Caesars affirms digital commitment amid $576m Q1 2022 net loss

Caesars has restated its commitment in its Caesars Digital business, despite the division posting a $576m net loss and a $56m negative revenue figure during the first quarter of 2022.

Releasing its financial results for the period, the Las Vegas-headquartered operator reported the twin losses, as well as an adjusted EBITDA loss of $554m over the same period in the digital division.

Caesars CEO Tom Reeg acknowledged the losses, which he attributed to the financial impact of launching in New York and Louisiana, combined impacts which amounted for a little over $400m of the adjusted EBITDA loss figure.

“If you look at the quarter, we lost about $44m in March, so as we got out of that heavy launch period, our losses moderated considerably,” Reeg explained.

Reeg highlighted the pledge made by Caesars in August with the relaunch of its sportsbook, to invest $1bn in marketing over the next two and a half years.

“If you think about the investment that we talked about making in terms of cumulative EBITDA losses, we said north of a billion when I made that statement when we launched in August.

“I was thinking a billion and a quarter to a billion and a half based on where we’ve gotten, share wise. I think a billion and a half is the right neighborhood,” he clarified.

“If you look at what we’ve done to date, about two-thirds of our cumulative EBITDA loss is our investment into digital, something which is now in the rear-view mirror,” Reeg added.

In February, Caesars committed to cutting back on its early marketing spend in New York, suggesting that it had achieved its objectives in generating a leading market share in the Empire State, despite subsequently being surpassed by US market leader FanDuel.

“We got to our handle share goals far earlier than we anticipated, and so we cut back all of our mass media spend,” Reeg said.

“We’ve cut a little over a quarter of a billion dollars of expected spend from when we started cutting in February through to the end of 2022. There has been no degradation in our handle share other than our planned retrenchment in New York.”

Reeg continued: “We were more aggressive than we needed to be out of the box in New York and got 37%-40% market share, beyond our expected estimates of around 15%-20% where we are now.

“Since we’ve retrenched that’s the only material movement in share even though we’ve cut over a quarter of a billion dollars from marketing,” he added.

The Caesars CEO was grilled by investors on whether there might be a potential move in the works by the sportsbook should efforts to open up the California sports betting market to commercial operators prove successful in November 2022.

Reeg spoke in the wake of the news that a multi-operator legislative initiative in this area had garnered enough signatures to potentially be considered for a vote in California.

“Between our Indian partnerships and our Vegas assets, we have an enormous California database and we would expect to be an aggressive competitor for business if and when that state launches,” Reeg told investors.

“There are things that we learned in New York in terms of how we would tailor and what we would shoot for, but we would expect to be among the leaders in California like we are in most states where we operate,” he added.

At a wider group level, Caesars reported net revenue of $2.3bn in Q1 2022, a year-on-year rise of 28%, with both the group’s flagship Las Vegas and regional casino operations reporting growth.

Las Vegas revenue rocketed 84% year on year to $914m, while regional operational revenue rose 14% to $1.3bn over the same period.

However, Caesars reported a 60% increase in its net losses for Q1 to $680m and a 43% year-on-year reduction in its adjusted EBITDA, which fell to $296m, primarily due to the Caesars Digital losses.

Excluding Caesars Digital, Caesars’ group adjusted EBITDA would have increased 60% year on year to $850m from a prior year high of $530m.