Caesars aims for 2023 digital profitability and technology push

Caesars Entertainment executives have suggested the firm’s digital division is on track to deliver a positive EBITDA contribution to overall group revenue in 2023, as the sportsbook and igaming operator looks to advance its technology offering.

The firm’s overall group CEO Tom Reeg and Caesars Digital kingpin Eric Hession spoke as Caesars revealed a 104% year-on-year (YOY) rise in revenue from its digital division during Q4 2022 to $237m, up from just $116m a year prior.

Caesars also confirmed narrowing digital adjusted EBITDA losses of negative $5m, down more than 98% from the $305m loss reported by the firm during the same period of 2021.

Caesars Digital negative net income figures shrank during Q4 2022 by 90% YOY from a negative $360m to a figure of negative $35m in the period.

In his remarks accompanying the results, Reeg suggested these results were a “strong foundation” for 2023 growth, something which he expanded on in the firm’s Q4 financial call.

“First quarter, we launched Ohio, and given the launch cost there, you should expect a modest loss in the first quarter,” Reeg explained.

“We’re anticipating that digital on a full year basis will be an EBITDA contributor for us this year and when I say that, I’m talking about overall and both verticals, I expect sports betting and igaming to be EBITDA positive this year for us.

“When we started this digital launch about a little over 18 months ago, we told you that cumulative EBITDA losses would be something north of $1bn. Looks like they’re going to finish at somewhere a little over $1.1bn,” he added.

Reeg continued: “We expect at maturity that we’ll generate in excess of 50% of that in annual EBITDA out of the digital business and that has not changed at all from when we launched remains in our sights.

“We’d expect to be generating that level of EBITDA full year of 2025. We’re hopeful we’ll be run rating at least a quarter or two in 2024 at those levels,” he added.

The Caesars CEO cited a pivot away from extensive brand building exercises, as well as national advertising, together with “granular changes” to individual marketing as slowing dramatically during the last quarter.

Reeg also highlighted the comparably more significant launches in New York and Louisiana last year as slanting potential financials in Q1 2023.

He continued: “You’re going to see over $0.5bn of trailing EBITDA losses in digital disappear this quarter. January alone, on a consolidated basis EBITDA improved over $450m for the month.

“So obviously, there’s going to be a significant change in trailing credit statistics that we’re excited for,” he added.

A structurally significant change for Caesars in 2023 is the transition to one centralised app for both sports betting and igaming, with greater cross sell opportunities for the firm deriving from bringing these verticals together.

Speaking about the digital pivot to a single app, digital CEO Eric Hession outlined the benefits for the firm’s account holders.

“Right now, if you want to play on the casino, you have to go download the sports betting app and then find the casino icon, click on it and go through the casino,” Hession said.

“We’ll also be offering a casino app that then you can do the same thing and go back to the sports betting side, but it will be much easier to use from a customer perspective who’s looking just for the casino side.

Highlighting benefits to Caesars, Hession continued: “We’ll also be creating some branded live table games in the various states more so than we have right now. We’ll also be introducing the ability to do segmented and triggered marketing.

“If you recall, a year ago, we were unable to do that on the sports betting side. We’re now able to do segmentation on the sports betting side, but we’re not on the casino side.

“We’re unable to use the learnings from the years’ and years’ experience we have on the brick-and-mortar side on the icasino side and so that will come in handy as well,” he concluded.

Technology used by Caesars hit the headlines in Nevada earlier this month when the William Hill sportsbook and Caesars’ own app crashed during a crucial stage of Super Bowl LVII, leaving account holders without the ability to draw winnings for almost four days.

Addressing this technology failure, Reeg was keen to move on from the outage, instead focusing on the positives that the new centralised app would bring to the table in the Silver State.

“That’s over and done with. That’s a technology issue. We’re running Nevada on old technology, not Liberty [Caesars new platform tech] . Liberty needs approval. It’s actually the PAM provider that needs approval,” Reeg said.

“We expect that relatively soon, and so we expect Nevada to be on Liberty for next football season.

“So that’s certainly not something that we enjoyed while it was going on, but it’s in the rearview mirror at this point,” he concluded.