Caesars Sportsbook, iGaming Apps Hit Profit Milestone

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Caesars Entertainment‘s online gaming business is EBITDA positive for the first time since the William Hill days.

Caesars Digital, which houses Caesars Sportsbook and new Caesars Palace apps, posted $11 million in adjusted positive EBITDA for Q2, per the company’s quarterly earnings report on Tuesday. That has not happened since the digital gaming business rebranded from the William Hill sportsbook in August 2021.

That was a 116% improvement over the same period last year for a business that lost over $1 billion to date. Digital was the only one of Caesars business sectors to increase its net income year-over-year, an 81% improvment to $22 million in losses. Meanwhile, Las Vegas-related net income fell by 16.6%, amid declines in city tourism and gaming.

CZR stock on Wednesday opened 3.44% down compared to Tuesday’s closing price of $57.80

Caesars joins BetMGM, FanDuel in profit

CZR is the second online gaming operator to go EBITDA-positive last quarter, joining BetMGM, and third to hit the mark overall, joining FanDuel, which broke even in Q2 2022. The news fulfills CEO Tom Reeg‘s “cautious optimism” to start the year that the digital gaming business would break even before football season.

During Tuesday’s call, he described Digital’s chances of staying EBITDA-positive in Q3 as a “coin flip” because of costs related to the start of NFL betting. He maintained it would hit the mark again “significantly” in Q4 and beyond. His goal is over $500 million in EBITDA by 2025.

Improved sports betting hold, iGaming volume

Eric Hession, president of Caesars Sports and Online Gaming credited increases in sports betting hold and iGaming volume, along with “targeted promotional investment and overall lower level of marketing.”

No states launched online gaming during the quarter, as committed partnerships continued to roll off. Digital’s $216 million net revenue was a 213% improvement year-over-year. Sports handle was $2.49 million for the quarter, a 5.3% drop year-over-year, while iGaming handle was up 27.1% to $2.65 million.

Hold improved 180 basis points to 6.4%, with a target of 7.58% average hold by 2025.

“We’ve made a lot of improvements over the last kind of year, year and a half with respect to just the trading team getting more experienced, but also on the tech side,” Hession said. “So I think as we go forward, you will continue to see a higher percentage of customers not betting straight wagers. So whether that’s an in play or player prop or same game parlay type wagers that generally have a higher hold percentage that’s going to contribute to the increase.”

Tech highlights rest of year outlook

Executives expect all sportsbook customers will be switched over to the updated app by NFL Week 1. That includes improvements like faster loading speeds, improved stability, and enhanced development speed, according to Hession. The company also plans to introduce an in-house player account management (PAM) system later this year and launch its now-separate iGaming app in additional markets.

Q2 saw the company’s Nevada products finally transition onto Liberty, the fully integrated tech stack already powering its products in every other state. That may help prevent another malfunction during the biggest sporting event of the year.

“Moving to Liberty in Nevada is an enormous lift. We were operating on the equivalent of a Commodore 64 computer in the old technology,” Reeg said. “And now we have the [Caesars Palace] app too, that’s competitive with what they’ve got at home, whether it’s with us or somebody else, that’s going to be a giant customer acquisition opportunity for us.”

Caesars rolls out separate iGaming app

Reeg said to “expect us to be visible” in promoting the new iGaming app, but marketing costs will be “nothing anywhere close” to the rebranded sports betting rollout.

The “casino-first” app uses an integrated rewards system to marriage in-person and online play. It began soft-launching two weeks ago with market access in four jurisdictions:

“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,” Reeg said. “But we feel like we’ve got the product to start to build market share, and wrapping that into Caesars rewards has been and will continue to be powerful for that business.”