Caesars slips to FY24 net loss, confident on digital EBITDA target

Caesars Entertainment, a leading name in the gambling industry, reported a net loss for its 2024 fiscal year, primarily due to a decrease in total group revenue. However, the company remains optimistic about its future earnings potential, particularly in its growing digital segment.

For the 12 months ending December 31, 2024, Caesars reported total group revenue of $11.2 billion (£8.89 billion/€10.71 billion), marking a 2.5% decline compared to the previous year, as disclosed in a press release on February 25. This downturn was largely attributed to a drop in revenue from both Las Vegas and regional operations, exacerbated by a decrease in managed and branded revenue lines.

Despite these challenges, the digital sector demonstrated robust growth, with revenue from online gaming and sports betting increasing by 19.5%. Although this figure represents a slowdown from the astounding growth rate of 77.6% achieved in 2023, it highlights the ongoing upward trend in digital operations.

Caesars Sets Ambitious Digital EBITDA Target for 2025

While the growth in the digital segment may fall short of the previous year’s benchmark, Caesars remains steadfast in its long-term financial outlook. In May 2023, the company set a digital EBITDA target of $500 million to be realized by 2025. During a recent earnings call, CEO Tom Reeg reiterated this commitment, expressing confidence in meeting this objective ahead of schedule.

In 2024, the digital adjusted EBITDA reached $117 million, reflecting an impressive 207.9% increase from the $38 million reported in 2023. “I’d expect you’re going to start seeing our best quarters to date shortly,” Reeg noted, emphasizing stability in their financial forecasts. “Our targets have remained consistent, tracing back to when we first projected them nearly four years ago.”

Resilience in Regional and Las Vegas Performance

The regional properties represent Caesars’ largest revenue segment, which experienced a 4.1% revenue decline, totaling $5.54 billion. Nonetheless, Reeg believes this segment is stabilizing, bolstered by a loyal customer base. The completion of the Caesars New Orleans expansion in October 2023, followed by the opening of Caesars Virginia in December, is set to enhance revenue prospects for this segment going forward.

Conversely, Las Vegas revenues dipped 1.5% year-on-year to $1.34 billion, a decline attributed in part to the favorable comparison year that included the city’s inaugural Formula 1 race. However, Reeg pointed out a consistently strong customer base and highlighted new amenities such as Gordon Ramsay’s Burger and Pinky’s at the Flamingo, asserting that these additions will have a positive impact on future performance.

“We’re optimistic about the returns from our newly launched hotel projects,” Reeg stated, highlighting the benefits of recent operational enhancements. “With significant developments on the Las Vegas Strip, including the high-profile opening of balcony rooms at Versailles, we have reason to look forward to 2025 with optimism.”

Additionally, the managed and branded operations underperformed, contributing $274 million, down 10.8% from the previous year. Corporate and other losses totaled $5 million, leading to an overall casino revenue decline of 1.6%, settling at $6.27 billion. Revenue from hotels decreased by 3.5% to $2.02 billion, while food and beverage revenue fell 0.7%, and other revenue slipped 7.2% to $1.25 billion.

Substantial Net Loss of $278 Million

In terms of operational expenses, Caesars reported a 1.3% decrease for the year, amounting to $8.94 billion. However, other expenses grew to $2.43 billion, resulting in an increased pre-tax loss of $124 million, significantly higher than the $60 million recorded in the previous year. The tax burden reached $87 million, contrasting sharply with the $888 million tax benefits received in 2023, and factoring in $67 million in losses from non-controlling interests.

Consequently, Caesars concluded 2024 with a substantial net loss of $278 million, reversing from a profit of $786 million the previous year. Adjusted EBITDA also saw a decline, down 4.6% year-on-year to $3.72 billion.

Year-End Review: Q4 Performance Insights

Examining the final quarter of 2024, total revenue decreased by 0.9% to $2.8 billion, reflecting the aforementioned trends in both regional and Las Vegas operations. The digital segment experienced minor revenue declines due to favorable betting results impacting sports outcomes towards the quarter’s conclusion.

Operating expenses were reduced by 7% to $2.13 billion, and after accounting for other costs, Caesars reported a pre-tax profit of $43 million, a significant turnaround from the $40 million loss recorded in Q4 2023. The tax obligation for the quarter was $19 million, alongside $13 million in losses from non-controlling interests, leading to a net profit of $11 million—an improvement over the $72 million loss from the same period the previous year.

However, adjusted EBITDA decreased by 4.6%, settling at $882 million. Looking to the future, Reeg expressed optimism, stating, “As we look ahead to 2025, we anticipate another year of strong net revenue and adjusted EBITDA growth driven by our digital segment, combined with lower capital expenditures and cash interest expenses. This positions us well to generate significant free cash flow, which we intend to utilize to further deleverage the company.”