Caesars Entertainment reported its third-quarter results on Tuesday, showing a dip in its Las Vegas operations while its regional and Caesars Digital segments experienced modest growth. This comes as the company is working towards completing its $17.6 billion acquisition by Fertitta Entertainment, a deal first announced in May after a competitive bidding process involving investor Carl Icahn. The merger is expected to finalize by mid-2024 after the Federal Trade Commission requested additional documents on September 17, which has postponed the antitrust approval process by at least 30 days. Caesars' shareholders endorsed the merger on September 22, with 65% voting in favor.
In the third quarter, revenue from Las Vegas fell by 2% year-over-year, totaling $930 million. Additionally, the company’s adjusted EBITDA dipped to $343 million, a 10% decrease, and net income dropped significantly by 40%, amounting to $79 million. So far in 2023, Las Vegas revenue is down 2%, adjusted EBITDA has decreased by 8%, and net income has seen a 21% decline.
Although Caesars is set to transition to a private company post-merger, its stock price has plummeted from over $100 in 2021 to approximately $29 today. On the stock market, the company's shares fell slightly on Tuesday, declining less than 1%. This quarter, no analyst call was held due to the ongoing merger, though CEO Tom Reeg previously addressed the situation.
During a keynote address at the Global Gaming Expo in Las Vegas, Reeg criticized the pressures of operating a business as a public company, stating that measuring performance in 90-day increments is "not healthy" for operations. He emphasized the benefits of combining their restaurant and hospitality business with Fertitta's portfolio, which includes over 400 outlets nationwide, creating a synergistic ecosystem.
The regional segment provided a positive highlight in Q3, with revenue climbing 6% to $1.6 billion and adjusted EBITDA increasing by 3.5% to $524 million. Year-to-date, regional adjusted EBITDA has shown a 4.5% increase, reaching $1.4 billion, while net income is up by 6%, totaling $69 million.
Caesars currently has 54 properties in 20 North American jurisdictions, with the majority being regional, meaning they are situated outside Las Vegas. Fertitta's Golden Nugget brand operates eight casinos across the country, seven of which are not in Las Vegas.
Currently, both companies compete in multiple regional markets, including:
– Lake Tahoe, NV
– Laughlin, NV
– Atlantic City, NJ
– Lake Charles, LA
– Danville, IL
– Biloxi, MS
Following Caesars' acquisition by Eldorado Resorts in 2020, several properties were sold off to navigate antitrust issues. At the G2E event, Reeg mentioned he wouldn’t be surprised if some properties might need to be divested in the ongoing merger process.
As the quarter closed, Caesars reported $864 million in cash and cash equivalents against a total debt of $11.6 billion, which will be assumed in the Fertitta acquisition.
Caesars Digital reported $326 million in revenue for Q3, a 5% increase from the previous year. Its adjusted EBITDA rose dramatically by 57% to $44 million, and net income reversed a $21 million loss last year, resulting in a $4 million profit this year. Year-to-date, digital revenue has increased by 6%, adjusted EBITDA by 20%, and net income has nearly tripled, jumping by 194%.
This division has been a primary area of growth for Caesars, with speculation about potential sell-offs emerging prior to the Fertitta deal. Caesars currently offers online sports betting in 28 jurisdictions and iGaming in six.
Caesars has notably avoided participating in prediction markets due to concerns over how such platforms might affect its retail casino licenses. In contrast, many competitors like FanDuel, DraftKings, and Fanatics have invested heavily in prediction markets and customer acquisition.
At the G2E, Reeg voiced his disapproval of prediction markets and highlighted an instance where contracts regarding Caesars' potential acquisition were listed, pointing out the lack of rules preventing him from betting on them. "There was nowhere in their rules that said I couldn’t place a bet," he remarked to the audience.
