Caesars sees revenue slip 1.7% in Q2 despite digital growth

Revenue in Q2 was marginally behind the $2.89bn recorded by Caesars in the same period last year. It is also the second consecutive quarter of year-on-year decline but Q2 revenue is up 3.3% from $2.74bn in Q1.

Q2 told a similar story as Q1 in that digital was the most positive area for Caesars. During the quarter, Caesars Digital revenue increased 27.8% to $276m. The segment also saw adjusted EBITDA reach an all-time high of $40m, just one year after becoming EBITDA-positive for the first time.

“Net revenues in our sports betting segment increased 19% year-over-year, driven by flat handle and hold of 7.2%,” said Eric Hession, president of Caesars Sports and Online Gaming. “Our product on the sports side continues to improve and our customers are reacting positively to our increasing mix of parlay and in-game offerings.

“Caesars Palace Online continues to grow as a percentage of our total icasino revenues. We’re actively enhancing the product offerings by adding new and exciting game content including exclusively designed Caesars themed games.”

Hession added that the digital segment will likely see more growth in Q3 and beyond after several recent acquisitions. 

These include WynnBet’s operations in Michigan in June, with its new Horseshoe-branded igaming app set to launch in early Q3. In addition, shortly after the quarter end, Caesars purchased ZeroFlucs, a sports betting technology company based in Australia.

“As we head to the back half of the year, we continue to be optimistic about the progress we’re making in both sports and icasino,” Hession said. “I believe we are well set up for a strong finish to the year. We now offer sports betting in 32 North American jurisdictions, 26 of which offer mobile wagering.”

Contrasting fortunes for Caesars’ land-based operations

Looking across the wider group, Q2 results for land-based activities did not make for nearly as positive reading as digital.

The regional segment remains its primary source of revenue at $1.39bn though this was 5.2% lower than in 2023. Caesars put this down to competition in new markets, with this only partially offset by its temporary facility in Virginia and its property in Columbus, Nebraska.

Las Vegas revenue held steady at $1.10bn, down 2.7% from last year. However, when 2023 figures were adjusted to reflect the subtraction of Rio All-Suite & Casino prior to divestiture in Q3 last year, revenue was 1.9% higher.

A further $70m in revenue came from managed and branded activities, down by 2.8%. In addition, Caesars reported a $2m loss from corporate and other operations during Q2.

As to where revenue came from, casino activities generated $1.56bn, down 1.7% from last year. Hotel revenue slipped 2.1% to $514m but food and beverage revenue remained level at $435m. Other operations drew $324m in revenue, a decline of 3.3%.

Higher costs see Caesars slip to net loss

Turning to expenses, Caesars spent a total of $2.32bn on operating costs in Q2, an increase of 2.4%. Casino costs were by far the main outgoing at $817m, although this was level with last year.

Total other costs climbed 2.6% to $598m, driven by a rise in interest expenses. As such, this left Caesars with a pre-tax loss of $92m, compared to a $26m profit last year.

The group paid $10m in tax in Q2, whereas last year it received $928m in tax benefit. This had a major impact on bottom line for the quarter. After also discounting $20m in in profit from non-controlling assets, Caesars reported a net loss of $122m, in contrast to a $920m net profit in 2023.

Adjusted EBITDA was also down 0.7% to $1bn despite further improvements in digital.

Similar story in H1 for Caesars 

Turning now to H1, figures posted by Caesars make for fairly similar reading. Group revenue fell 2.4% despite significant growth in the digital segment.

Digital revenue was 22.9% higher at $558m but this was again offset by decline across land-based operations. Regional revenue fell 3.5% to $2.75bn, Las Vegas revenue was down by 5.8% to $2.13bn, managed and branded revenue slipped 2.1% to $138m, and corporate and other activity generated a $3m loss.

Casino activity drew the most revenue at $3.09bn, although this was down 2.4%. Revenue from hotels fell 2.0% to $1.01bn, food and beverage revenue was down 0.6% to $857m, while other revenue declined 5.2% to $616m.

Costs-wise, total operating spend increased 1.9% to $4.58bn while other expenses reached $1.21bn, leaving a pre-tax loss of $219m, compared to last year’s $159m loss.

Caesars paid $25m in tax, having last year received $951m in benefits. After taking off $36m in profit from non-controlling assets, this resulted in a net loss of $280m, in contrast to last year’s $784m profit. In addition, adjusted EBITDA fell 5.7% to $1.85bn.

“We remain optimistic for the balance of 2024 driven by strong operating trends in our Las Vegas and Caesars Digital segments and the expected openings of the permanent facility in Danville coupled with our $430m capital investment in our newly rebranded Caesars New Orleans property,” Caesars CEO Tom Reeg said.

What are the analysts saying?

While the revenue decline and net loss for Q2 and H1 will make for disappointing reading, analysts remain positive about future prospects for Caesars.

Both Truist Securities and Jefferies have retained their ‘buy’ ratings for the operators. This is mainly based on growth within the digital sector and certain improvements in Las Vegas.

“Las Vegas is building better momentum than anticipated, regional gaming is pivoting from consuming to generating cash and digital is accelerating profits,” analysts at Jefferies said. “We further believe that expectations have been reset to bear an upward bias moving forward compared with the past several quarters.”

Truist added: “After recent underperformance and a few earnings hits by one-timers/extraordinary factors, we think the shares could respond favourably.”

Caesars shares closed yesterday (30 July) at $36.90, up 1.04% on opening price.