Caesars Entertainment Faces Losses Despite Digital Growth in Q3

Caesars Entertainment, a prominent player in the casino and hospitality sector, presented a mixed picture in its third-quarter earnings report, reflecting ongoing challenges within its traditional casino business while showing promising growth in its digital segment. Despite a slight decrease in revenue and a shift to a net loss compared to last year, the company saw a significant uptick in its Caesars Digital segment, underlining the increasing importance of its online betting and gaming operations.

Decline in Revenue and Shift to Losses

For Q3 2024, Caesars Entertainment reported net revenue of $2.8 billion, a modest drop from $3 billion in the same quarter of 2023, and falling short of analysts’ expectations of $2.9 billion. The company’s bottom line shifted from a net income of $74 million last year to a net loss of $9 million this quarter. According to Caesars CEO Tom Reeg, Las Vegas segments saw record third-quarter revenue from hospitality, food, and beverage, but regional market performance suffered due to increased competition and construction-related disruptions, adding pressure to earnings.

The Las Vegas segment contributed $1.062 billion to Q3 revenue, down by 1.3% compared to last year. The regional markets showed a more notable decline, with a 7.6% drop to $1.446 billion, influenced by new competition and challenging market conditions, illustrating the hurdles the company faces in sustaining market share in established geographic areas.

Digital Growth Outpaces Traditional Operations

In contrast to the struggles in traditional segments, Caesars Digital delivered a strong performance, with Q3 revenues soaring by 40.9% year-over-year to $303 million. The digital segment’s growth boosted adjusted EBITDA to a quarterly record of $52 million, up significantly from $2 million in Q3 2023. This growth is largely attributed to Caesars Digital’s iGaming expansion, which reported an 83% increase in net revenue year-over-year. The recent launch of the Horseshoe Casino brand in Michigan and its expansion to Pennsylvania and West Virginia have been key drivers of this growth.

The sports betting division also contributed to Caesars Digital’s strong performance, with a 36% increase in revenue compared to Q3 2023. The company’s betting hold rose from 6.5% to 8.6% this year, a result of strategic updates to its app, including enhanced parlay and cash-out options. According to Eric Hession, President of Caesars Sports and Online Gaming, these improvements in the app are expected to sustain a hold rate above 10% over the next few years, enhancing profitability.

Strategic Asset Sales to Enhance Financial Position

In a bid to bolster its financial standing amid rising debt, Caesars recently finalized two major asset sales. The company completed the $500 million sale of the World Series of Poker (WSOP) brand to NSUS, the parent company of GGPoker. Under the of the agreement, Caesars will continue hosting the annual WSOP event in Las Vegas over the next 20 years and has secured licensing rights to use the WSOP brand for its digital platforms and live events nationwide.

Additionally, Caesars announced the sale of the LINQ Promenade in Las Vegas for $275 million to a t venture between TPG Real Estate and Acadia Realty Trust, with the transaction anticipated to close by the end of Q4 pending regulatory approval. Caesars CFO Bret Yunker stated that proceeds from these sales would help improve liquidity, allowing the company to focus on strategic priorities while reducing debt.

Emphasis on Digital and Operational Efficiency

Looking forward, Caesars Entertainment plans to prioritize digital growth and streamline operations within its traditional markets. Reeg indicated that Caesars would employ a targeted marketing approach for sports betting in the 32 North American markets where it already operates, with reinvestment levels in sports betting running below market averages. This conservative marketing strategy aims to maximize return on investment and maintain a sustainable market presence.

To further strengthen its financial outlook, Caesars is set to curb capital expenditures in quarters to boost free cash flow, a move designed to address its $12.7 billion debt. With cash reserves totaling $802 million, the company is focused on improving its balance sheet, potentially enabling stock buybacks in the near future.

Caesars’ third-quarter results underscore a clear shift toward digital as a primary growth driver, even as traditional segments face heightened competition and market challenges. The growth in Caesars Digital signals a potential path forward for the company in an industry increasingly focused on digital transformation, providing a foundation for future profitability and sustained market presence.

Sources:

Caesars Entertainment, Inc. Reports Third Quarter 2024 Results, newsroom.caesars.com, October 29, 2024.