Caesars Q2 Results Lackluster, but Company Optimistic About Future

Caesars Entertainment on Tuesday shared its second-quarter results, which were muted compared to the same quarter last year. Adjusted EBITDA for Q2 2022 was $978 million, down from $1.004 billion for the year-ago period. The company also had a $0.57 loss per share, a major swing from the previous Q2’s $0.34 earnings per share gain.  

Similarly, company-wide net income and Caesars digital were both in the negative. The company’s net loss was $123 million, spurred primarily by losses in the Caesars Digital, corporate, and managed/branded segments. In the previous year, Caesars Digital showed a loss of $22 million and the total company net income was a positive $71 million. 

Caesars has reason to look up, though, as net revenue is up compared to the prior year. For Q2 2022, net revenue totaled $5.1 billion, compared to 2021’s $2.5 billion. Also, Adjusted EBITDA for Las Vegas and regional segments of the business had a strong quarter, with Las Vegas bringing in $547 million in earnings, up over $100 million from the previous year. 

On the earnings call, leadership described the return of customers and increased group bookings at Las Vegas properties as “extremely strong.” Said Caesars CEO Tom Reeg, “There are not words strong enough to describe what is happening in Vegas.” 

The company also paid off approximately $770 million of outstanding debt. It paid off a $630 million sum on its Caesars Resort Collection Loan, which totaled $1.7 billion before interest. 

This has made the company feel more comfortable looking into a recession. With the company’s net debt being less than 5.5 times the company’s income and the company generating $1.5 billion in free cash flow, it is confident that it can ride out any economic turbulence. 

Q2 Results for Caesars Digital 

The focus of the call stayed primarily on Las Vegas and retail operations, however, there were some highlights on Caesars Digital. The adjusted EBITDA for the digital segment was a loss of $5 million. This is the closest the company has ever come to breaking even on the digital front, and leadership has said they expect to come even closer in the month of July. Still, the company expects that it won’t become profitable in the digital space until Q4 2023. 

The company pointed to its learnings from pulling back on marketing spend over the first half of the year as evidence of future profitability. The biggest takeaway was that customers were easier and cheaper to retain than acquire. By pulling back on ad spend in recruiting new customers, the company saved hundreds of millions of dollars without sacrificing its 15% market share of handle nationwide. 

The success of pulling back on marketing is for two reasons. First, there haven’t been any major state launches since the beginning of the year. Launches pull millions in resources to recruit new customers, and Caesars doesn’t expect to deal with a launch until Ohio in 2023. Second, advertising spend decreases outside of football season, as other sports have less of a draw for new customers.

The company expects that it will see increased ad spending during football season, though not to the amount it was prior to the cutback. Likewise, the company is planning a large investment and expects to see a large loss for the digital segment, when Ohio sports betting goes live. 

All of this factors into the Q4 2023 profitability timeline. Company leadership said that even with the amount of cash inflow to Caesars Digital, they aren’t worried.

“We have a long track record of turning highly subsidized [brick and mortar] business into profit, and it’s the same thing for digital,” said Reeg. “When we started, we didn’t have the ability to segment customers. Now that we do, we can invest strategically in acquiring players.” 

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