Caesars Targets Sports Betting Profit, Fixing Tech Issues In 2023

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Caesars expects its online sports betting and casino business to be profitable later this year after narrowing losses to close out 2022.

Speaking to investors during Caesars Entertainments quarterly earnings call, Tuesday, CEO Tom Reeg said the digital business should run at $550 million in adjusted EBITDA for “at least a quarter or two” in 2024 before hitting that rate for good in 2025. He expects it to be EBITDA positive by the end of 2023, after piling up over $1 billion in losses the last two years.

“You’ve got a business that’s growing organically and has added a bunch of states, some more recently than others. There doesn’t appear to be a huge new state pipeline coming on,” Reeg said. “Obviously, we’ve got a significant ramp expected in iGaming as we get into back half of ’23.

“And then you do have all of that, the original partnerships that were stuck in that should be rolling off starting in ’24, ’25 on and some of the chunkier ones that flow directly to EBITDA as they run off.”

Stock market reaction mixed

For the entire Caesars brand adjusted EBITDA was $3.24 billion in 2022 versus $2.99 billion in 2021. Digital was its only sector other than “corporate/other” to go negative.

Caesars missed earnings per share estimates by $0.40, with a net loss of $0.70 per share in Q4.

Caesars Entertainment shares were $51.25 at market open Wednesday, down 2.84%.

Caesars to pour more resources in parlays, trading

President of Digital Eric Hession said he sees parlays as a percentage of overall bets continuing to steadily rise, as the company pours more resources into the high-hold bet type.

“So if you go on our app now, you’ll see we have pre-canned parlays, so they’re effectively prebuilt. Right now, they’re the same for everybody.

“But in the future, we’ll be able to use some segmented marketing to display different pre-canned parlays, which I think will be really – customers will be really receptive to that,” Hession said.

Sports betting handle doubles in 2022

Sports betting handle for 2022 was $12.8 billion, an 111% increase from 2021, according to the company’s 10-K. The New York sports betting market came online in 2022, likely accounting for a chunk of that growth.

Hold increased from 4.3% to 5.4% on the year. iGaming handle increased 44% to $8 billion, while hold slipped slightly.

The company made a number of changes to its trading team in the quarter, including organizing traders by sport and transitioning mostly to in-house modeling.

Hession said those changes should continue to increase hold percentages. Caesars will split its casino and sports betting app to two standalone apps in 2023, he added.

Building on digital’s strongest quarter

Caesars Digital more than doubled revenue in Q4 to $237 million and reported $35 million in net losses, a $325 million improvement from Q4 2021, according to earnings figures. The digital business finished 2022 with $780 million net losses, versus $580 million in 2021.

“You didn’t see us at the Super Bowl, but more importantly, the granular changes in individual marketing have slowed dramatically,” Reeg said. “This is the quarter when we launched New York and Louisiana last year. So you’re going to see over $0.5 billion of trailing EBITDA losses in Digital disappear this quarter.”

The company’s online sports betting and casino businesses reported $5 million in adjusted EBITDA losses in Q4, finishing 2022 with $666 million in the negative, up from its $476 million in losses from 2021.

NY sports betting blues

Most of those early-year losses can be attributed to lucrative promos in New York, where Caesars offered up to $3,000 in bonus bets. It has avoided those types of promos in subsequent launches and promised a marketing pullback after that early blitz.

Hession said promotional expenses were down 43% during the quarter, while volume rose 7%.

The fourth quarter would have been positive if it was not for Mattress Mack and his $30 million win from the Houston Astros, Reeg said.

Caesars addresses Nevada app failure during Super Bowl

Reeg addressed the company’s Super Bowl fiasco, which saw its Nevada sports betting app crash during the second quarter of the game and remain offline for three days. The unexpected shutdown affected both its William Hill and Caesars apps, as well as 16 in-person sportsbooks throughout the state.

LSR reporting revealed Nevada is one of the only remaining states yet to transition onto Caesars’ newer Liberty tech platform, despite transition plans scheduled for 2022.

Reeg said the Caesars Nevada apps will be fully transitioned to Liberty before the 2023 NFL season starts in August.

Caesars set for Massachusetts

Reeg said the company is ready to launch online sports betting in Massachusetts if it goes live March 10th at 10 a.m., the date proposed by state regulators. It has an in-person sportsbook license pending for the Raynham Park casino. The app should launch this week for registrations and deposits.

Caesars operates sports betting apps in over 20 states after recent launches in Ohio and Maryland.