The value of the digital business at Caesars is a little muddied, and CEO Tom Reeg would like to clear that up.
Reeg said all possibilities to monetize its EBITDA-positive digital segment are on the table on Tuesday’s year-end earnings call. That includes potentially spinning the segment off into its own publicly traded company.
“We recognize that a digital business trading at our blended brick and mortar multiple seven, eight times that there’s dollars left on the table,” Reeg said. “… But it’s a natural time to start to think about should you be doing something else strategically that allows investors a path to investing in that business on a pure-play basis.
“And if the market dynamics remain the same and the business continues to grow as it has, you should expect that we would look at any and all avenues in terms of how we can drive the most value to our shareholders.”
The market reaction was positive overnight but Caesars closed Wednesday down 0.9% to $34.56.
When will $500M digital EBITDA hit?
Caesars Digital remains on track to hit $500 million in adjusted EBITDA next year, according to Reeg.
Reeg has explained for years that digital EBITDA will improve as sports betting sponsorship contracts that Caesars jumped into would not be renewed.
“We’re well on that path [to $500 million],” Reeg said. “The remaining piece at the end of 2025 will be the roll off of some big partnership contracts in the beginning of 2026, and then I’d expect that we’d be at our targets. And recall those targets have not moved since those were just numbers on a spreadsheet almost four years ago at this point.”
Digital EBITDA was $117 million for 2024, up from $38 million in 2023.
Caesars online casino details
Online casino handle jumped more than 40% to $14.9 billion in 2024 compared to 2023.
Two main factors drove that growth, one of which was the Horseshoe rollout that began in October. The bigger factor is it was the first full year of contribution from the Caesars Palace standalone online casino app that launched in August 2023, Caesars Digital President Eric Hession said.
Around 65% to 70% of online casino business comes from those standalone apps, he said. The majority of new customers to those apps were not in the Caesars database before signing up, Hession added.
Caesars benefited from the higher handle with a higher hold, too, jumping 0.4 percentage points to 3.5% for the year. That rate is sustainable, Hession said, adding that the company is working on games and side bets to help boost hold as well.
More numbers from Caesars 10K
Caesars’ annual filing included a bit more of a deep dive into digital numbers than the earnings release.
Sports betting hold was 7.0% for last year, up 0.7 percentage points from 2023, though handle was down 4.8% to $11.5 billion.
Not included in that number is $979 million in handle from “select wholly-owned and third-party operations for which Caesars Digital provides services.” Hold from those operations was 9.3%.
Net digital gaming revenue was $1.1 billion, up 22.5% from 2023. That includes $283 million of incentives for sports betting, online casino and poker, which is 11.9% higher than 2023.
Tax chatter good for iGaming?
Reeg called the multiple states suggesting tax increases for sports betting a “headline cycle we’re in.”
Caesars will adjust as necessary to any states that raise taxes, with Reeg noting that Maryland “appears determined to raise more money out of gaming through additional taxes.” He was also asked about New Jersey‘s proposed increase but said he needed more than a couple of hours to know what to anticipate.
But Reeg, a veteran in the land-based casino business, knows that discussions around raising more dollars from gaming are not always bad. In this case, it could speed some states along in their discussions to legalize online casino gambling.
“Somebody is saying they want more tax revenue from gaming, the way you’ve seen it evidence itself over time is expansion of gaming, which would be good for us,” Reeg said.
