The CEO of Caesars, Tom Reeg, said the company “isn’t in the habit of delivering quarters like this” when the gaming giant announced Q1 revenue and earnings that fell below 2023 levels.
Reeg told Wall Street analysts Tuesday that he would want answers, too, if he were in their chairs.
The company reported net revenue of $2.74 billion, down from $2.83 billion in 2023, a decline of 1.2%. Adjusted earnings were $853 million compared to $958 a year ago, a decline of 9.9%.
“If you look at the biggest buckets, this was kind of a kitchen-sink quarter for us,” Reeg said. “Everything that could go wrong for us did. The biggest piece is our hold in Las Vegas. Weather across the country was well understood. Then there was the digital launch in North Carolina. Other pieces are more minor, but there’s clearly over $75 million of one-time negatives in the quarter. If I look at where we came out of the quarter and where the business was operating fundamentally, it looks more like a flattish quarter, notwithstanding the EBITDA we posted.”
As for Las Vegas, Reeg said January didn’t start great. In addition, the typical hold is a range of 20%-23% for tables. Caesars reported 15% for the quarter, 500-800 basis points below normal and that was on an $850 million drop.
Caesars reported $440 million in adjusted EBITDA for Las Vegas, down 15.7% from $533 million a year ago.
Reeg said the consumer is healthy and spending is robust; international business was as high as it has been since 2019 and VIP volumes were strong. It comes down to hold.
“Table hold is a typical bell curve. We’re completely comfortable that this reverses over time. Our time will come. It was not an instance of a few players beating us, but a repeated butt-kicking broadly based throughout the quarter.”
Slot volumes were flat, at the same time that hotel and food and beverage set first-quarter records. The revenue also had to overcome the increases in union costs.
Las Vegas reported $1 billion in revenue versus $1.13 billion a year ago, a decline of 4.7%.
“Volumes are great and people are still here, but we just didn’t hold,” Reeg said. “If you think about running these properties over 97% occupancy, you’re fully staffed. There’s no opportunity to make up hold.”
Reeg said they were impacted by Adele postponing her March concerts to the fourth quarter.
“As we look forward at April, May, and June, each month is forecast at 98% occupancy,” Reeg said. “Our cash rates are up 8% to 14%, so Vegas remains very strong. I don’t like to talk about holds and I hope this is the last time this year. Presuming normal hold, I expect to grow in the last three quarters of the year. We’re in a little more than $70 million hole out of the first quarter. I don’t know if we’ll make up that entire $70 million. That probably needs a hold benefit on the right side of the range. I expect we’re eating away at it throughout the rest of the year.”
In a discussion of regional properties, Reeg blamed weather for a 3% decline in adjusted earnings. Except for the weather, regionals would have increased year over year, he said. He also cited the benefits coming from permanent facilities that will open in Nebraska in May and Virginia by the end of the year and the completion of construction in New Orleans.
“We’re particularly optimistic about the rest of the year, particularly the second half,” Reeg said. “We believe that regionals will grow on a full-year basis. Regional EBITDA in January was down more than 20%. In February, it was down about 4% and in March was up about 10%. We feel good about the second quarter and the rest of the year.”
Reeg called digital exciting with the North Carolina launch of sports betting getting greater customer acquisition than expected compared to other recent launches. He said that’s attributed to the strength of their database, with the first-month market share almost 9% of the market, three times more than other new-launch states.
First-quarter digital earned $282 million in revenue, a 18.5% increase over $239 million in 2023.
“As a result, North Carolina was negative $11 million of net revenue in the quarter and negative $20 million of EBITDA,” Reeg said. “If you strip out that launch, we were $25 million of EBITDA, online sports betting revenue was up 33%, and icasino, not impacted by North Carolina, was up 54%. It’s tremendous momentum for us in digital in the quarter, despite March Madness and the Super Bowl not being great (in terms of sports outcomes).”
Reeg talked of the possibility of generating more than $500 million in EBITDA for digital operations in 2025.
“We feel very good about what’s going on in digital and that it really matches the progress against markets we laid out when there was no one in the space laying out any similar markers,” Reeg said.
Caesars is wrapping up its extensive capital expenditures across the country and that will increase free-cash flow and the ability to move to offense, which includes buying stock, Reeg said. They’re also looking at growth opportunities.
“We’re not in the habit of reporting quarters like this,” Reeg said. “We anticipate getting back to quarters like we’ve been printing for the last 10 years, starting with this next one.”
Finally, Reeg reiterated that Caesars isn’t looking to sell any of its Las Vegas properties.
