CEO Tom Reeg indicated that a digital sell-off could come next year once forecasts are met.
For Caesars Entertainment, second-quarter results looked nearly identical to those of Q1, just more pronounced. The company’s Las Vegas and regional divisions were average, but its digital segment continued its streak of record performance.
Overall, group net revenue in Q2 was up about 3% year-on-year to $2.9 billion. A little more than $1 billion of that came from Las Vegas, a 3.7% YoY decrease, while its regional revenue was up 3.6% to $1.4 billion. Digital revenue, by contrast, shot up 24% from last year to $343 million, meaning both quarters this year have seen high double-digit growth.
With regard to adjusted EBITDA, Las Vegas slipped 8% YoY to $469 million, with regional close behind at $439 million (-6%). Digital AEBITDA doubled from $40 million last year to $80 million this past quarter.
Caesars’ combined H1 net revenue of $5.7 billion represents a 2.5% gain from this point in 2024. By category, Las Vegas is -2.7% for the period and regional is +2.7%, while digital is +21.5%. Those trends are further illustrated by H1 adjusted EBITDA: Las Vegas, $902 million (-4.7%); regional, $879 million (-2.5%); and digital, $123 million (+173%).
You know what we’re going to ask
Given this widening disparity, Caesars for several quarters has addressed questions related to its digital business, namely its receptiveness to a spin-off, or, if that is not planned, what the expectations should be long term. In 2021, the company targeted $500 million in annual digital EBITDA by 2026 and it is well positioned to hit that goal. But what comes after that?
CEO Tom Reeg expounded on these topics again in an earnings call Tuesday.
“We remain on track to deliver half-a-billion-plus of EBITDA in [2026],” he told analysts. “The momentum in digital is extraordinary, both from a volume and an EBITDA perspective.”
He added that Caesars is both increasing sports betting handle YoY and growing its iGaming business at about twice the rate of its peers. Now that the once-mighty $500 million goal is within view, analysts were curious about the next goal to latch onto.
Reeg stopped short of providing a new figure but indicated it would surely increase. He pointed to a busier Q4 and Q1 with football season, and the potential of new online gaming jurisdictions in future years.
“I’ve taken so much grief over the $500 million target that we’re right on the precipice of, I’m hesitant to immediately put another target out there,” he said. “But I’d say we’re going to generate substantially more than $500 million of EBITDA from digital if you’re looking out a few years.”
Did someone say spin-off?
Such comments continue to add fuel to the long-held belief that a digital spin-off is on the horizon. With such dislocated growth, a separation might better unlock future potential. And generally speaking, brick-and-mortar operators are grappling with how to make digital offerings profitable.
Wynn Resorts folded its online operations in 2023, Boyd Gaming just sold off its stake in FanDuel, Penn Entertainment investors have been clamouring for a digital divestiture for years, and so on. Caesars is quickly becoming an outlier in that regard, although offers are never far away.
In the spring, activist investor Carl Icahn made headlines by regrowing his Caesars stake and installing two associates on the company’s board. Icahn was the mastermind behind Caesars’ mega-merger with Eldorado Resorts in 2020, through which Reeg became CEO. Icahn does not appear to be as aggressive this time around, but Reeg told iGB in April that the billionaire “sees the same thing we see” with regard to undervalued assets.
It now appears that the company will look to hit its forecast before seriously pursuing alternatives.
“There is internal plumbing that needs to happen to be in position to separate that foots well with when we hit our numbers for our initial targets,” Reeg said on Tuesday. “We’ll take a look at what we think of value at that point, whether it’s reflected. We would absolutely pursue a separation if we believed it would drive significant value to our shareholders.”
Viva Soft Vegas
The discussion that focused on Las Vegas and regionals was dominated by one word: soft. Reeg said YoY comps were soft, and he said Q3 would be soft, and those Las Vegas summers? Always soft.
On the Q1 call, the CEO was largely dismissive of macroeconomic fears, as were his contemporaries. He acknowledged this time, though, that the “leak” in Las Vegas started in late spring but has been stabilising with fall and winter ahead.
“It’s as if your tire had a leak and you patched it,” he told analysts. For a while, the company’s running three-month outlook was trending downward, but he asserted it is now holding somewhat steady. The market is fearful of a severe travel slowdown related to international pushback to rising US tariffs and rising economic pressure on consumers.
His assessment of the regional business was similar, but he said he expects to see that segment finish the year flat or slightly up over 2024.
What was not discussed on Tuesday was a tragedy connected to Caesars and Las Vegas. On Monday evening, about 24 hours before the call, 27-year-old Shane Tamura entered an office building at 345 Park Avenue in New York City and opened fire, killing four and critically injuring another before turning the gun on himself. He had driven to New York from Las Vegas, where he had worked in the surveillance department of the Horseshoe Las Vegas, a Caesars property.
“Our thoughts are with the victims, their families, and all those affected by this tragic event,” Caesars said in a statement. “We are cooperating with law enforcement and will not be commenting further.”
Odds and ends
Reeg, one of the more expansive executives in the industry, briefly touched on several other topics.
He talked about the One Big Beautiful Bill from US President Donald Trump, which, as CFO Bret Yunker pointed out, actually includes favourable tax provisions for the company. The bill’s controversial 90% loss limit for gambling deductions, which has unleashed professional bettors’ fury, was not discussed.
The New York casino licence race was also mentioned, as Caesars is proposing a Times Square casino with partners SL Green and Roc Nation. A team of reps that included Roc founder Jay-z gave a presentation for the project earlier this month.
“We’re proud of the submission we’ve put forward,” Reeg told analysts. “We’ve got a strong partnership with a lot of local support. We are mindful that Manhattan may be an underdog for a licence. If there is a casino awarded in Manhattan, we are confident that we would be the one.”
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