Good morning. Caesars’ OSB progress - handle share up to 17%, icasino held back for content upgrade; were standouts as it announced its Q3 results. The group is also aiming at “massive cash generation” with asset sales and FCF to cut down debt levels. We also have Red Rock Resorts Q3s, the recap from the Reputation Matters event hosted by WE+M’ Scott Longley; and the New York license shake out has started as the state looks set to announce first consortiums to be approved for OSB.

If you were forwarded this newsletter and would like to subscribe, click here:

Caesars Entertainment Q3 

The top line 

• Net revenues of $2.7bn vs. $1.4bn Q321, net loss of $233m vs. -$926m YoY. 

• Caesars Digital net revenues of $96m ($221m YTD), EBITDA loss of $164m ($171m YTD).   

• LV net revenues $1.017bn, up 234% YoY $304m; adj. EBITDA of $500m up 44% vs. Q319; regionals $1.54bn vs $1bn Q320, AEBITDA $567m vs. $350m Q320   

• Caesars had $15.2bn in outstanding debt and $1.1bn on the balance sheet. 

Bring me your tired, your poor: Praising Caesars’ progress on the digital front, CEO Tom Reeg said the group had recorded Q3 handle of just over $1.7bn, but over the course of October alone handle had reached $1.3bn, which one quick-thinking analyst noted represented c20% share. Reeg pointed out that the group achieved 12% share of OSB handle in non-Liberty states and in the jurisdictions where the Liberty platform was live, share of handle had reached 17%. The handle figure was reached without “adding fantasy (DFS) or horse racing: it’s pure sports betting handle and it continues to generate momentum,” he said. 

Up on the roof: Reeg once again talked up the 65 million-strong Caesars rewards program, which he said brought in 30% of new customers to the Caesars sportsbook. Those players made up 50% of its OSB handle during Q3, with many of those players being higher spenders “betting large amounts and making their way into our system.” 

Sports betting and volumes on parlays had grown significantly thanks to the company launching its marketing campaigns in early August, brand awareness levels had gone “through the roof” since then, Reeg said. 

Non-compete: Caesars’ icasino offering however will have to wait until it’s been rejuvenated with fresh content. 

“The platform is non-competitive,” Reeg said, “we’ve not spent money promoting icasino until we have a broad array of games. This should take place by year end and we’ll talk more about it then.” 

The hold up revolves around getting content approved in different states, but this wasn’t due to states dragging their feet, Reeg said, “William Hill when it was under UK ownership didn’t provide the resources to its US business to develop its icasino platform and we’re now putting resources into igaming to catch up with OSB.” 

Payment plan: Caesars’ focus will be on paying down debt in the next 12 months, Reeg said. It will start the sale process of one of its Strip assets in early 2022 as part of “a massive cash generation” exercise. It will also include the $1.2bn recouped from the sale of Hill’s non-US assets, the sale of its stake in Neo Games (amount undisclosed) and its brick and mortar activities generating $2bn in FCF. Caesars will be very “aggressive on the refinancing front to lower debt cost”  and expects to have “well in excess of $5bn cash to deploy”.  

Red Rock Resorts Q3

The top line

• Revenues of $414.8m up 17% YoY and adj. EBITDA of $184.5m was up 15% on Q320.

• Las Vegas operations revenue of $412.7m up 29% YoY and adj. EBITDA of $197.9 up 40% YoY.

• ‘Prioritized’ free cash flow hit $126.3m.

Miss you nights: CFO Stephen Cootey said the reintroduction of the mask mandate in Nevada at the end of July had a “modest impact” on visitation and time-on-device metrics.

Cashless advance: The company said it had started a trial of IGT’s cashless solution at its Red Rock and Green Valley casinos. Meanwhile, in digital the company has recently signed a deal with GAN for its spoon-to-launch STN sportsbook operation. Red Rock is developing the Durango project and has six other development opportunities in the Las Vegas valley.

“We really like the idea of doubling the size of our essentially doubling the size of our current operating platform here in Las Vegas by developing those properties,” said CEO Frank Fertitta. 

Earthquake: Cootey suggested the margin expansion seen in the last four quarters was “seismic”. “We see a lot of these cost savings that we've put in place, and all the processes we put in place, are permanent,” Cootey added. “And while we have no crystal ball in terms of a revenue standpoint, we do expect several high margin lines of business to come back in ‘22 and ‘23.” Fertitta also noted that recent demographic trends were also ”super-positive”.

*** A message from our sponsors: Venture capital firm Yolo Investments continues to build one of gaming’s most dynamic portfolios as it eyes up seed and A-stage opportunities across the sector. Its 28-company, €135m AUM gaming fund already houses holdings in fast-growing suppliers and operators, including Green Jade Games and Casino Days. Yolo Investments is also on the lookout for LPs as it looks to scale new concepts, including its high-roller live casino brand, Bombay Club.

As a proud sponsor of Earnings+More from Wagers.com, Yolo Investments wants to hear from readers of this newsletter. Get in touch with your pitch, or for a chat.

Reputation Matters recap

Turn back time: In his keynote for Reputation Matters, John O’Reilly, CEO of Rank Group, said he was hopeful any changes brought in by the UK Gambling Act review would not “turn back the clock to intolerance and disapproval” of the gambling industry and it was vital that operators and the Gambling Commission had “some clear air in which to regulate” the sector. O’Reilly added that the aim of the 2001 Budd Report, on which much of the 2005 Gambling Act that regulates UK operators today is based, was to extend consumer choice while enhancing protections for the most vulnerable in society. 

Noting how in 2021 the industry was almost always addressed in a negative way, O’Reilly asked: “Where did it all change? Have operators overstepped the mark (with excessive advertising)? Has there been too much competition?” 

Clause 4: The subsequent panels were not optimistic about the regulatory prospects for UK operators, even if this was largely related to the fraught relationships many of them have with the Gambling Commission. In terms of messaging, Camilla Wright, former journalist and current partner at Red Knot Communications, said the industry needed “its own Clause 4 moment” (when the Labour Party renounced its call for national ownership of industry). “That could be giving up sports sponsorship or imposing voluntary stake limits,” she added. 

Unintended consequences: Stephen Ketteley, partner at the law firm Wiggin, pointed out that the key regulatory goals of keeping crime out of gambling, protecting the most vulnerable  and ensuring betting integrity had largely been achieved, but on a burning issue like affordability there was a lack of joined up thinking. 

“Affordability is a good example, there has to be a balance between preventing players from losing too much money, but if customers who spend over the national average are asked to supply payslips (to prove income), they'll refuse to do that,” Ketteley said. “The result will be going to the black market or stopping gambling. The government doesn’t want that so the regulator has to understand the issues.” 

We can work it out: In terms of messaging once again there were calls for the industry to make itself heard among non-gambling voices and tell its own positive story, although delegates in the audience pointed out that they had tried but with little success. There was also broad praise for the work undertaken by the Betting and Gaming Council, which has ended the highly-damaging casino-bookmaker warfare that dominated so much of the FOBT debacle and pushed for positive measures such as adoption of the the whistle-to-whistle advertising ban, operators implementing 20% responsible gambling messaging and safer game design.

First New York OSB licensees to be announced 

Wait is over: The industry may not have to wait long to find out who will be able to offer online sports betting in New York, according to the New York Post. A source close to the matter told the newspaper that state authorities will start with “at least” two consortiums, these will be the groups that include Bally Bet, BetMGM, DraftKings and FanDuel and the group composed of Caesars, Wynn Interactive, Empire Resorts and Rush Street Interactive. If the timeline is respected New Yorkers would be able to bet on the Super Bowl with those operators. 

Miss you NY: On the face of it, the consortium that includes Jay-Z, Fanatics and Barstool will miss out as it had “not gotten the same paperwork to sign this week as the two groups that appear to have been selected by the state — raising questions about whether the Fanatics group will get a license”.

High taxes - less promos: The New York tax rate will be set at 51%, much higher than the 13% in New Jersey and even the 34% tax rate in Pennsylvania, which will likely lead to worse odds but less promotions and bonuses. Commenting on the possibility of regulated OSB in New York during Caesars' Q3 call yesterday, CEO Tom Reeg said he would “prefer lower tax rates”, but in “larger population states there is high velocity and participation and you can conceivably make money.” 

Newslines 

Game on: After many disagreements and arguments from commercial operators, the Hard Rock group launched its online and mobile sportsbook in Florida on Monday. Hard Rock said it was “Game on, Florida” for the launch of what is effectively a sports betting monopoly in Florida that is expected to generate $500m in taxes for state coffers. It will be supported by marketing agreements with pari mutuel operators in the state.   

Gris gris gumbo: Genius Sports has been certified by Louisiana’s Gaming Control Board as a Sports Wagering Service Provider for an initial six months, during which time it will seek to obtain its full license from the state. The Louisiana permit means Genius Sports is now authorized to operate in 18 US states. 

Great lake realms: UK games developer Gaming Realms has been granted a full iGaming Supplier Licence in Michigan. The group had been granted a provisional license by the state in January and is now licensed in three US jurisdictions (NJ and PA are the other two). It recently launched its flagship Slingo game with Wynnbet in New Jersey and Fanduel in Michigan.

What we’re reading 

LP: Check out SBC’s fuller coverage of John O’Reilly’s keynote. 

Calendar

• 3 Nov: Everi, Golden Entertainment, MGM Resorts International Q3s

• 4 Nov: Aspire Global, Penn National Gaming, Gaming & Leisure Partners Q3s

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com