Caesars stock rose nine percent as the company announced an unexpectedly large increase in profits during its Q3 report. Operating profit increased 176 percent to $232 million, up from $84 million. Net revenues of $2.19 billion were more-or-less in line with projections.
President and CEO Mark Frissora explained:
“We executed well during the quarter despite a challenging operating environment in Las Vegas and Atlantic City, and we are optimistic about the opportunities ahead.
“Our results demonstrated continued broad-based strength across our regional properties and momentum in our operational efficiency efforts. Our performance this quarter shows the benefits of our portfolio approach and the balance between destination and regional assets.”
The release of the earnings report was but one of three major Thursday announcements from the press room.
Caesars has also become the first founding partner for the Las Vegas Raiders stadium, but Frissora won’t be around to christen the VIP suite at the 50-yard line. The CEO is leaving the company effective Feb. 8, 2019.
Caesars announced the exit just prior to releasing its earnings report. Frissora has been at the helm since his predecessor, Gary Loveman, stepped down from the role in 2015.
With much of the Caesars group lingering in bankruptcy protection, investors sought a new strategy. They chose Frissora, an outsider to the gaming industry from a background in the rental car business.
In the departure announcement, Chairman of the Board Jim Hunt said Frissora will leave a company in better shape than when he arrived:
“The Board of Directors thanks Mark for his instrumental role in leading the Company through a challenging period and setting Caesars on a course for sustained, long-term growth and value creation. Under Mark’s leadership, the Company has significantly improved margins and profitability while simultaneously increasing customer and employee satisfaction. We are grateful for his leadership and numerous contributions and are optimistic for the future.”
There’s little to go when trying to predict his replacement. The board is conducting an intensive search, though, and could have a few candidates within the industry.
Mitch Garber comes to mind as someone who should be near the top of the list.
Garber is the former CEO of Caesars Interactive Entertainment (CIE) and the current corporate vice chairman. During his tenure, he oversaw the sale of the subsidiary — minus WSOP assets — to Giant Interactive Group for $4.4 billion. The transaction went a long way towards stabilizing the parent company.
Garber is also the former head of partypoker, though poker is low on the totem pole.
There was not a word about online poker in the Q3 report.
Caesars retains ownership of the land-based WSOP empire, operating the WSOP NJ and WSOP NV sites in New Jersey and Nevada, respectively. It relies on a mature partnership with 888 to power its platforms across all markets.
When interactive gaming launches in Pennsylvania, a WSOP-branded poker platform will be part of the market there, too.
Harrah’s Philadelphia paid $10 million for all three permits, planning to roll out a full-service PA online casino. There’s even the potential to link poker pools under multi-state poker agreements down the road.
PA online poker players might be champing at the bit, but Caesars investors are focused on bigger-money verticals. The WSOP still represents just a fraction of its portfolio. And right now, the “brave new world” of sports betting offers bigger prospects in many more markets.
Frissora spent some time discussing the current corporate strategy, with sports betting as a focal point:
“We are making important progress against our growth strategy with the integration of Centaur, expansion of our US sports betting business, and the creation or renewal of partnerships with six professional sports organizations.”
Caesars has newly regulated sports betting operations at its properties in Mississippi and NJ in addition to its long-standing presence in Nevada. It also offers online/mobile betting in the latter two. Pennsylvania sports betting will follow within a few months, too, both in retail and digital settings.
Riding the tide, Caesars has become active in aligning itself with the sports industry. The Q3 presentation included two slides about its ongoing sports betting expansion, including a string of partnerships announced in recent weeks.