Under the bright lights of the Las Vegas Strip, a shadow has been cast over Caesars Entertainment—a titan in the arena of casino operators. On a Tuesday that saw the after-hours market turn as gloomy as a gambler’s luck running dry, shares of Caesars (NASDAQ: CZR) plummeted, a continuation of a sorrowful 4.66% descent witnessed during the day. The source of this financial misfortune was a grim first-quarter earnings report that failed to meet the high-rolling expectations of Wall Street analysts.
At the heart of the Strip, a place synonymous with opulence and grandeur, Caesar’s majestic empire reported a troubling contraction in its wealth. Earnings for the opening act of the year revealed a loss of 73 cents per share against the backdrop of $2.74 billion in revenue, a discordant tune compared to the modest loss of eight cents and $2.83 billion revenue predictions. The gambling giant pointed to unfortunate bets on events such as the Super Bowl and the NCAA Tournament for its disappointing performance, but those accustomed to playing the odds may see more to the story when they scrutinize the data from Caesars’ Las Vegas and regional domains.
In the neon-soaked corridors of the second-largest Sin City operator, Caesars witnessed its fortunes dwindle, with revenue tumbling to $1.03 billion from the previous year’s $1.11 billion. The decline didn’t stop there; adjusted earnings before the imposing figures of interest, taxes, depreciation, and amortization (EBITDA) shrank to $440 million, a steep decline from the $533 million celebrated a year before. These numbers fuel the fear that the siren song of the Strip is fading, quieting the echoes of a robust demand borne from the pandemic’s enforced seclusion.
Caesars’ woes didn’t confine themselves to the deserts of Nevada but spread to the company’s regional strongholds. Here, adjusted EBITDA stood at $443 million with revenue of $1.37 billion, which, although still lordly, were both subtle retreats from the previous year’s figures of $448 million and $1.39 billion, respectively. This showing isn’t entirely unexpected, as various casino operators have registered concern over the January weather, which had cast a cold and unwelcome chill over visitors to Reno/Tahoe and the Midwest. Further, there are growing indications that patrons in the South with thinner wallets are growing cautious in their spending at gaming tables.
Indeed, the tremors from macroeconomic giants—soaring interest rates, sticky inflation, and an array of fiscal gales—have been felt in gaming venues across the Midwest and South. Evidence of this comes from Atlantic City, where six out of nine casinos saw profits shrivel in the past year, while many locals turned to the digital allure of iGaming.
Yet, walking through storm and tempest, CEO Tom Reeg holds an optimistic torch aloft, declaring confidence in the unfolding year and the prospects of turning the tide on the quarter’s adversities.
As the curtain rose on 2023, the audience of analysts and investors were eager to scrutinize Caesars’ playbook for tackling one of the industry’s heftiest burdens: debt. Light did trickle through with signs of progress; the company chopped its towering debt pile, albeit slightly, from $12.439 billion at year’s end to $12.436 billion come March 31. With a treasury of $726 million in cash and cash equivalents, exclusive of $139 million in restricted reserves, there’s a glint of the coin for the fiscal path ahead.
CFO Bret Yunker added to this hopeful chorus, with projections to deploy free cash flows for the ongoing quest of debt reduction in the year of 2024. These words paint the picture of a Caesars determined to rise again, to shine once more as the empire it has always been amidst the shifting sands of fortune.
