Caesars on road to recovery with increased revenue and record EBITDA in Q3

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Caesars Entertainment has released its Q3 financial results for 2021, showing that recovery in certain areas of the business led to a reduction in its net loss for the quarter, at $233m compared to a $926m net loss in Q3 2020.

Sources of revenue

The business brought in a total of $2.685bn in revenue during the quarter, up 86.1% year-on-year.

The revenue consisted of $1.51bn from casino and pari-mutuel commissions, up 53.9%, $511m in hotel revenue, up 155.5%, $347m from food and beverage, up 173.2%, and other revenues of $317m, up 134.8%.

The operator’s biggest revenue contributor was its regional properties, which brought in $1.55bn during the quarter, up 24.9%, while its Las Vegas properties experienced significant growth from last year, bringing in $1.02bn compared to just $391m in Q3 2020.

Caesars Digital generated $96m in revenue, up from $86m, while managed and branded revenues came to $79m, up from $46m. Corporate and other revenues brought in a further $1m.

These quarterly revenue totals brought the operator’s year-to-date revenue to $6.98bn, compared to just $2.04bn in the first nine months of 2020.

Growth in adjusted EBITDA

Adjusted EBITDA for the business came to a total of $882m during the quarter, more than double the $433m total in Q3 2020.

Las Vegas properties contributed $500m of the EBITDA total, and regional properties brought in $567m, while managed and branded EBITDA totalled $21m.

Caesars Digital generated a negative EBITDA figure of $164m.

These figures brought the business’ total EBITDA for the year-to-date to $2.42bn, compared to just $707m in the first nine months of 2020.

Cost breakdown

The business also saw a significant increase in costs compared to last year, with total operating expenses amounting to $2.15bn, up 36.8%.

Expenses relating to casino and pari-mutuel commissions made up the largest cost, at $830m, followed by general and administrative costs at $486m. Food and beverage, hotel and other costs came to $210m, $130m and $114m, respectively.

After corporate costs of $86m, and losses of $276m attributable to depreciation and amortisation, in addition to a further $21m in transaction costs and other operating costs, the business was left with an operating income of $532m, compared to an operating loss of $131m in Q3 2020.

Further expenses included a net interest expense of $579, a loss of $117m on extinguishment of debt, and other losses of $153m. These costs left the business with a loss from continuing operations before income taxes of $317m.

An income tax benefit of $90m brought the loss from continuing operations to $227, while a further $4m loss from discontinued operations and $2m loss attributable to non-controlling interests gave Caesars its total attributable net loss figure of $233m, compared to $926m in losses for Q3 2020.

This brings its year-to-date loss to $585m, compared to $1.20bn in the first nine months of 2020.

The inside view

“Our third quarter operating results reflect an all-time quarterly EBITDA record in our Las Vegas segment and a new third quarter EBITDA record for our regional segment,” said Tom Reeg, the operator’s chief executive officer.

“We are encouraged by the early results from our rebranded Caesars Sportsbook launch and we are looking forward to launching additional states by year end and into 2022.”

Bret Yunker, Caesars’ chief financial officer, added: “As of October 19th 2021, we have repaid a total of $975 million of traditional debt on a year to date basis.”

“When combined with the repricing and issuance of lower cost debt during the third quarter, our pro forma interest expense has been reduced by approximately $75 million on an annual basis. We expect further debt reduction to come from strong operating cash flows and expected asset sale proceeds.”

During the operator’s earnings call yesterday, president and chief operating officer Anthony Carano said: “We’re laser-focused on scaling our digital business through aggressive customer acquisition during our first fall sports season, post-launch of our seasons branded apps in nine states.”

Caesars Digital product roadmap

The operator’s online offering generated over $3bn in turnover, giving its $96m in net revenue and an adjusted EBITDA loss of $164m. Mobile accounted for 90% of handle, with around 55% of that figure coming from sports betting and 45% from iGaming.

Carano added that customer acquisition and handle had exceeded Caesars’ internal expectations, but net revenues were impacted by promotional investments in odds and profit boosts, competitive pricing strategies and a lower hold than has been seen historically in certain markets.

Sports betting handle share in the eight states operating on the Liberty platform, which Caesars acquired along with its takeover of William Hill, increased to 12% in September, while national market share including all legalised sports betting states sits at 17%.

Following the recent launch of retail sports betting in Louisiana, Caesars now offers sports betting in 20 jurisdictions including 14 on mobile. It also expects to expand the migration of legacy platforms to Liberty in Washington, D.C., Nevada, Pennsylvania and Illinois in 2022.

Carano also said the company expects to roll out enhanced online casino offerings in the fourth quarter, after regulatory approvals related to new game releases in New Jersey, Michigan and West Virginia.

He said the expanded game portfolio will be accompanied by significant improvements to the operator’s in-app merging technologies.

Speaking on the future of the operator’s online offerings, Carano said: “We are anticipating investing in the terms of a cumulative EBITDA losses north of a billion dollars into the digital segment, and generating cash-on-cash EBITDA returns at maturity north of 50%.”

About the author

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Conor Mulheir

Conor entered the gaming industry in 2018 producing high-level live event content for audiences in London, Amsterdam and São Paulo. From 2020, he went on to report news and commission exclusive content for various gaming media brands before joining iGaming NEXT as editor in January 2022.

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