Despite a recent 15% decline in the share price of Caesars Entertainment, CEO Tom Reeg maintains an optimistic outlook on the company’s future prospects.

Topline numbers

Caesars Entertainment recorded a 3.7% year-over-year revenue upswing to $3bn in Q3 2023.

The company also achieved a record-high adjusted EBITDA of $1.04bn, marking a 3.1% year-on-year increase.

A detailed revenue and EBITDA breakdown can be found here.

News nugget

Caesars CEO Reeg (pictured) expressed optimism about the company’s financial performance and growth prospects, despite recent fluctuations on the stock market.

“Our EBITDA is growing in both brick-and-mortar and digital. So our free cash flow is growing. We continue to use our free cash flow to pay down debt and reduce leverage,” Reeg said.

He went on to emphasise his confidence for the future: “So we feel very, very good about how the business is performing, how it’s coming together. Looking forward, we feel very good about what we see in front of us. 

“We see, of course, the volatility that you see in share prices in the space. It’s not reflective of what’s going on in the business. And we’re just going to keep delivering numbers until that volatility subsides. And we expect the market to recognise the value in our equity.”

Caesars Entertainment has faced its share of stock market fluctuations in recent months. 

The stock reached a peak of $60 in July, but experienced a 15% loss over the past month, as well as a 14% decline over the past six months. 

Year-to-date, it has fallen by 6%. 

An update on digital

Caesars, meanwhile, pointed to its success on the digital side. In Q3 2023, online sports betting handle increased 14% and iCasino handle improved 38%. 

“Revenues were negatively impacted by lower year-over-year hold in both our online sports betting and iCasino segments, which we believe to be temporary,” said Eric Hession, president Caesars Sports and Online Gaming.

During Q3, Caesars launched its iCasino app, which is now known as “Caesars Palace Online.” 

Hession emphasised the strides the company had made in the past two years, highlighting that its product now compares favourably to the top offerings in the market. 

However, he also acknowledged that there were still some areas of functionality that needed further development and focus.

Hession explained: “Broadly speaking, I feel like if a customer came to our app, the benefits that we have with Caesars Rewards and other unique features make it a compelling choice.

“The app is going to allow them to stay with us and become a loyal customer, which might not have been the case a year or so ago.”

Caesars is also actively working on improving the integration of various game vendors, aiming to gain more insights into the preferences of their customers. 

“We are also exploring the possibilities of adding another skin to the portfolio, as there are a number of states where we have additional licences that we’ve reserved and would plan to potentially roll that out later in 2024,” he added. 

CEO Reeg also noted that Caesars has experienced minimal cannibalisation in its digital and brick-and-mortar operations. 

He highlighted that customers who were acquired or re-engaged through digital channels have continued to visit physical Caesars locations, and this trend has been strengthening with each passing quarter.

Best quote

“I don’t have grandkids yet, but I’m hoping it’s awarded before my first grandkid is 25 years old. It’s going slowly. They’ve just passed the second round of questions. I think the quickest that they could issue a licence based on what needs to be accomplished between now and then, is the end of 2024. I would say, my personal expectation is it’s 2025 before a licence is on.”
CEO Tom Reed on the casino licence process in New York City

Best question

Shaun Kelley from Bank of America sought to gain a clearer understanding of the expense pressures that Caesars Entertainment is currently facing in its business operations.

CEO Reeg replied: “We’re constantly continuing to find new opportunity to squeeze cash flow out of the business. The cost pressures related to labour and inflation that you are hearing about, both from us and others, are not new.

“We’ve been dealing with them since we got out of the pandemic. And we have said all along that you shouldn’t expect a significant decline in our margin and you haven’t seen that to date. So that’s what I’d expect going forward.”

Current trading & outlook

In Q1 2023, Caesars Entertainment CEO Tom Reeg set a $5bn EBITDA target for 2025, including a Digital segment EBITDA target of $500m.

Reeg said: “The target has not changed. We continue to see a visible path to that end. And each quarter, we grow more confident.”

Caesars Entertainment posted a 3.7% year-on-year revenue increase to $3bn in Q3 2023, with growth seen across all core segments.

Adjusted EBITDA reached $1.04bn, which translated to a 3.1% year-on-year increase and a record high for the company.

The Caesars Digital segment maintained its positive EBITDA status after turning a profit in Q2 2023.

The unit’s adjusted EBITDA reached $2m, marking a significant improvement from the $38m EBITDA loss reported during the same period of the previous year.

Net income stood at $74m, up 42% on Q3 2022.  

Caesars CEO Tom Reeg commented: “During the third quarter of 2023, the company achieved an all-time consolidated adjusted EBITDA record. 

“We experienced adjusted EBITDA growth year-over-year in all three of our primary operating segments including Las Vegas, Regional and Caesars Digital. 

“Our Regional segment achieved an all-time quarterly adjusted EBITDA record as we harvest the recent portfolio investments within this segment.” 

Revenue and EBITDA breakdown

Breaking down the revenue figures by segment, Caesars’ Las Vegas segment reported revenue of $1.1bn, a 4% increase compared to the prior year.

The Regional segment reported $1.6bn in revenue, a 2.3% increase from the previous year.

The Caesars Digital segment generated $215m in revenue, reflecting a 1.4% increase from the prior year, driven by the launch of a new standalone iCasino app, Caesars Palace Online.

The operator’s Managed and Branded business segment generated further revenue of $98m and, at 40%, saw the largest year-on-year rise.

Adjusted EBITDA for the Regional segment stood at $575m, a 1% year-on-year increase. 

However, adjusted EBITDA for the Managed and Branded segment was $20m, a 9% year-on-year decrease, while adjusted EBITDA for the corporate segment recorded a 64% decrease, leading to an EBITDA loss of $36m.

Caesars refrained from providing any specific remarks regarding this EBITDA loss.

However, back in September, the company fell prey to a cyberattack.

In response to the attack, Caesars incurred expenses associated with addressing, resolving, and investigating the situation.

At the time, however, Caesars said that it expected no material impact on its Q3 financial results.

Instead, the group said it remained optimistic that its cybersecurity insurance and potential indemnification claims against third parties would help mitigate any potential financial consequences.

Caesars did not disclose any additional details about the incident.

2023 outlook

Meanwhile, Caesars president and COO Anthony Carano said the group is looking forward to a strong finish to 2023. 

“Consumer demand remains strong, and our capital projects are winding down. We will continue to remain focused on operating cost efficiencies, harvesting returns on project capital and driving long-term EBITDA growth.”

Caesars Entertainment has revealed strategic insights into its digital division and has pledged to intensify competition for market share.

Topline numbers

In Q2 2023, Caesars Entertainment reported total revenue of $2.9bn, surpassing the $2.8bn recorded in the same period last year.

The group posted net income of $920m in Q2 2023, compared to a loss of $123m in the same quarter of the previous year.

Adjusted EBITDA reached just above $1bn, up from $978m for the comparable prior-year period.

A full Q2 business segment breakdown can be found here.

News nugget

The big news this quarter was the positive financial contribution coming from Caesars’ digital division.

Caesars Digital reported revenue of $216m and $11m in adjusted EBITDA. This represents a stark contrast to the $69m EBITDA loss reported during the same period last year.

Those results also marked a significant milestone for the division, as it achieved its first full quarter of EBITDA profitability since rebranding to Caesars Sportsbook in Q3 2021.

During the quarter, Caesars Sportsbook saw a substantial 180 basis points improvement in sports betting hold compared to the previous year. Furthermore, the firm saw a notable year-on-year increase of 27% in iCasino volume.

Caesars attributed this success to its targeted promotional investments and a lower level of marketing, both for existing customers and those in the new states.

Technology enhancements

In addition to the strong financial results, Caesars Sportsbook unveiled four technology enhancements that are expected to drive further growth going forward.

The first is its new iCasino product, Caesars Palace online, which has already gone live in multiple states and is pending regulatory approval in others.

It boasts a significantly improved product with enhanced marketing capabilities, all integrated with the enticing benefits of Caesars rewards, the operator said.

Moreover, the company transitioned its Caesars app in Nevada to its flagship Liberty platform, delivering a “vastly improved” experience for customers.

“Pending regulatory approval, we anticipate converting our William Hill product and our retail sportsbooks to the Liberty platform at some point later this year,” said Eric Hession, Caesars’ president for sports and online gaming.

Caesars Sportsbook has also begun rolling out its new native iOS Sportsbook app, aiming to achieve 100% adoption by August, while the company is also on track to introduce its in-house player account management system, with a state-by-state rollout planned for later in the year.

This system will eventually lead to a shared wallet, expected to be launched in 2024.

These four products required “significant amounts of technical resources over the past year and we’re very excited to introduce them to our customers,” Hession said.

Product development

Presently, Caesars Sportsbook operates sports betting in 30 North American jurisdictions, 22 of which offer mobile wagering. Additionally, Caesars offers iCasino products in six jurisdictions.

CEO Tom Reeg also pointed to Caesars’ focus on iCasino, especially since its acquisition of William Hill.

“When we took over William Hill, William Hill had one employee working on iGaming and we were on old technology,” he said.

He emphasised the capabilities of the Caesars Palace online casino product, including bonusing, segmentation, proprietary games, and live dealer features.

“We are fully aware that we have seen significant competition in the iCasino space. We don’t expect that we’re just going to come in and run everybody over.

“But we feel like we’ve got the product to start to build market share,” Reeg concluded.

Best quote

In Q1 2023, Caesars Entertainment CEO Tom Reeg set a Digital segment EBITDA target of $500m within the next two years. During the Q2 earnings call, he said:

“I laid up specific targets in terms of where we can be in Digital looking out to 2025 on our last call. Then I went to some conferences where a lot of you told me there’s no way we’ll get there. Every number that I laid out, I’m 100% confident that we’re going to hit it.”

Best question

Several questions arose during the earnings call about Caesars’ digital business. Joe Greff from JPMorgan highlighted an interesting trend, noting that Caesars’ iGaming revenue increased sequentially from $75m in Q1 to $80m in Q2.

He then enquired about Caesars’ expectations for the future.

Hession replied: “From a volume perspective, particularly on the iCasino side, and from a general business standpoint, we are feeling very optimistic.”

He further explained that the company is now equipped with a competitive product to work with their existing customer database.

This would enable them to move loyal customers of the Caesars rewards programme smoothly over to the online casino side, which was previously challenging as customers had to navigate through the sports betting app first.

Additionally, Hession emphasised that they hadn’t been able to conduct segmented marketing effectively with their existing technology.

However, with the new system in place, Caesars can now implement segmentation and reinvest directly in the casino side, he concluded.

Current trading & outlook

Following the presentation of the results, Caesars’ shares experienced a decline of approximately 2%.

However, CEO Reeg remained positive about the company’s current trading and outlook.

Commenting on his expectations for the company’s 2023 performance, Reeg said: “We’re on a run rate of about a little over $4bn of trailing EBITDA.”

Looking to the future, Reeg envisions the potential for over $500m of EBITDA in the digital business and a similar opportunity in the brick and mortar segment, driven by returns from recently completed and upcoming projects.

This growth trajectory is expected to drive Caesars towards becoming a $5bn company.

Caesars Entertainment has hailed the strong performance of its digital division in Q2 2023, as it posted its first positive adjusted EBITDA result since rebranding.

In Q2 2023, Caesars Entertainment reported total revenue of $2.9bn, surpassing the $2.8bn recorded in the same period last year.

Net income showed a remarkable turnaround, reaching $920m in Q2 2023, compared to a net loss of $123m in the same quarter of the previous year.

That turnaround was “primarily driven by a release of $940m of valuation allowance against deferred tax assets associated with our real estate investment trust (REIT) leases,” Caesars said.

The Caesars Digital segment, however, also emerged as a standout performer, as it posted its first quarter of positive adjusted EBITDA since rebranding to Caesars Sportsbook in Q3 2021.

The segment reported adjusted EBITDA of $11m in Q2 2023, in stark contrast to the $69m EBITDA loss reported during the same period in the prior year.

Q2 business segment breakdown

Breaking down the revenue figures by segment, Caesars’ Las Vegas segment reported revenue of $1.1bn after experiencing a slight decline of 1.2% compared to the prior year.

However, the regional segment showed more resilience as it reported $1.5bn in revenue, a 0.5% increase from the previous year.

The Caesars Digital segment generated $216m in revenue, reflecting a substantial 42.1% increase from the prior year.

The operator’s Managed and Branded business segment generated further revenue of $72m, down 2.7% from the previous year, while the Corporate and Other segment reported revenue of $2m.

Commenting on the results, Caesars Entertainment CEO Tom Reeg expressed satisfaction with the company’s performance, stating: “The second quarter of 2023 reflected continued strength in our business. Demand remains strong in both Las Vegas and our regional markets.”

He also highlighted the significant progress made by Caesars’ digital division.

CFO Bret Yunker, meanwhile, highlighted the company’s focus on reducing debt and leverage, noting that Caesars had permanently repaid the $250m Baltimore Term Loan following the acquisition of the remaining 24% equity ownership in the property.

H1 results

For the first half of 2023, Caesars Entertainment reported strong financial results with total revenue reaching $5.71bn, marking a significant 11.8% increase from the previous year’s $5.11bn.

Among its different business segments, regional revenue showed a modest 1.3% growth, reaching $2.85bn, while Las Vegas revenue climbed 9.9% to $2.26bn.

The digital business demonstrated extraordinary growth, skyrocketing by an impressive 358.6% to $454m.

Additionally, managed and branded revenue experienced a slight uptick of 0.7%, reaching $141m.

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.

Caesars will “dramatically curtail” its US marketing efforts effective immediately according to CEO Tom Reeg, who insists the operator has already smashed its online market share targets.

Since launching the Caesars Sportsbook brand, Reeg said the business had gone from an “afterthought in the market” to winning a combined US sports betting handle market share of almost 21%.

In Q4, the operator more than tripled its digital revenue year-on-year to $116m. However, this came at a cost, as Caesars reported a Q4 net loss of $360m for the division during the reporting period, rising to $580m for full-year 2021.

In fact, Caesars made a bigger loss on the digital division in Q4 than its online operation generated in net revenue for the whole of 2021 ($337m).

As with most US sports betting operators, the losses were attributed to high marketing spend and the cost of acquiring new customers, particularly in newly launched states like New York and Louisiana.

Caesars’ share price fell by more than 3% following the publication of the results as investors continue to struggle to see a path to profitability for Caesars Digital – and many of its rivals – in such a competitive and expensive operating environment.

“That leads me into digital, where I know the market is struggling,” said Reeg on the Q4 analyst call. “Investors are struggling with it. Can this be a profitable business? We’ve gone from kind of ever-increasing bullishness to unlimited bearishness at this point,” he added.

To remedy this, Reeg has promised to pull the vast majority of Caesars’ above-the-line digital division marketing spend in the US. This appears to have done the trick, at least in the short term, with Caesars’ pre-market share price up by more than 5%.

“You are going to see us dramatically curtail our traditional media spend effective immediately,” said Reeg. “We have accomplished what we set out to do. We set out to become a significant player, and it’s happened significantly quicker than we thought.

“I think most of you know me as someone who’s not one to spend any money needlessly. We’ve gotten to where we need to be and you’re going to see our commercials largely disappear from your screens,” he added.

Caesars Sportsbook ads will continue into March Madness in some states as it was too late to change the schedule, according to Reeg.

The operator has spent a fortune to date on traditional media marketing, led by Hollywood-style TV ad campaigns fronted by actor and comedian JB Smoove, including a 30-second spot starring Halle Berry during this month’s Super Bowl.

It has also broken the bank to acquire customers in key battlegrounds including New York, where Caesars currently leads the monthly revenue rankings. When the market launched in January, the operator offered a deposit match of $3,000 to new users.

“I know there was a lot of focus on our $3,000 deposit match in New York and the thought that, gee, I could just put in $3,000, make a couple of easy bets and withdraw my money,” said Reeg. “But our average deposit in New York was about $450.

“Our results in New York were not driven by a lot of $3,000 deposits responding to our offer – it was hundreds of thousands of smaller customers that came to our site.

“The reason that you go after those brand-new customers as avidly as all of us do is because the customer that you find in the first quarter post-launch is worth something in the neighbourhood of 2x what you find afterwards, so there is a method to the madness here.”

On the call, Reeg revealed that overall betting volumes in New York, and Caesars’ current market share in the state, were both double what the operator had originally anticipated.

Caesars has recruited around 500,000 customers in New York since going live on 8 January and the state is nearly as large as the rest of its US digital business combined.

Reeg described the consumer demand for mobile sports betting in New York as “absolutely staggering” and said Caesars dealt with 75,000 customer queries within the first 72 hours of launch.

Caesars’ higher-than-expected market share means the cost is also greater than the operator had originally modelled for, with the Super Bowl in particular triggering some sizeable pay-outs.

Considering New York went live after the Q4 reporting period, in January 2022, Reeg warned investors the bottom line will almost certainly get worse before it gets better.

“We were extremely pleased with how we came out of the box,” said Reeg. “But because of the launch of New York and Louisiana in the first quarter, you should anticipate that this current quarter is our peak EBITDA loss and that you’re never going to see a quarter like this again.

“That quarterly loss is going to be larger than it was in the fourth quarter, but you’re going to see us moving toward profitability and making moves both in traditional media and ultimately through offers to customers, because we have reached where we want to reach in terms of customer acquisition,” he added.

Caesars reported a 63.5% year-on-year rise in overall Q4 net revenue to $2.59bn, primarily driven by recovery across the operator’s regional and Las Vegas-based casino properties. The business made an overall Q4 net loss of $434m.

For full-year 2021, the operator reported net revenue of $9.57bn amid an overall net loss in excess of $1bn.

Caesars Entertainment CEO Tom Reeg will take home a base salary of $2m in 2022 after the US operator renegotiated the contracts of its senior leadership team.

Caesars entered into an amended and restated employment agreement with Reeg on 28 December 2021, which became effective as of 1 January 2022 and will last for a three-year term until 1 January 2025, with automatic one-year renewals.

Reeg’s annual incentive bonus opportunity as a percentage of base salary is 200%, meaning he could earn a further performance-based $4m each year.

The new contract also includes a long-term incentive award initiative at 450% of base salary, or $9m. This type of policy rewards employees for reaching specific goals that lead to increased shareholder value.

Reeg is also entitled to a $5m signing bonus for the new executive employment agreement.

Four further executives entered into amended and restated employment agreements with Caesars at the turn of the year, including father-son duo Gary Carano (chairman) and Anthony Carano (president and COO), as outlined below.

The company also entered into new executive employment agreements with chief marketing officer Josh Jones and chief administrative and accounting officer Stephanie Lepori.

Caesars Entertainment will report its Q4 and full-year 2021 financial results on 22 February.

The business brought in a total of $2.69bn in revenue during Q3, up 86.1% year-on-year after its regional casino properties reopened following Covid-19 closures and disruption in the year prior.