Record year for Caesars Interactive after social & real-money growth

12th March 2014 9:28 am GMT

Caesars Interactive Entertainment (CIE) has reported a 52 per cent increase in revenue to a record $316.6m for the full 2013 year, following growth across its social gaming and real-money gaming operations.

CIE, the online gaming arm of US casino operator Caesars Entertainment, said it was a “significant year” for the company which also saw it spun off under Caesars Growth Partners (CGP) - a joint venture in which Caesars holds a 58 per cent economic interest through Caesars Acquisition Company.

“We demonstrated solid economic results in the current year while simultaneously investing and positioning our business for future growth in social, mobile and real money online gaming,” said Craig Abrahams, chief financial officer of CIE parent company Caesars Acquisition Company in an earnings call yesterday.

The company said that its record revenue performance was primarily a result of its acquisition of Buffalo Studios, organic growth from Playtika, and revenue growth in the real-money segment from the launch of WSOP.com in Nevada and in New Jersey.

“On the real money front, in January, we increased our visibility through advertising and other marketing in New Jersey,” continued Abrahams. “We are pleased with the resulting total CIE revenue growth of 49 per cent and increased market share to 32 per cent from December to January (including 888).

“We expect the impact of marketing costs and expenses related to the ramp up of operations to continue this year as we work to attract new customers, invest in operational infrastructure and create greater awareness in both Nevada and New Jersey.”

CIE closed its fourth social game acquisition in four years in February with the purchase of Pacific Interactive, operator of leading social and mobile casino-themed game House of Fun Slots. The company said that its “differentiated slot content offering and talented team” will add to Caesars’ portfolio of market-leading casino games.

“We expect to complement this product with our marketing and operational skills to deliver an excellent experience to our newly acquired players,” said Abrahams.

“We have made substantial advances in 2013 and in 2014, and will continue to focus on gaining market share, growing the business via acquisitions and increasing user adoption of our mobile and web platforms through technology enhancements and content development,” he added.

2013 Net Revenue

US Dollars (US$) 20122013
Casino 6,243.0m5,808.8m
Food and Beverage 1,507.6m1,510.0m
Rooms 1,205.5m1,219.6m
Management Fees 47.3m57.0m
Other 762.0m874.8m
Reminbursable Management Costs 67.1m268.1m
Casino Promotion Allowances (1,252.1m)(1,178.6m)
Net Revenue 8,580.4m8,559.7m
 - Caesars Interactive Entertainment 207.7m316.6m

Meanwhile, Caesars Entertainment reported a marginal 0.2 per cent decline in net revenue for the year to $8,559.7m with a decrease in casino revenues largely offset by increases in “passthrough” reimbursable management costs, rooms, food and beverage, and other revenues, coupled with lower promotional allowances.

Casino revenue fell 7 per cent to $5,808.8m, in large part due to the continued weakness seen in Atlantic City resulting from increased regional competition. Continued softness in the domestic gaming market in certain other US regional markets outside of Nevada also negatively impacted casino revenues, as has the sale of the Conrad.

The company reported a loss from operations of $2,234.6m for the year, compared to $319.9m a year ago, as it recorded total impairment charges of $3,018.9m.

Results were also impacted by the decline in casino revenue, the write-off of its investment in Suffolk Downs in Massachusetts, and a $52.9m charge for a contingent earn-out liability related to the Buffalo acquisition. Net loss for the year widened to $2,948.2m, an increase of 95 per cent compared to the previous year.

“During 2013 we invested significantly in our properties and executed a number of initiatives to enhance the company’s capital structure and better position the company for sustainable growth,” said Gary Loveman, chairman, CEO and president of Caesars Entertainment. “The recently announced asset sale to Caesars Growth Partners further supports these objectives by increasing liquidity at our CEOC (Caesars Entertainment Operating Company) subsidiary and facilitating new investment in some of the assets.

“Looking ahead, our efforts to improve the company’s capital structure remain a key priority as we build on our recent actions and leverage our operating and financial toolbox to create value. The asset sale is an important step in our ongoing efforts to improve the health of the CEOC subsidiary. The process to address CEOC’s condition is well underway, but will take quite some time to achieve. I am proud of the milestones we have reached to date and look forward to making much more progress.”

As at December 31st the company held cash and cash equivalents of $2.77bn, compared to $1.76bn a year ago, with long-term debt of $20.9bn.

Shares in Caesars Entertainment Corporation (Co. Data) (NASDAQ:CZR) closed at $25.57 per share in New York yesterday, while shares in Caesars Acquisition Company (NASDAQ:CACQ) closed down 1.56 per cent at $15.75 per share.

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