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  • Caesars CEO predicts $5bn EBITDA by 2025 as digital losses are cut to $4m in Q1
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Caesars has reported Q1 2023 net revenue of $2.8bn and improved digital division performance, with CEO Tom Reeg predicting EBITDA of $5bn by 2025.

Topline numbers

Caesars net revenue in Q1 2023 reached $2.8bn compared to $2.3bn for the same period last year.

However, the company reported a net loss of $136m, which is an improvement from the net loss of $680m reported during the same period last year.

The company’s same-store Adjusted EBITDA was $958m in Q1, a significant increase from $296m last year.

Excluding its Caesars Digital segment, same-store Adjusted EBITDA was $962m, compared to $850m for the prior-corresponding period.

Caesars Digital posted a negative Adjusted EBITDA of $4m during Q1, a huge improvement on the $554m of digital division losses recorded during Q1 2022.

News nugget

Caesars CEO Tom Reeg expressed satisfaction with the company’s digital division, noting the positive EBITDA prediction for 2023 had already been achieved on a year-to-date basis, and was expected to exceed previous projections.

The company’s net revenues have now reached a level where they can roughly breakeven and cover their proprietary technology costs, with year-over-year net revenue expected to grow each quarter.

Caesars currently offers sports betting in 30 North American jurisdictions, with 22 offering mobile wagering, and iCasino in five jurisdictions.

Reeg credited the success to targeted promotions in their customer base, including customers in Ohio and Massachusetts, two states recently launched by the company.

Caesars also announced the forthcoming launch of a standalone iCasino app, which is intended to enhance customer engagement and marketing capabilities.

Reeg predicted that, including revenue from Caesars’ land-based venues, the company could approach EBITDA of $5bn by 2025.

CFO Bret Yunker added that given the progress Caesars made in its digital segment, “which is now fully self-funded, we have the ability to sweep all brick-and-mortar cash flow toward debt reduction”.

When asked during the earnings call about the possibility of shifting from reducing debt to buying back shares, Reeg responded that such a move could be possible next year.

He also mentioned that reducing debt is a part of the company’s capital return strategy.

Best quote

“We delivered a dramatic improvement in the performance of our digital segment versus the prior year. Our business nearly broke-even during the quarter on $238m of net revenue versus a $554m EBITDA loss last year.”

Caesars president sports and online gaming Eric Hession

Best question

Chad Beynon, managing director and equity analyst at Macquarie Securities, enquired about Caesars’ potential involvement in industry consolidation.

Reeg stated that the company currently has no assets for sale, and that is unlikely to change in the near future.

However, he added: “Effectively as a public company, everything is for sale every day, so you don’t know what you’ll be approached with.”

He did suggest that Caesars could become more aggressive in its approach to M&A in the future, by switching from a neutral stance to a more offensive approach.

This decision would be based on various factors, including the company’s available free cash flow.

In a similar vein, Barry Jonas from Truist Securities mentioned MGM’s recent acquisition of Push Gaming and wanted to know Reeg’s thoughts about more investment on the digital content side.

Reeg replied:We want to migrate to more of our own games. That’s part of why we are moving to our new app and ultimately our PAM allows us to do so.

“And I would say we are more of a builder versus a buyer, but that could change tomorrow if we see something attractive,” he added.

Current trading & outlook

During the earnings call, Reeg was also asked to clarify his $5bn EBITDA prediction for 2025 since investors would use this as a guidance.

“I’m referring to a three-year time horizon, which is not typical for a call like this,” he admitted.

“Is it possible that within those three years, there could be a cyclical downturn?

“Yes, it’s possible. So, let’s say that instead of $5bn, we end up with $4.75bn. That would be a $1 difference per share on the free cash flow number.”

At the time of writing, Caesars Q1 performance did not generate significant enthusiasm among investors, resulting in a decline of more than 4% in the company’s share value.

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