Caesars Entertainment pleased the investment community by reporting an unanticipated profit in the fourth quarter Thursday, but the company refused to address its biggest overhang – how the hostile moves by corporate raider Carl Icahn to gain representation on the board and force a sale of the casino giant will play out.
At the outset of a conference call with analysts to address the company’s results for the quarter that ended Dec. 31, CEO Mark Frissora all but repeated Wednesday’s statement that management and the board held discussions with Icahn, who acquired almost 9.8 percent of the company’s stock.
“We regularly engage with shareholders and we value their input,” Frissora said in prepared remarks. “We intend to carefully evaluate Mr. Icahn’s suggestions, including his request for board representation and will provide updates in due course.”
Icahn, 83, disclosed his interest in Caesars in a Securities and Exchange Commission filing Tuesday, saying the company was undervalued and the best way to boost the stock price was through a sale.
Frissora did address another of the company’s overhangs – the search for his replacement as CEO. Frissora, who has been with Caesars since 2015, announced his intention in November to step down this month. However, when the search stalled, Frissora agreed to stay on the job through April.
Icahn told the company in the SEC filing to abandon the CEO pursuit.
When asked by Macquarie Securities gaming analyst Chad Beynon how the CEO search was proceeding, Frissora said the company “was far along in the process” and has “a good list” of potential candidates.
“We’re far enough along to insure a seamless transition with me,” he said.
Later in the call, Frissora told another analyst the board looking for a CEO candidate with experience in hospitality and gaming who was a “seasoned executive” who has “managed through turbulent times and adversity.” He added, “We feel like the Caesars brand is attracting a good talent pool.”
In the quarter, Caesars grew revenue overall revenue 11.3 percent to $2.12 billion, which was due primarily to the inclusion of two Indiana racetrack casinos the company acquired last summer.
In Las Vegas, where the company operates 10 resorts on or near the Strip, revenue grew 7.8 percent to $949 million. Revenue per available room increased 10.9 percent.
Caesars net income was $198 million in the quarter, or earnings per share of 29 cents. A year ago, the company has net income of $2 billion in the same quarter, or $2.88, which was primarily due to a nonrecurring tax benefit.
Analysts were pleased with the numbers.
Credit Suisse gaming analyst Cameron McKnight called the results, “a very good quarter, against reasonably muted expectations. He said investors would most likely focus on the Las Vegas revenue increases and cash flow growth of 18 percent.
Caesars, which has some 40 casino properties in 13 states and owns the World Series of Poker, exited a 30-month bankruptcy that shed more than $16 billion of debt from its books in October 2017.
For all of 2018, Caesars net revenue grew 72.4 percent to $3.52 billion, due to the acquired casinos and the bankruptcy reorganization. Full year net income was $303 million, reversing a loss of $368 million in 2017.
Shares of Caesars closed at $9.43 on the Nasdaq Thursday, down 19 cents or 1.98 percent. The stock price was almost 2 percent in after-hours trading.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
