Caesars Reports Q2 Loss, Reeg Says Decision on iGaming, Sports Unit Could Happen This Year
Posted on: August 6, 2020, 03:17h.
Last updated on: August 7, 2020, 08:40h.
In its first earnings report in new form, Caesars Entertainment (NASDAQ:CZR) reported a loss of $100 million on revenue of $126.5 million, down from net income of $18.9 million a year earlier. But the stock rose modestly in Thursday’s after-hours session, extending a 6.22 percent gain accrued during normal trading.
The “new Caesars” — the combination of the old version of that company and its acquirer, Eldorado Resorts — joins a growing list of gaming companies reporting dismal second-quarter results because of the coronavirus pandemic.
The combined company’s properties were closed for all of April, with some regional venues coming back online in May. Since the middle of that month, 51 Caesars venues reopened.
Caesars CEO Tom Reeg said the company is encouraged by operating trends, in a recent statement.
Bullish commentary on regional casinos is on par with what Eldorado and the old Caesars said following reopenings and in the weeks leading up to finalization of the $17.3 billion takeover. However, Reeg noted there’s been weakness among gamblers 55-years-old and up because older demographics are more susceptible to contracting the coronavirus. The CEO pointed out some of that softness is being offset by gains from unrated players.
In his opening remarks on a conference call with analysts and investors, Reeg said he frequently takes questions regarding the fate of the combined company’s online casino and sports betting businesses. Soon after Eldorado announced its offer for Caesars in June 2019, Reeg said the iGaming and sports wagering units could eventually be spun-off from the parent company to maximize value for investors.
Today, Reeg said a “permanent solution” on the online casinos and sports wagering businesses could be announced within the current calendar year. But he cautioned against “knee jerk reactions,” simply because financial markets are assigning lofty valuations to those fast-growing segments.
He said Caesars’ iGaming and sports betting business could generate $600 million to $700 million in revenue next year. This year, the company’s online gaming unit in New Jersey alone could account for $125 million in turnover, with margins in the high 30s on a percentage basis, said Reeg.
The CEO added “there’s room for multiple success stories in this space,” and that he’s convinced Caesars is going to be one of them.
Leading up to the completion of the acquisition, Eldorado said it would sell at least one property on the Las Vegas Strip. Then, in July, a new wrinkle entered the equation when the operator told Indiana regulators it could sell three gaming venues in the Hoosier State.
Reeg told analysts on the call new Caesars is looking to making something happen in Indiana “relatively quickly.”
Reiterating that the company will sell a Strip property, the CEO said, because of COVID-19, the timeline for that sale could be 12 to 18 months rather than the initial projection of a year. He didn’t mention a specific Sin City venue that could be sold.
“Everything’s for sale every day,” said Reeg.
In terms of expansion, the CEO said there isn’t an immediate need to enter cities or regions in which Caesars currently doesn’t have a footprint, and implied international expansion is off the table for the foreseeable future.
As of June 30, Caesars had $14.7 billion in debt and $1.7 billion in cash.
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