Caesars Entertainment reported a decline of 1.7% in its group’s net revenue in the second quarter, to $2.83bn ($2.83bn/PS2.20bn/EUR2.62bn), despite reporting double digit growth in their digital division.
Caesars’ revenue in Q2 fell just behind that of $2.89bn in the same quarter last year. This is the second quarter in a row that revenue has declined year on year, but it is still up by 3.3% compared to Q1.
The Q2 was similar to Q1 as digital showed the greatest growth for Caesars. Caesars Digital’s revenue grew 27.8% during the quarter to $276m. In just one year, the segment’s adjusted EBITDA reached a record high of 40m.
Eric Hession is the president of Caesars Sports and Online Gaming. He said that “net revenues” in Caesars Sports and Online Gaming’s sports betting segment had increased by 19% over last year, mainly due to a flat hold and handle of 7.2%. Our product continues to be improved on the sporting side and customers have responded positively to an increasing number of in-game and parlay offerings.
Caesars Palace Online is growing as a proportion of our overall icasino revenue. “We’re constantly improving the products by adding exciting new game content, including Caesars-themed games.”
Hession said that after recent acquisitions, the digital segment is likely to see growth beyond Q3 in terms of its size.
WynnBet launched its Michigan operations in June. Its new Horseshoe branded igaming application is set to be released in Q3 of this year. Caesars also purchased ZeroFlucs a sports betting software company in Australia shortly after quarter-end.
Hession stated that “as we enter the second half of this year, we remain optimistic regarding the progress being made in sports and casino.” I believe that we’re well-positioned for a successful finish of the year. “We now offer sports wagering in 32 North American jurisdictions. 26 of these offer mobile betting.”
Comparing fortunes of Caesars land-based operations
The Q2 digital results were not as good as the land-based ones.
Regional segment revenue is still the main source of revenue, at $1.39bn, though it’s 5.2% less than 2023. Caesars attributed this to the competition in new markets. Its temporary facility in Virginia, and property in Columbus Nebraska, were only partly offset.
Las Vegas revenues remained at $1.10bn – down 2.7% on last year. When 2023 revenue figures are adjusted for Rio All-Suite & Casino’s divestiture from Q3 of last year to account for the removal, revenues in 2023 were 1.9% higher.
Another $70m of revenue was generated by managed and brand activities. This is a 2.8% decrease. Caesars also reported a loss of $2m from its corporate and other business operations in Q2.
Casino activities contributed $1.56bn in revenue, a drop of 1.7% compared to last year. The hotel revenue fell 2.1%, to $514m. Food and beverage revenues remained flat at $435m. Revenue from other operations fell by 3.3% to $324m.
Caesars’ net loss slips to a lower level due to higher costs
In Q2, Caesars spent $2.32bn in total on its operating costs, an increase of 2,4%. The casino costs were the largest expense at $817m. This was on par with last year.
The rise in interest costs drove the 2.6% increase to $598m. Caesars now has a $92 million pre-tax deficit, down from a profit of $26m last year.
In Q2, the group had to pay $10m tax, whereas it was able to receive $928m tax benefits last year. The impact of this on the bottom line was significant. Caesars also reported a $122m loss after discounting the $20m profit on non-controlling properties. This compares to a 920m profit for 2023.
The adjusted EBITDA also fell by 0.7%, to $1bn. This was despite the continued improvement in digital.
Caesars H1: Similar Story
The H1 figures reported by Caesars are very similar. The group revenue dropped by 2.4%, despite significant growth within the digital segment.
The digital revenue increased by 22.9% to $558m, but was once again offset due to a decline in land-based operations. Las Vegas revenue dropped by 5.8%, to $2.13bn. Managed and branded revenues fell 2.1%, to $138m. Corporate and other activities generated a loss of $3m.
The casino industry generated the highest revenue, $3.09bn. This was a 2.4% decrease. Hotel revenue fell by 2.0%, to $1.01bn. Food and beverage revenues were down 0.6%, to $857m. Other revenue dropped 5.2%, to $616m.
Total operating costs increased by 1.9%, to $4.58bn. Other expenses reached $1.21bn. The pre-tax losses were $219m compared with last year’s loss of $159m.
Caesars has paid tax of $25m, despite receiving $951m last year in benefits. Caesars’ net loss was $280m after subtracting $36m of profit from non controlling assets. This compares to the $784m profit last year. The adjusted EBITDA also fell by 5.7%, to $1.85bn.
Caesars CEO Tom Reeg stated that “we remain optimistic about the remainder of 2024, driven by the strong operating trends of our Las Vegas segment and Caesars Digital and the anticipated openings of our permanent facility in Danville along with our capital investment of $430m in our newly-rebranded Caesars property in New Orleans.”
What do analysts say?
Analysts remain optimistic about the future of Caesars despite the disappointing revenue and net loss figures for Q2 and for H1.
Truist Securities as well as Jefferies retained their ratings of ‘buy.’ The main reason for this is the growth in Las Vegas’ digital industry and some improvements.
Analysts at Jefferies stated that Las Vegas was gaining momentum faster than expected, and regional gaming has shifted from being a consumer to one of generating money. Digital is also accelerating profits. We also believe expectations are now more optimistic than in the previous quarters.
Truist added: “After recent underperformance and a few earnings hits by one-timers/extraordinary factors, we think the shares could respond favourably.”
Caesars closed at $36.90 yesterday, up 1.04 % from the opening price.
