As Caesars Entertainment CEO Tom Reeg tells it, the digital side of Caesars was one Super Bowl result away from a profitable quarter.
“The Super Bowl didn’t hold very well for us, frankly, given the amount of scoring that happened in it,” Reeg explained during the conference call about the company’s Q1 2023 earnings.
Caesars Digital posts just $3.5 million in adjusted EBITDA losses
Because of the skills of Jalen Hurts, Patrick Mahomes, and others, the digital side of the business ended Q1 roughly $3.5 million in the hole. It is a massive jump forward from Q1 of 2022, when the digital sector had adjusted EBITDA of $554 million in losses.
Caesars Digital produced $238 million in net revenues compared to $53 million in losses last year. Net income was $32 million in lossess compared to $576 million in losses in 2022.
Reeg pointed out the company now had a promo credit to handle ratio of 1.25%, which he said was lower than many competitors and certainly a far cry from the New York promotional spend a year ago.
Reeg also noted that had perhaps only one state and not both Ohio and Massachusetts launched during the period, it would have been a positive quarter.
“Our performance this quarter clearly demonstrates the effectiveness of our targeted promotional investment within our existing customer base as well as customers located in the new states that we launched this quarter, Ohio and Massachusetts,” added Caesars Sports and Online Gaming President Eric Hession.
Reeg pointed out that Ohio is already EBITDA positive as of March, just three months after launch.
The Caesars leadership said they believe digital will continue to pay for itself in the coming quarters, though did acknowledge that the acquisition costs associated with the start of NFL season could mean slight Q3 losses. Hession elaborated on how the company is preparing new technology to stay ahead of pace when it comes to the growth of Caesars Digital.
New tech and standalone Caesars online casino app planned
Hession elaborated on the three-pronged tech advancement:
“First starting early in the third quarter, we will be launching a new standalone iCasino app this exciting addition to our product offering will allow us to drive better customer engagement through a dedicated application with a focus on increased game content, which will include new proprietary offerings and improved marketing capabilities.
Second, we expect to begin testing our in-house player account management system later this year, which will ultimately lead to a shared wallet that we anticipate rolling out in 2024. And finally, we expect to migrate all of our operations in Nevada to our Liberty tech stack ahead of the 2023 football season.”
When asked about why the company is moving to a standalone casino app while some competitors are focused on a singular app, Hession noted that the slot customer in particular was being underserved with the current status quo.
“So it’s a fine experience for somebody who’s predominantly a sportsbook player who then likes to dabble or play some of the casino side. But for somebody who’s a primary casino customer or somebody who likes to play a little bit of Sportsbook but mostly casino, they want to see the casino app and they want to go right into the homepage where the casino games are that they can start engaging with,” said Hession.
Because of the strong digital performance, Caesars repaid its $400 million Forum Convention Center loan two years early, saving $32 million in interest in the process.