Caesars Entertainment beat profit estimates for the third quarter on Tuesday, reporting a profit of 34 cents per share, compared with analysts’ expectations of 29 cents. Total quarterly revenue was about $3 billion, up 3.7% from a year earlier, driven by steady demand in Las Vegas casinos and digital growth.
Analysts, on average, were expecting revenue of $2.93 billion in the third quarter, as per LSEG data quoted by Reuters. The company benefited from consumer spending shifting away from goods and towards experiences, a trend that profits casino operators such as Nevada-based Caesars.
Net income for Q3 amounted to $74 million, up from $52 million in the comparable prior-year period. Meanwhile, consolidated Adjusted EBITDA reached $1.04 billion, up from $1.01 billion in Q3 2022, an all-time record.
Tom Reeg, CEO of Caesars, said: “We experienced Adjusted EBITDA growth year over year in all three of our primary operating segments including Las Vegas, Regional and Caesars Digital. Our Regional segment achieved an all-time quarterly Adjusted EBITDA record as we harvest the recent portfolio investments within this segment.”
Growth across all segments
Breaking down revenue by activities, Casino drew the most revenue at $1.62 billion, up 0.9%, while Food and beverage revenue climbed 7.8% to $443 million. Hotel revenue was up 1.7% to $553 million, and Other revenue jumped 15.6% to $378 million.
Analyzed by segment, Regional, which covers properties outside Las Vegas, remained the primary source of revenue at $1.57 billion, up 2.3%. Turning to Las Vegas operations, which benefited from a 64.3% year-on-year rise in convention attendance to the city in August, revenue increased by 4% to $1.12 billion.
But not only Caesars’ land-based operations proved a success in Q3: online gaming also played its part, as Caesars Digital Adjusted EBITDA reached $2 million, up from a $38 million loss in the same quarter last year. The segment was helped by the launch of Caesars Palace Online in Q3, as total spending on digital was up 38%, reflecting the impact of the new venture.
“We feel very good about how the business is performing, how it’s coming together,” Reeg said on a call with investors. “We feel very good about what we see in front of us. We’re excited about the momentum we’ve got in online casino now that we’ve launched Caesars Palace Online.”
Caesars up almost 9% year-to-date
Revenue for the first nine months of the year was up by 8.9% compared to the same period in 2022, amounting to $8.70 billion. Casino remains the largest source of revenue at almost $4.8 billion, followed by Food and beverage’s $1.31 billion and $1.58 billion in Hotel revenue. Other sources contributed $1 billion to the Q1 – Q3 period.
While the Regional segment was up by 1.7% to $4.42 billion and Las Vegas revenue hiked almost 8% to $3.38 billion, it was Caesars Digital that experienced the biggest revenue jump, up by a whopping 115.1% to $669 million.
Caesars President and Chief Operating Officer Anthony Carano added: “We are looking forward to a strong finish to 2023. Consumer demand remains strong and our capital projects are winding down. We will continue to remain focused on operating cost efficiencies, harvesting returns on project capital and driving long-term EBITDA growth.”
Caesars discusses contract negotiations
In the company’s earnings call on Tuesday, Reeg informed stakeholders that they should be prepared for Caesars to deliver wage increases to its employees soon. He described the anticipated upcoming raise for culinary workers as “well-deserved,” and said that this is anticipated in Caesars’ business model.
“Our employees should and will participate in that, so you should expect that when we reach an agreement on a contract, it’s going to be the largest increase that our employees have seen in the four decades since we started interacting with the Culinary Union,” Reeg said Tuesday.
However, Reeg also noted that a decision might still be weeks away. “This is a five-year contract,” the CEO told investors. “These are complex contracts that cover a long period of time and we’re going to do the work with the union to make sure that we do it right for all parties. I can’t tell you if that means it’s going to happen next week, a couple of weeks from now, or a month from now.”
Employees at the company have been working under an expired contract since mid-September and authorized a strike to be called at any time, a threat that increasingly grows against the backdrop of the Formula One Las Vegas Grand Prix to be held in just over two weeks.
Caesars and the union met for a negotiation session last Friday, hoping to advance talks. However, before that, dozens of union members were arrested after stopping traffic on the Las Vegas Strip in a planned display of civil disobedience, reflecting that some tensions and the possibility of a strike still loom.
“Our goal is to send a message to these companies that it’s time to bargain, and they have not made their moves, and they haven’t done the wrong thing,” said Culinary Union Secretary-Treasurer Ted Pappageorge this week. “They have the opportunity to fix this, but they’re running out of time.”
Access Caesars’ full Q3 report here.