Adjusted EBITDA across the business totalled $296m, down from $535m in the prior-year period. This accounts for an EBITDA loss of $554m attributable to Caesars Digital.
According to CEO Tom Reeg, over $400m of the digital division’s EBITDA loss was the result of launching online services in New York and Louisiana, which brought significant marketing and promotional costs for the business.
In February, Reeg said the business would “dramatically curtail” its US marketing efforts, after suggesting it had already surpassed its online market share targets.
Caesars Entertainment CEO Tom Reeg: “We fully expect to inflect to EBITDA positive in Digital as we move into football season of 2023.”
“And we did cut back all of our mass media spend,” Reeg told Caesars investors on yesterday’s (3 May) earnings call. “So we cut about a little over a quarter of a billion dollars of expected spend from when we started cutting in February, through the end of this year.”
Further, he explained that costs began to reduce after the initial launch periods in New York and Louisiana. “If you look at the quarter, we lost about $44m in March. So as you got out of that heavy launch period, our losses moderated considerably.
“So our losses come down considerably as we move forward, and we fully expect to inflect to EBITDA positive in Digital as we move into football season of ‘23,” he said.
Speaking to the benefits and challenges presented by pushing the Digital business, Reeg added: “To give you some context, we’ve had 1.4 million in Caesars reward sign-ups since we re-launched digital that came in through the digital channel.
“If you think about a typical Caesars property, we get about 50,000 on average per property per year of new sign-ups. If you think about 1.4 million customers coming into the pipeline, in really a span of five months, it’s extraordinary. And now the work in front of us is to identify which are the most valuable customers there.“As you look back at the way football season was last year, you are getting the same offer whether you were a $50 player or you were a $1,000 and above player. We didn’t discriminate. That’s kind of what we inherited, as we bought all of these brick-and-mortar assets for various operators in the past, marketing to the masses with little discrimination.
“And what you’ve seen us do repeatedly in the brick-and-mortar business is target that spend to our most valuable players, and not waste money on the unprofitable players. That’s the task in front of us in Digital.
“So you’re going to see us segmenting in terms of our marketing as we move forward. And that’s going to be a dramatic improvement in profitability as we move forward. So we are excited for that.”
Of the total $680m net loss in Q1, Caesars Digital accounted for $576m, compared to just an $8m loss in Q1 2021.
The operator’s ‘managed and branded’ and ‘corporate and other’ business segments also made net losses of $211m and $185m, respectively.
Caesars Entertainment CEO Tom Reeg: “You’re going to see us segmenting in terms of our marketing as we move forward. And that’s going to be a dramatic improvement in profitability as we move forward.”
“Our properties are performing above expectations and we anticipate significant debt reduction in 2022 through a combination of strong operating cash flows and expected asset sale proceeds,” said Bret Yunker, CFO of Caesars Entertainment.
According to Caesars president and COO Anthony Carano, 18 of the operator’s properties set a record for the highest first-quarter EBITDA levels during the period, while 28 set a record for highest Q1 EBITDA margin.
The business ended the reporting period with $814m in cash and cash equivalents, and net debt of $13.49bn.