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Caesars Acquisition Company reports Q2 2016 results

3 Aug 2016

(PRESS RELEASE) -- Caesars Acquisition Company today reported the following results for Caesars Growth Partners, LLC for the second quarter 2016. Caesars Acquisition Company was formed to make an investment in CGP LLC, owns 100% of the voting membership units of CGP LLC and accounts for its investment under the equity method.

  • Achieved another strong quarter in the Interactive Entertainment business unit with net revenues and Adjusted EBITDA up 33.9% and 42.7% for the three-month period ended June 30, 2016 as compared to the three-month period ended June 30, 2015.
  • Recorded consistent growth in the Casino Properties and Developments business unit with net revenues and Adjusted EBITDA up 8.8% and 17.3% for the three-month period ended June 30, 2016 as compared to the three-month period ended June 30, 2015.

Adjusted Earnings before Interest Income/Expense, Income Taxes, Depreciation and Amortization is a non-GAAP financial measure that is reconciled to its most comparable generally accepted accounting principles measure later in this release.

Financial Results
Second Quarter 2016 results compared with Second Quarter 2015

Net revenues for the second quarter of 2016 were $673.6 million as compared to $576.2 million for the respective period in 2015, which was an increase of $97.4 million, or 16.9%. The increase in revenue for Caesars Interactive Entertainment, Inc. was primarily driven by strong organic growth in the social and mobile games operating unit due to the continued focus on conversion and monetization. The increase in revenues for Casino Properties and Developments was primarily due to an increase in casino revenues at Horseshoe Casino - Baltimore, an increase in entertainment revenues at Planet Hollywood Resort & Casino, and increases in all categories of revenues as a result of renovations at The LINQ Hotel & Casino which was substantially completed and available to guests in early May 2015.

Income from operations for the second quarter of 2016 was $90.3 million as compared to $98.4 million for the same period in 2015, which was a decrease of $8.1 million, or 8.2%. The decrease in income from operations was primarily due to increased stock-based compensation expense at CIE offset by the income impact of year over year revenue growth at CIE and Horseshoe Baltimore and increased revenues as a result of renovations at The LINQ Hotel & Casino.

Net income for the second quarter of 2016 was $24.3 million as compared to $37.0 million for the same period in 2015, which was a decrease of $12.7 million, or 34.3%. The decrease in net income was primarily due to the factors discussed for the decrease in income from operations as well as increases in interest expense and the provision for income taxes.

Adjusted EBITDA for the second quarter of 2016 was $213.3 million as compared to $160.4 million for the same period in 2015, which is an increase of $52.9 million, or 33.0%, driven primarily by the income impact of increased revenues at CIE, Horseshoe Baltimore, Planet Hollywood, and The LINQ Hotel & Casino.

Six Months Ended June 30, 2016 results compared with June 30, 2015
Net revenues for the six months ended June 30, 2016 were $1,317.2 million as compared to $1,142.7 million for the respective period in 2015, which was an increase of $174.5 million, or 15.3%. The increase in revenue for CIE was primarily driven by strong organic growth in CIE's social and mobile games operating unit due to the continued focus on conversion and monetization. The increase in revenues for Casino Properties and Developments was primarily due to an increase in casino revenues at Horseshoe Casino - Baltimore, an increase in entertainment revenues at Planet Hollywood Resort & Casino, and increases in all categories of revenues as a result of renovations at The Linq Hotel & Casino. These increases were partially offset by lower revenues at Harrah's New Orleans Casino as a result of the April 2015 smoking ban.

Income from operations for the six months ended June 30, 2016 was $206.2 million as compared to $303.1 million for the same period in 2015, which was a decrease of $96.9 million, or 32.0%. The decrease in income from operations is primarily attributable to the change in the fair value of contingently issuable non-voting membership units recognized in the prior year with no comparable change recognized subsequent to December 31, 2015, and increased stock-based compensation expense at CIE. Excluding the impact of the change in fair value of contingently issuable non-voting membership units and the increase in stock-based compensation expense at CIE, income from operations for the six months ended June 30, 2016 increased by $92.0 million when compared to the same period in 2015 due to the income impact of year over year revenue growth at CIE and Horseshoe Baltimore and increased revenues as a result of renovations at The LINQ Hotel & Casino. These increases were partially offset by lower revenues at Harrah's New Orleans as a result of the April 2015 smoking ban.

Net income for the six months ended June 30, 2016 was $61.2 million as compared to $181.1 million for the same period in 2015, which was a decrease of $119.9 million, or 66.2%. The decrease in net income was primarily due to the factors discussed for the decrease in income from operations as well as increases in the provision for income taxes and interest expense.

Adjusted EBITDA for the six months ended June 30, 2016 was $407.9 million as compared to $308.4 million for the same period in 2015, which is an increase of $99.5 million, or 32.3%, driven primarily by the income impact of increased revenues at CIE, Horseshoe Baltimore, The LINQ Hotel & Casino, and Planet Hollywood offset by a decrease at Harrah's New Orleans as a result of the April 2015 smoking ban.

Second Quarter 2016 results compared with Second Quarter 2015
Interactive Entertainment net revenues increased by $63.2 million, or 33.9%, in the second quarter of 2016 as compared to the same period in 2015, resulting primarily from strong organic growth in CIE's social and mobile games due to the continued focus on conversion and monetization. Income from operations decreased by $33.1 million, or 61.0%, in the second quarter of 2016 as compared to the same period in 2015, primarily driven by increases in stock-based compensation and sales and marketing expenses offset by the income impact of increased revenues. Net income decreased by $35.0 million, or 89.3%, in the second quarter of 2016 as compared to the same period in 2015, primarily driven by the factors discussed for the decrease in income from operations as well as an increase the provision for income taxes. Adjusted EBITDA increased by $29.7 million, or 42.7%, in the second quarter of 2016 as compared to the same period in 2015, driven by the income impact of increased revenues, partially offset by an increase in sales and marketing expenses.

Six Months Ended June 30, 2016 results compared with June 30, 2015
Interactive Entertainment net revenues increased by $114.4 million, or 31.5%, during the six months ended June 30, 2016 as compared to the same period in 2015, resulting primarily from strong organic growth in CIE's social and mobile games due to the continued focus on conversion and monetization. Income from operations decreased by $20.3 million, or 21.4% during the six months ended June 30, 2016 as compared to the same period in 2015, primarily driven by increases in stock-based compensation, sales and marketing, and research and development expenses offset by the income impact of increased revenues. Net income decreased by $37.5 million, or 56.4%, during the six months ended June 30, 2016 as compared to the same period in 2015, primarily driven by the factors discussed for the decrease in income from operations as well as an increase the provision for income taxes. Adjusted EBITDA increased by $56.4 million, or 42.7%, during the six months ended June 30, 2016 as compared to the same period in 2015, driven by the income impact of increased revenues partially offset by increases sales and marketing and research and development expenses.

During the second quarter of 2016, CIE's social and mobile games business had approximately 891 thousand Average Monthly Unique Payers, or 4.6% of Average Monthly Unique Users on the social and mobile platforms, purchase virtual goods, which was an increase of approximately 15.1 basis points from the second quarter of 2015.

Second Quarter 2016 results compared with Second Quarter 2015
Casino Properties and Developments revenues were impacted primarily by the following:
  • Increase in casino revenues at Horseshoe Baltimore due to increases in both slot and table volumes;
  • Continued enhancement of entertainment options at Planet Hollywood positively impacted other revenues; and
  • Increases in all categories of revenues as a result of renovations at The LINQ Hotel & Casino, which was substantially completed and available to guests in early May 2015.

Net revenues for the second quarter of 2016 increased by $34.2 million, or 8.8%, when compared to the same period in 2015. Total trips decreased by approximately 1.8% during the second quarter of 2016 when compared to the same period in 2015. Gross casino hold increased to 12.5% for the quarter ended June 30, 2016 from 12.0% for the quarter ended June 30, 2015.

Cash average daily room rates for the second quarter of 2016 increased to $129, or 8.4%, when compared to $119 for the same period in 2015. Average daily occupancy was 96.0% and 94.9% for the second quarter of 2016 and 2015, respectively. Revenue per available room for the second quarter of 2016 and 2015 was $122 and $113, respectively, or an increase of 8.0%.

Income from operations for the second quarter of 2016 increased by $15.7 million, or 28.6%, when compared to the same period in 2015, Net income for the second quarter of 2016 increased by $13.6 million, or 176.6%, when compared to the same period in 2015, and Adjusted EBITDA increased by $17.0 million, or 17.3%, when compared to the same period in 2015 primarily driven by the income impact of increased revenues at Horseshoe Baltimore, Planet Hollywood, and The LINQ Hotel & Casino.

Six Months Ended June 30, 2016 results compared with June 30, 2015
Casino Properties and Developments revenues were impacted primarily by the following:
  • Increase in casino revenues at Horseshoe Baltimore due to increases in both slot and table volumes;
  • Continued enhancement of entertainment options at Planet Hollywood positively impacted other revenues; and
  • Increases in all categories of revenues as a result of renovations at The LINQ Hotel & Casino.
  • These increases were partially offset by lower revenues at Harrah's New Orleans as a result of the April 2015 smoking ban.

Net revenues for the six months ended June 30, 2016 increased by $60.1 million, or 7.7%, when compared to the same period in 2015. Total trips decreased by approximately 3.6% during the six months ended June 30, 2016 when compared to the same period in 2015. Gross casino hold increased to 12.2% for the six months ended June 30, 2016 from 11.8% for the six months ended June 30, 2015.

Cash average daily room rates for the six months ended June 30, 2016 increased to $133, or 8.1%, when compared to $123 for the same period in 2015. Average daily occupancy was 94.8% and 93.3% for the six months ended June 30, 2016 and 2015, respectively. Revenue per available room for the six months ended June 30, 2016 and 2015 was $123 and $114, respectively, or an increase of 7.9%.

Income from operations for the six months ended June 30, 2016 increased by $29.1 million, or 27.6%, when compared to the same period in 2015, Net income for the six months ended June 30, 2016 increased by $23.2 million, or 209.0%, when compared to the same period in 2015, and Adjusted EBITDA for the six months ended June 30, 2016 increased by $34.4 million, or 18.3%, when compared to the same period in 2015 primarily driven by the income impact of increased revenues at Horseshoe Baltimore, The LINQ Hotel & Casino, and Planet Hollywood offset by a decrease at Harrah's New Orleans as a result of the April 2015 smoking ban. The increase for Net income was also offset by an increase in interest expense.

Liquidity and Capital Resources
CGP LLC and its subsidiaries' primary sources of liquidity include currently available cash and cash equivalents, cash flows generated from its operations and borrowings under the Caesars Growth Properties Holdings, LLC ("CGPH," an indirect, wholly-owned subsidiary of CGP LLC) $150.0 million revolving credit agreement ("Revolving Credit Facility") which is intended to satisfy CGPH's short-term liquidity needs.

At June 30, 2016 and Dec. 31, 2015, CGP LLC had cash and cash equivalents totaling $1,029.2 million and $901.7 million, respectively. Third-party debt outstanding at CGP LLC was $2,284.2 million as of June 30, 2016 and $2,337.3 million at Dec. 31, 2015. This amount includes debt of the consolidated subsidiary CGPH of $1,968.3 million and $2,018.3 million as of the respective dates. Net CGPH repayments under the Revolving Credit Facility during the six months ended June 30, 2016 were $45.0 million. As of June 30, 2016, no amounts were outstanding under the Revolving Credit Facility.
 
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