Online a boost to Caesars as Q3 casino revenue continues decline30th October 2013 9:05 am GMT
US casino operator Caesars Entertainment Corporation said Tuesday that the successful launch of real-money online gaming in Nevada and New Jersey could serve as a “model” and “potentially stimulate” other US states considering online gaming legalization, as the company reported a 46 per cent rise in revenue attributable to its online gaming arm for the third quarter of 2013.
Total net revenue in Q3 fell marginally by 0.7 per cent to $2,180.0m compared to the same period last year, due to a 7 per cent drop in casino revenue to $1,466.6m which was largely offset by the combination of lower promotional allowances and increases in non-gaming revenue.
Q3 Net Revenue Comparison
|US Dollars (US$)||Q3 2012||Q3 2013|
|Food and Beverage||389.2m||382.9m|
|Reimbursement Management Costs||22.3m||72.7m|
|Casibno Promotional Allowances||(322.6m||(300.6m)|
The decline in casino revenue was primarily driven by the continued impact of regional competition in Atlantic City and in certain other US regional markets outside of Nevada, as well as continued softness in the domestic gaming market and the loss of revenue following the partial sale of its Conrad Punta del Este casino in Uruguay during Q2.
“We made considerable progress on the execution of our strategy and achieved key milestones on many projects during the quarter, despite continued softness in the domestic gaming business,” said Gary Loveman, chief executive of Caesars Entertainment.
Revenue attributable to the company’s online gaming arm, Caesars Interactive Entertainment (CIE), increased by 46 per cent to $91.4m, primarily driven by growth in its social and mobile games business, as well as the acquisition of Buffalo Studios late last year.
Operating loss attributable to Caesars' online arm amounted to $109.3m, an improvement of 25 per cent year-on-year following lower impairment charges of $92.5m during the quarter compared to a year ago ($124.0m).
In an earnings call following the release of the company’s Q3 results, Caesars said that real-money online gaming was another “important component” of its plans to expand its distribution network.
“We launched real money online poker in Nevada on September 19,” said Loveman. “Though we are only about six weeks in, we have received positive feedback from players on WSOP.com about how sophisticated, user-friendly and dynamic the game play is.
“We commenced our marketing efforts at the end of September, utilizing a combination of promotions and advertisements that complement our land based strategy.”
According to data from Pokerscout, WSOP.com currently has a seven-day average of 126 players, slightly below UltimatePoker.com’s 136 players (the only other active Nevada-licensed online poker operator).
“Because of the popularity of the World Series of Poker franchise and our physical footprint, Caesars and CIE are uniquely positioned to tie in offline and online opportunities to broaden our reach,” said Loveman.
He confirmed that the company remains on course to launch online gaming in New Jersey on November 26th, with "soft play" starting on November 21st, subject to regulatory approvals.
“We believe the successful launch of real money online gaming in these states could serve as a model and potentially stimulate other states considering online gaming legalization,” he added.
Total operating expenses increased by 17 per cent to $2,817.5m, generating a loss from operations of $637.5m, a rise of 194 per cent versus a year ago. Net loss for the quarter amounted to $761.4m, up 51 per cent year-on-year.
For the nine month period, total revenue fell by 1 per cent to $6,481.3m, with revenue attributable to Caesars’ online gaming arm up by 27 per cent to $258.9m. Net loss increased by 16 per cent to $1,191.3m.
“While we were disappointed with the circumstances in Massachusetts that led to us ultimately withdrawing from our partnership, we have turned our focus back to our ongoing development and repositioning efforts, which are greater catalysts for enhancing the company’s performance,” continued Loveman. “With a stronger capital structure and positive momentum in our core business - both on the development and operations side – I remain quite enthusiastic about our prospects heading into 2014.”
As at September 30th the company held cash and cash equivalents of $1,707.9m compared to $1,757.5m a year ago.
Shares in Caesars Entertainment Corporation (Co. Data) (NASDAQ:CZR) closed in New York Tuesday down 0.86 per cent at $18.40 per share.