Caesars is taking what it sees as the next step to become a power player in US sports betting.
That $3.7 billion deal completed in late April, creating a combined digital business that did around $150 million revenue in Q1.
More investment on the way
The business was also cash flow-positive, unlike its competitors. To Caesars CEO Tom Reeg, that showed a lack of investment.
“William Hill with the UK parent and UK investor mindset, was more conservative toward leverage and not as aggressive as we expect to be in this business,” Reeg said.
He said the Hills brand was also “fighting with an arm behind its back” last football season because of the ongoing transaction. But that is going to change this year.
Single app experience
The new parent company is going to rebrand some retail books to Caesars and the app to Caesars Sports. The William Hill brand will remain in some states, a company spokesperson said.
The company then aims to merge its two apps together on Hill’s Liberty platform with a single wallet. Reeg alluded to the upcoming move in a March call.
That will happen in the fall, though Reeg warned it was unlikely to be in time for football.
Caesars ready to spend on sports betting
Regardless, Caesars is ready to put some cash behind the product.
“We see a great correlation between spend and market share at this point,” Reeg said. “And not quite so much [correlation] for brand or other non-spend categories. That’s a good sign for us when I talk about the cash flow that we’re generating right now.”
Reeg said Caesars would soon be throwing up $100 million in free cash flow every month that could be put behind sports betting. The CEO added:
“You shouldn’t expect us to be just throwing money away to buy market share. You should expect us to build this thoughtfully, but you should expect to see a significant increase in investment in this side now that we’ve got all our ducks in a row.”
Reeg declined to share a target market share.
Following the MGM model?
Specifically, Reeg said he was cheered by the success of BetMGM sportsbook in Michigan.
BetMGM was the second-largest online sportsbook in Michigan in March, and largest online gaming operator.
“[BetMGM] came from a position similar to where William Hill was, to a leadership position in a market thanks to a large database,” Reeg said. “That gives us a lot of confidence as we move forward.”
Positive turn for CZR stock
Even before this new commitment, Caesars had been positioning itself as a major player in US sports betting. It is an official “tri-exclusive” partner of the NFL and will also sponsor the New Orleans Saints’ Superdome.
The company’s share price was up 7% as of Wednesday morning to better than $102. Some 14 months ago, shares sat below $9 as the coronavirus pandemic began.
Caesars also said weekends in Las Vegas were sold out for the foreseeable future.