Caesars Q3 revenue takes a hit despite digital growth, LINQ and WSoP sales confirmed

Caesars Entertainment announced on 29 October it slipped to a net loss in Q3 as growth within its digital business and failed to offset declines elsewhere. The group has also completed the sale of the World Series of Poker (WSoP) brand and agreed to sell its LINQ Promenade destination in Las Vegas.

In a somewhat mixed Q3, group revenue reached $2.87 billion (£2.21 billion/€2.66 billion) at Caesars. This is 4% less than the previous year, with the operator seeing declines across all but one of its businesses.

Undoubtedly, the stand-out segment in Q3 was Caesars Digital, with figures from the group showing a 40.9% rise in revenue. Caesars also reported record non-gaming revenue in Las Vegas but declines elsewhere meant it ended Q3 with lower group revenue.

“Results in Las Vegas reflect record Q3 hotel, F&B and banquet revenues driven by strong occupancy and cash ADRs,” Caesars CEO Tom Reeg said in an investor call.

“Regional segment operating results were negatively impacted by new competition, construction disruption and difficult comparisons versus the prior year. Caesars Digital set a new all-time quarterly record for adjusted EBITDA driven by over 40% growth in net revenue.”

Digital dreamland for Caesars

Breaking down Q3 digital numbers, revenue hit $303 million, up from $215 million the previous year, which drove an all-time quarterly adjusted EBITDA record of $52 million.

Online casino revenue was 83.0% higher year-on-year. Caesars noted the impact of the Caesars Palace app, which it said continues to grow as a percentage of igaming revenue. During the quarter it also launched the new Horseshoe Casino brand in Michigan, Pennsylvania and West Virginia, with plans to extend this into Ontario and New Jersey by the year end.

As for online sports betting, revenue climbed 36%, driven by an increased hold of 8.6% versus 6.5% last year.

Caesars sports and online gaming resident Eric Hession put the increase in hold down to app enhancements that have helped drive higher parlay and cash-out mix. He also said segmented market campaigns had increased overall player retention across Caesars’ apps.

Looking ahead, Reeg said he is hopeful of further expansion in the US and for additional states to regulate both betting and igaming. Caesars’ long-term ambition is to operate legal online sports betting and igaming in all US markets.

“You’ve got a well-established path of legalising and licensing through the operators that have invested substantial amounts of capital, employed thousands of people and paid hundreds of millions, billions of dollars in taxes. We think it’s important that it continues on that path,” he said.

Land-based struggles continue in Q3

Looking elsewhere, Caesar’s Regional business remains its primary revenue source despite a 7.6% drop to $1.45 billion. This was mainly due to a 7.8% decline in casino gaming revenue during Q3.

Las Vegas revenue also fell 5.2% to $1.06 billion, again primarily due to lower casino revenue during Q3. A further $5 million in revenue came from branded and corporate operations.

Across the group, casino revenue fell 1.3% to $1.60 billion, food and beverage revenue slipped 1.1% to $438 million, hotel revenue 6.9% to $515 million and other revenue 14.8% to $322 million.

Another quarterly net loss for Caesars

Spending-wise, operating costs were marginally lower year-on-year. However, the decline in revenue pushed operating profit down 11.1% to $644 million.

After including $592 million in non-operating costs, this left a pre-tax profit of $52 million, down 62.6% year-on-year.

Caesars paid $43 million in income tax and also noted an $18 million loss attributable to non-controlling assets. This resulted in a bottom-line net loss of $9 million, compared to last year’s $74 million profit.

In addition, adjusted EBITDA slipped 4% to $1.00bn for the quarter.

Similar story in the year-to-date

As to how Q3 impacted Caesars’ year-to-date, the figures make for similar reading. Group revenue dropped 3.0% to $8.45 billion, with digital again the only business reporting growth for the period.

Caesars paid $68 million in income tax and reported $54 million in net loss attributable to non-controlling assets. As such, it ended Q3 with a $289 million net loss, in contrast to last year’s $858 million profit. The previous year was, however, helped by $904 million in tax benefits.

On top of this, adjusted EBITDA fell 4.6% year-on-year to $2.85 billion.

Caesars offloads WSoP and LINQ Promenade

Accompanying the Q3 announcement was confirmation of a double asset sale. Caesars has completed the sale of the WSoP brand and also agreed to offload its LINQ Promenade venue.

The WSoP deal was announced in August. NSUS Group Inc, the company behind online poker site GGPoker, is the new owner of the brand. NSUS is paying an initial $250 million in cash, plus a $250 million promissory note due five years after the transaction’s closing.

Caesars retains the right to host the flagship WSoP live tournament series at its Las Vegas casinos for the next 20 years. It will also receive a licence from NSUS to continue operating its WSoP Online real-money poker business in Nevada, New Jersey, Michigan and Pennsylvania for the foreseeable future.

Brick-and-mortar poker rooms currently operated by Caesars will continue to feature WSoP branding. In addition, Caesars destinations will continue to enjoy preferential rights to host live WSoP Circuit events going forward.

As for LINQ Promenade, this is being sold to a joint venture to be formed between TPG Real Estate and the Investment Management Platform of Acadia Realty Trust. The deal is valued at $275 million and should close before the end of 2024.

Located on Las Vegas Boulevard, LINQ Promenade offers a range of shopping, dining and entertainment options. These include the High Roller, the world’s tallest observation wheel.

“The sale of the LINQ Promenade represents an accretive, non-core asset sale that will accelerate our debt reduction goals,” Reeg said. “I want to thank all the team members and the tenants of the LINQ Promenade for their partnership over the last 10 years and wish them continued success.”

Could Caesars sell other casino properties?

During the investor call, Reeg faced questions over the sale of other assets. He revealed that the group is involved in discussions around other non-core assets but these will likely take some time to proceed.

Reeg did not disclose the identity of the other assets it is considering selling. However, while he did confirm current talks do not involve any casino properties, he did not rule this out in the future.

“To be 100% clear, we have no asset sale processes of actual casinos ongoing as we speak,” he said. “But to your point, if I just break the year into the 90 days between conference calls, the biggest change that I’ve seen in the last 90 days is the amount of incoming activity we have gotten from people calling us up and saying, ‘what do you think about this asset, what do you think about that asset?’

“And as you know, we’re economic animals. So, if it ultimately makes sense that the best way to drive value is we transact, that’s a possibility. But again, there’s nothing active ongoing, but there is a whole lot more inbound activity post the first Fed move,” the CEO concluded.