Caesars Digital Loss Narrows, Casino Outlook Sturdy

Caesars Entertainment (NASDAQ: CZR) delivered fourth-quarter results after the close of US markets today, highlighting a narrower loss in its digital business and strength at its land-based casinos.

Caesars Entertainment
Caesars Palace on the Las Vegas Strip. The operator reported solid Q4 results today. (Image: Caesars Entertainment)

The Harrah’s operator reported a fourth-quarter loss of 70 cents a share on revenue of $2.82 billion. Analysts expected a loss of 30 cents a share on sales of $2.81 billion. In the December quarter, the gaming company’s net loss declined to $148 million from $434 million a year earlier. Excluding the Caesars Digital unit, same-store adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) surged to $962 million from $886 million.

Our fourth quarter delivered another set of strong operating results as both our Las Vegas and Regional segments each set a new fourth quarter record for Adjusted EBITDA. Additionally, our Las Vegas segment set a new full year record for Adjusted EBITDA,” said CEO Tom Reeg in a statement.

Revenue on the Las Vegas Strip, where Caesars is the second-largest operator, jumped 11% in the final three months of 2022, helping to offset a modest drop in sales at the company’s regional casinos.

Caesars Casinos Boost 2022, Q4 Results

For all of 2022, Caesars’ Sin City venues generated adjusted EBITDA of $1.96 billion, up from $1.56 billion in 2021. The operator’s regional casinos posted 2022 adjusted EBITDA of $1.98 billion, a modest increase from $1.97 billion a year earlier.

While the press release didn’t feature specific guidance for 2023, Reeg said consumer demand remains sturdy across the company’s various verticals and that the operator is “optimistic” about what’s in store over the course of this year.

Some analysts agree with that take. In a note to clients today, B. Riley’s David Bain reiterated a “buy” rating on Caesars while lifting his price target to $111 from $102, implying the shares can more than double from today’s close at $51.22. He said Caesars’ land-based business on its own is worth $91 a share, implying the digital unit carries negative value. However, he added that if Caesars Digital were valued comparably to DraftKings (NASDAQ: DKNG), it’d be worth $20 a share.

Another potential positive in the operator’s financial update is that it pared debt by $1.2 billion last year, reducing its leverage, as calculated under a bank credit facility of 4.4x. The gaming company concluded 2022 with $13.1 billion in liabilities and $1 billion in cash on hand, which doesn’t include restricted cash of $265 million.

Caesars Digital Stands Out

Caesars Digital, which includes Caesars Sportsbook, lost $5 million on an adjusted EBITDA basis in the last three months of 2022, down from a loss of $305 million. While the operator didn’t offer up a specific timeline to profitability, that loss reduction is significant.

It’s also amplified at a time when rivals are forecasting profitability or getting close to being there. Caesars Sportsbook was among the first operators in the space to slash marketing spending and that move appears to be paying off.

“Caesars Sportsbook delivered significantly improved operating results during the fourth quarter which sets the foundation for a strong 2023,” said Reeg in the statement.

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