Caesars Entertainment (CZR)'s CEO is banking on online sports gaming to boost company profits.
According to chief executive Tom Reeg's predictions, the company will see positive profit in its digital gaming by the end of fiscal year 2023.
Obviously, the couple of quarters before football season in '23 tend to be lower volume sports quarters, so lower loss anyway, Reeg told analysts on an investors call Tuesday night. So is it possible? It sneaks a little bit earlier? I'd say that's possible. But I'd be banking on inflection in the fourth quarter (of 2023) as we sit here today.
Caesars combines iGaming and mobile sports gambling in its digital portion of the business which reported an adjusted EBITDA loss of $554 million in the first quarter of 2022. Reeg noted on Tuesday nights earnings call that cutting back on marketing as well as contributions from the iGaming sector will be key factors toward driving profitability in the digital business by the end of 2023.
The company cut its marketing spend on mobile sports gaming by more than $250 million in the first quarter, he said on the call, striking a clear tone that Caesars will be shifting that strategy moving forward.
The Caesars Palace Hotel is shown behind some of the fountains of the Bellagio Hotel (not shown) in Las Vegas, Nevada.
Caesars spent significantly in Q1, offering up to a $2,000 deposit match for new mobile sports gamblers in New York.
That spending appears to have paid off the betting platform reported a $110.69 million gross gaming revenue in New York from the first week of January through the week ending April 24, which accounted for roughly 27% of market share of the countrys largest sports gambling market. FanDuel (PDYPY) currently leads the state with 40% of the markets overall gross gaming revenue while DraftKings (DKNG) comes in slightly behind Caesars at 24%.
"We're going to target our promotional spending at our profitable customers, which is going to be a much smaller subset of that larger group," Reeg said. "And that's going to have two significant changes, two significant impacts, you're going to build loyalty among that that group that is targeted, and you're going to increase profitability as you increase share of wallet, you're still going to have activity from those that are not targeted to the same degree, but your profitability on those customers is going to change dramatically, because they're not getting the marketing offers."
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As each company scales back its promotional spending, all eyes will be on the numbers (Caesars is no longer offering that $2,000 match). And while sports gambling will be on an increasing number of ballots during the 2022 midterm elections, Reeg doesnt foresee a plethora of customer acquisition spending in the near future which would help the company drive profits.
We have got an Ohio launch in front of us, that would be the only launch that I can think of that would have significant costs surrounding it, Reeg said. And so how we come out of the box in Ohio will be a governing factor in terms of where we would be, but that's the rights weve got.
Here's how Caesars Entertainment performed compared to Wall Street estimates for the first quarter:
Josh is a producer for Yahoo Finance.
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Caesars CEO predicts when online sports gambling will be profitable - Yahoo Finance
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