Eldorado Resorts Results

Eldorado Resorts Reports First Quarter Net Revenue of $627.8 Million, Record Operating Income of $123.7 Million

Eldorado Resorts

Eldorado Resorts, Inc. (NASDAQ: ERI) today reported record operating income and Adjusted EBITDA for the first quarter ended March 31, 2019. As outlined in the tables below, the Company generated 2019 first quarter Consolidated Adjusted EBITDA of $166.7 million and Consolidated Adjusted EBITDA after $21.9 million of Master Lease payments of $144.8 million. The property results for Presque Isle Downs and Casino and Lady Luck Nemacolin are excluded in the results of operations for both the 2019 and 2018 first quarter periods in this press release following their respective sales on January 11, 2019 and March 8, 2019.

     
    Total Net Revenue
($ in thousands, except per share data)   Three Months Ended
    March 31,
    2019  

Divestitures

(1)

  2019 Total(2)   2018  

Divestitures

(3)

 

2018 Pre-

Acquisition(4)

 

2018

Total(5)

  Change
West   $ 118,095   $ -   $ 118,095   $ 99,579   $ -   $ 29,283   $ 128,862   (8.4 )%
Midwest     96,787     -     96,787     100,795     -     -     100,795   (4.0 )%
South     132,714     -     132,714     122,800     -     19,354     142,154   (6.6 )%
East     166,233     8,071     158,162     116,891     41,671     84,451     159,671   (0.9 )%
Central     120,472     -     120,472     -     -     124,890     124,890   (3.5 )%
Corporate and Other     1,522     -     1,522     127     -     31     158   863.3 %
Total Net Revenue   $ 635,823   $ 8,071   $ 627,752   $ 440,192   $ 41,671   $ 258,009   $ 656,530   (4.4 )%
                                                 
     
    Operating Income
($ in thousands, except per share data)   Three Months Ended
    March 31,
    2019  

Divestitures

(1)

  2019 Total(2)   2018    

Divestitures

(3)

 

2018 Pre-

Acquisition(4)

 

2018

Total(5)

  Change
West   $ 10,801   $ -     $ 10,801   $ 10,139     $ -   $ 4,674     $ 14,813     (27.1 )%
Midwest     27,833     -       27,833     26,676       -     -       26,676     4.3 %
South     27,515     -       27,515     13,359       -     1,386       14,745     86.6 %
East     27,161     (91 )     27,252     19,131       3,002     8,404       24,533     11.1 %
Central     27,070     -       27,070     -       -     27,006       27,006     0.2 %
Corporate and Other     3,224     -       3,224     (15,111 )     -     (5,950 )     (21,061 )   (115.3 )%
Total Operating Income   $ 123,604   $ (91 )   $ 123,695   $ 54,194     $ 3,002   $ 35,520     $ 86,712     42.7 %
                                                       
     
    Adjusted EBITDA
($ in thousands, except per share data)   Three Months Ended
    March 31,
    2019    

Divestitures

(1)

  2019 Total(2)   2018    

Divestitures

(3)

 

2018 Pre-

Acquisition(4)

 

2018

Total(5)

  Change
West   $ 24,043     $ -     $ 24,043     $ 18,424     $ -   $ 7,766     $ 26,190     (8.2 )%
Midwest     36,324       -       36,324       34,515       -     -       34,515     5.2 %
South     38,671       -       38,671       32,217       -     3,421       35,638     8.5 %
East     39,504       (38 )     39,542       26,180       4,707     16,376       37,849     4.5 %
Central     38,323       -       38,323       -       -     35,131       35,131     9.1 %
Corporate and Other     (10,213 )     -       (10,213 )     (7,792 )     -     (4,846 )     (12,638 )   (19.2 )%
Total Adjusted EBITDA(5)   $ 166,652     $ (38 )   $ 166,690     $ 103,544     $ 4,707   $ 57,848     $ 156,685     6.4 %
                                 

Net Income

 

$

38,229

           

$

20,855

                 

Basic EPS

 

$

0.49

           

$

0.27

                 

Diluted EPS

 

$

0.49

           

$

0.27

                 
                                         
(1)   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.
(2)   Total figures for 2019 exclude results of operations for Presque Isle Downs and Nemacolin.
(3)   Figures are for Presque Isle Downs and Nemacolin for the three months ended March 31, 2018.
(4)   Figures are for Grand Victoria (“GV”) and Tropicana Entertainment, Inc. (“TEI”) for the three months ended March 31, 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.
(5)   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.
(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’s record first quarter results reflect our expanded, geographically diversified regional gaming platform and benefited from our unique operating initiatives which drove a 6.4% rise in Adjusted EBITDA to $166.7 million on a 4.4% net revenue decline. First quarter growth was achieved despite significant weather disruption across the bulk of the portfolio in the 2019 first quarter. Our Black Hawk properties were impacted by ongoing renovation-related disruptions to large portions of the hotel rooms and gaming floors which will be completed in the second quarter. Notwithstanding these issues, our growth was broad based across the property portfolio with Adjusted EBITDA rising at 17 of our 26 properties, including double-digit Adjusted EBITDA growth at nine properties. Overall, Adjusted EBITDA increased at four of our five reporting segments as our margin enhancement and operating efficiency initiatives led to a 270 basis point year-over-year rise in the consolidated adjusted EBITDA margin to a first quarter record of 26.6%,” said Tom Reeg, Chief Executive Officer of Eldorado.

“We continue to make significant progress on our synergy plan following our acquisition of Tropicana Entertainment and the Grand Victoria Casino in the second half of 2018. Our implementation of best practices across the property portfolio continues to benefit our legacy properties as well, resulting in expanded margins and elevated guest service and satisfaction across our operations. We expect to continue to grow property margins across the portfolio as we focus on extracting additional efficiencies from our expanded scale in areas such as marketing, advertising, purchasing, player promotion and food and beverage operations.

“Our successful execution on return-focused amenity upgrades remains another factor in our ability to drive improved operating performance. In Reno, we have completely transformed THE ROW properties over the last several years with the renovation of approximately 50% of the 4,071 hotel rooms, new food and beverage outlets, the addition of a world-class spa and other enhancements that have positioned THE ROW as a market leader. We also continue to make progress in conjunction with our partner, The Cordish Companies, on the master plan and design concept that is expected to transform Isle Casino Racing Pompano Park and the surrounding real estate to a must see mixed-use entertainment and hospitality destination. In Black Hawk we are renovating all of the hotel rooms at both properties and updating the casino floors in anticipation of new visitors to the market beginning later this year. Finally, at Tropicana Atlantic City we recently opened an expansive, new sportsbook that has created great excitement and positioned the property as a leader in the market for sports wagering enthusiasts which is translating into increased visitation and higher table game play, food and beverage revenue and hotel occupancy while also allowing us to realize marketing efficiencies.”

Balance Sheet, Liquidity and Return of Capital

At March 31, 2019, Eldorado had $216.9 million in cash and cash equivalents, excluding restricted cash. Outstanding indebtedness at March 31, 2019 totaled $3.1 billion, including approximately $40.0 million outstanding on the Company’s revolving credit facility as Eldorado paid down approximately $205.0 million of outstanding borrowings under the revolving credit facility in the 2019 first quarter, which included approximately $150 million of proceeds from the sale of Presque Isle Downs that were applied to temporarily repay borrowings under the revolving credit facility. The terms of our indentures require us to make an offer to purchase a portion of our outstanding senior notes with the excess proceeds from the sale unless we permanently reduce debt or make specified acquisitions or capital expenditures within 365 days of the sale. Capital expenditures in the first quarter of 2019 totaled $38.4 million.

The Company did not repurchase any shares in the 2019 first quarter and continues to have approximately $140.9 million remaining on its current stock repurchase program.

Summary of 2019 First Quarter Region Results

The property results for Presque Isle Downs and Casino and Lady Luck Nemacolin have been excluded from the results of operations in this press release and property results for Grand Victoria and properties owned by TEI have been included in results of operations for the first 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 March 31, 2019 declined approximately 8.4% to $118.1 million compared to $128.9 million in the prior-year period, and operating income decreased to $10.8 million from $14.8 million in the year-ago quarter. West Region first quarter Adjusted EBITDA declined 8.2% to $24.0 million. The region’s Adjusted EBITDA margin improved 10 basis points to 20.4% as the Company was successful in managing labor costs to match the lower volumes at THE ROW and Black Hawk properties, primarily related to weather and construction disruption, respectively.

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 March 31, 2019 decreased approximately 4.0% to $96.8 million compared to $100.8 million in the prior-year period, while operating income rose to $27.8 million from $26.7 million in the year-ago quarter. Midwest Region first quarter Adjusted EBITDA rose approximately 5.2% to $36.3 million as the Adjusted EBITDA margin for the segment rose 330 basis points to 37.5%. Adjusted EBITDA was up at all six of the Midwest properties year over year for the second consecutive quarter. Adjusted EBITDA for the Midwest Region in the prior-year period was $34.5 million reflecting an Adjusted EBITDA margin of 34.2%.

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 March 31, 2019 declined approximately 6.6% to $132.7 million compared to $142.2 million in the prior-year period, while operating income increased to $27.5 million from $14.7 million in the year-ago quarter. South Region first quarter Adjusted EBITDA increased approximately 8.5% to $38.7 million as Adjusted EBITDA increased at five of the seven South region properties, including double-digit increases at three properties. The Adjusted EBITDA margin for the segment rose 410 basis points to 29.1%.

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 March 31, 2019 declined approximately 0.9% to $158.2 million compared to $159.7 million in the prior-year period, while operating income grew to $27.3 million from $24.5 million in the year-ago quarter. East Region first quarter Adjusted EBITDA rose 4.5% to $39.5 million compared to Adjusted EBITDA of $37.8 million in the prior-year period as the East Region’s Adjusted EBITDA margin improved 130 basis points to 25.0%.

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

Net revenue for the Central Region for the quarter ended March 31, 2019 decreased approximately 3.5% to $120.5 million compared to $124.9 million in the prior-year period, while operating income increased to $27.1 million from $27.0 million in the year-ago quarter. Central Region Adjusted EBITDA for the first quarter rose 9.1% to $38.3 million compared to Adjusted EBITDA of $35.1 million in the prior-year period as the Central Region’s Adjusted EBITDA margin improved 370 basis points to 31.8%. Adjusted EBITDA improved by double digits at two of the three properties.

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 28,000 slot machines and VLTs and approximately 750 table games, and over 12,500 hotel rooms.

 
ELDORADO RESORTS, INC.
CONSOLIDATED STATEMENTS OF INCOME

($ in thousands, except per share data)

(unaudited)

     
    Three Months Ended
    March 31,
    2019   2018
REVENUES:            
Casino and pari-mutuel commissions   $ 470,851     $ 343,528  
Food and beverage     75,209       52,198  
Hotel     64,691       30,741  
Other     25,072       13,725  
Net revenues     635,823       440,192  
EXPENSES:            
Casino and pari-mutuel commissions     210,306       169,551  
Food and beverage     60,385       44,776  
Hotel     23,650       12,506  
Other     11,249       7,405  
Marketing and promotions     32,301       21,301  
General and administrative     119,888       74,202  
Corporate     16,754       11,569  
Impairment charges     958       9,815  
Depreciation and amortization     57,757       31,534  
Total operating expenses     533,248       382,659  
Gain (loss) on sale or disposal of property and equipment     22,318       (706 )
Transaction expenses     (1,894 )     (2,548 )
Income (loss) from unconsolidated affiliates     605       (85 )
Operating income     123,604       54,194  
OTHER EXPENSE:            
Interest expense, net     (73,510 )     (31,251 )
Unrealized loss on restricted investments     (1,460 )      
Total other expense     (74,970 )     (31,251 )
Net income before income taxes     48,634       22,943  
Provision for income taxes     (10,405 )     (2,088 )
Net income   $ 38,229     $ 20,855  
Net income per share of common stock:            
Basic   $ 0.49     $ 0.27  
Diluted   $ 0.49     $ 0.27  
Weighted average basic shares outstanding     77,567,147       77,353,730  
Weighted average diluted shares outstanding     78,589,110       78,080,049  
                 
 
ELDORADO RESORTS, INC.
SUMMARY INFORMATION AND RECONCILIATION OF
OPERATING INCOME (LOSS) TO ADJUSTED EBITDA
($ in thousands)
 
    Three Months Ended March 31, 2019
     
   

Operating

Income

 

Depreciation

and

Amortization

 

Stock-based

Compensation

 

Transaction

Expenses (6)

  Other (7)  

Adjusted

EBITDA

Including Divestitures:                        
West   $ 10,801     $ 13,143   $ -   $ -   $ 99     $ 24,043  
Midwest     27,833       8,421     15     -     55       36,324  
South     27,515       11,015     9     -     132       38,671  
East     27,161       12,149     7     -     187       39,504  
Central     27,070       11,210     -     -     43       38,323  
Corporate     3,224       1,819     4,917     1,894     (22,067 )     (10,213 )
Total Including Divestitures   $ 123,604     $ 57,757   $ 4,948   $ 1,894   $ (21,551 )   $ 166,652  
                         
Divestitures:                        
East   $ (91 )   $ -   $ 7   $ -   $ 46     $ (38 )
Total Divestitures (1)   $ (91 )   $ -   $ 7   $ -   $ 46     $ (38 )
                         
Excluding Divestitures:                        
West   $ 10,801     $ 13,143   $ -   $ -   $ 99     $ 24,043  
Midwest     27,833       8,421     15     -     55       36,324  
South     27,515       11,015     9     -     132       38,671  
East     27,252       12,149     -     -     141       39,542  
Central     27,070       11,210     -     -     43       38,323  
Corporate     3,224       1,819     4,917     1,894     (22,067 )     (10,213 )
Total Excluding Divestitures (2)   $ 123,695     $ 57,757   $ 4,941   $ 1,894   $ (21,597 )   $ 166,690  
                                           
     
    Three Months Ended March 31, 2018
     
   

Operating

Income

 

Depreciation

and

Amortization

 

Stock-based

Compensation

 

Transaction

Expenses (6)

  Other (8)  

Adjusted

EBITDA

Excluding Pre-Acquisition/Including Divestitures:                        
West   $ 10,139     $ 8,189   $ 63   $ -   $ 33   $ 18,424  
Midwest     26,676       7,645     44     -     150     34,515  
South     13,359       8,531     25     -     10,302     32,217  
East     19,131       6,049     5     -     995     26,180  
Central     -       -     -     -     -     -  
Corporate     (15,111 )     1,120     3,542     2,548     109     (7,792 )
Total Excluding Pre-Acquisition/Including Divestitures   $ 54,194     $ 31,534   $ 3,679   $ 2,548   $ 11,589   $ 103,544  
                         
Divestitures:                        
East   $ 3,002     $ 1,415   $ 5   $ -   $ 285   $ 4,707  
Total Divestitures (3)   $ 3,002     $ 1,415   $ 5   $ -   $ 285   $ 4,707  
                         
Pre-Acquisition :                        
West   $ 4,674     $ 3,084   $ -   $ -   $ 8   $ 7,766  
Midwest     -       -     -     -     -     -  
South     1,386       2,027     -     -     8     3,421  
East     8,404       7,876     -     -     96     16,376  
Central     27,006       8,105     -     -     20     35,131  
Corporate     (5,950 )     632     -     472     -     (4,846 )
Total Pre- Acquisition (4)   $ 35,520     $ 21,724   $ -   $ 472   $ 132   $ 57,848  
                         
Including Pre-Acquisition/Excluding Divestitures:                        
West   $ 14,813     $ 11,273   $ 63   $ -   $ 41   $ 26,190  
Midwest     26,676       7,645     44     -     150     34,515  
South     14,745       10,558     25     -     10,310     35,638  
East     24,533       12,510     -     -     806     37,849  
Central     27,006       8,105     -     -     20     35,131  
Corporate     (21,061 )     1,752     3,542     3,020     109     (12,638 )
Total Including Pre- Acquisition/Excluding Divestitures (5)   $ 86,712     $ 51,843   $ 3,674   $ 3,020   $ 11,436   $ 156,685  
                                         
(1)   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.
(2)   Total figures for 2019 exclude results of operations for Presque Isle Downs and Nemacolin.
(3)   Figures are for Presque Isle Downs and Nemacolin for the three months ended March 31, 2018.
(4)   Figures are for Grand Victoria (“GV”) and Tropicana Entertainment, Inc. (“TEI”) for the three months ended March 31, 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.
(5)   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.
(6)   Transaction expenses represent costs related to the acquisition of TEI and GV and costs related to the divestiture of Presque Isle Downs and Nemacolin for the three months ended March 31, 2019 and costs related to the acquisition of TEI, GV and Isle of Capri for the three months ended March 31, 2018.
(7)   Other for the three months ended March 31, 2019 is comprised of severance expense, gain (loss) on the sale or disposal of property and equipment, equity in income (loss) of an unconsolidated affiliate, an impairment charge on non-operating land and selling costs associated with the dispositions of Presque Isle Downs and Nemacolin.
(8)   Other for the three months ended March 31, 2018 is comprised of severance expense, gain (loss) on the sale or disposal of property and equipment, equity in income (loss) of an unconsolidated affiliate, an impairment charge at Vicksburg and selling costs associated with the dispositions of Presque Isle Downs, the terminated sale of Vicksburg and the purchase of GV.
     
 

Reconciliation of Adjusted EBITDA to Adjusted EBITDA after Master Lease Payments

     
   

Three Months ended

March 31, 2019

Adjusted EBITDA   $ 166,690  
Less: Master Lease Payments (1)     (21,910 )
Adjusted EBITDA after Master Lease Payments   $ 144,780  
         
(1)   In conjunction with the Tropicana Acquisition, we began reporting Adjusted EBITDA after Master Lease Payments. Master Lease Payments represents cash rent payments to GLPI associated with the triple net operating lease entered into on October 1, 2018. Total interest expense related to the Master Lease was $24.6 million for the three-month period ended March 31, 2019. For the initial periods of the Master Lease, cash payments are less than the interest expense recognized due to the accounting treatment of the Master Lease as a financing obligation. The pro forma adjusted revenue to rent ratio (as defined in the Master Lease Agreement) for the properties in the aggregate totaled 2.2:1.0 for the trailing twelve months ended March 31, 2019.



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