Caesars and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Eldorado and Caesars stockholders in respect of the proposed transaction under the rules of the SEC.

Contacts

Thomas Reeg

Chief Executive Officer

Eldorado Resorts, Inc.

775/328-0112

investorrelations@eldoradoresorts.com

Joseph N. Jaffoni, Richard Land

JCIR

212/835-8500

eri@jcir.com

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