Caesars Entertainment endured an underwhelming Q1 2024, including a drop in net revenue, but executives were pleased with strong progress in the online gaming and sports betting segments.
Revenue for the quarter totaled $2.7 billion, down fractionally from the $2.8 billion recorded in Q1 2023. Adjusted EBITDA fell 9% to $853 million from $947 million year-over-year, while net loss increased to $158 million from $136 million in the previous year.
“We’re not in the habit of delivering quarters that look like this,” CEO Tom Reeg admitted to investors on the company’s Q1 earnings call on April 30. “If you look at the biggest buckets…everything that could go wrong did for us.”
President and COO Anthony Carano attributed those declines to “several transitory issues during the quarter.”
One of those was that the Las Vegas segment experienced a 4.5% decline in revenue to $1.03 billion. The company says this was primarily due to lower-than-expected hold despite a Q1 record occupancy of 97.6% thanks to events such as the Super Bowl and Chinese New Year.
Table hold in Vegas was 5% to 8% lower than usual. “This was not an instance of a few players beating us,” said Reeg. “This was kind of a repeated butt-kicking broadly based throughout the quarter.”
Other factors in Caesars’ underwhelming results were inclement winter weather that disrupted operations across the country and a significant loss incurred on launching sports betting in North Carolina, said executives.
Reeg added that these elements amounted to more than $75 million “of what’s clearly one-time negatives for us in the quarter.”
Caesars Digital revenues climb
The biggest bright spot for Caesars was the performance of its online casino and sports betting operations.
Caesars Digital delivered $282 million in net revenues, up 18.5% year-over-year. It also generated $5 million of adjusted EBITDA during the quarter, up from a loss of $4 million in the prior year.
In particular, online sports betting saw a 23% growth in net gaming revenue year-over-year, while iCasino net gaming revenue spiked 54%. Adjusted EBITDA improved to $5 million from a loss of $4 million in the prior year. However, the strong performance in those verticals was somewhat offset by declines in retail and other segments.
Caesars Digital President Eric Hession acknowledged that, while online sports betting hold increased roughly 80 basis points year-over-year, that performance was at “the lower end of our expected range” due to subpar results around Super Bowl and March Madness.
On the online casino front, Hession cited the new Caesars Palace Online Casino app as a key driver in the company’s iGaming operations setting new quarterly records for active customers, volume, GGR and net gaming revenue. The app now comprises more than half of Caesars’ net gaming revenues in this segment, Hession noted.
This week, Caesars announced that the app will undergo a comprehensive makeover.
Caesars pleased with initial North Carolina impact
There was also positive messaging around the company’s sports betting launch in North Carolina at the start of March.
Caesars is one of numerous licensed operators in the Tar Heel State. It has a supplier license through its partnership with the Eastern Band of Cherokee Indians and holds exclusive rights for online wagering on tribal lands across the state. That status allowed Caesars Sportsbook to get the jump on competitors and became the first operator to accept wagers in the state on March 1 under the Indian Gaming Regulatory Act.
“We’re encouraged by the early results and have signed up new customers at a faster pace than prior state launches, translating into a higher initial market share,” Hession told investors.
“North Carolina for us was a much more successful launch in terms of customer acquisition than we were anticipating,” added Reeg. “Our first-month market share was almost 9% of the market, which is about three times what we’ve been doing in other new launch states.”
Caesars now offers sports betting in 31 North American jurisdictions and mobile wagering in 26 of those.
Future outlook for Caesars
Reeg said the digital arm showed “tremendous” momentum in the quarter and the company feels “fantastic” about its positioning and prospects in the market.
Hession added that Caesars is on track to launch another secondary iCasino brand in the second half of 2024 and expects to roll out a shared wallet across state lines in all jurisdictions by the middle of 2025. The company will also enhance its online sports offerings, including its same-game parlay and live wagering products.
He stressed that excluding effects from new state launches, net revenue flow-through to EBITDA was over 50%, which is consistent with expectations and “sets the stage for continued profitable growth in the years ahead.”
“We anticipate getting back to quarters like we’ve been printing for the last 10 years, starting with the next one,” concluded Reeg.
