Caesars CEO Says Monetization of Digital Unit Still on the Table

• Caesars boss says digital unit performing well, but it’s not reflected in share price
• Options for monetization still possible, but he stopped short of saying “spin-off”

Caesars Entertainment (NASDAQ: CZR) delivered first-quarter results late Tuesday with one of the eye-catching numbers being a 19% surge in revenue at its online gaming unit.

During the first three months of the year, Caesars Digital, which includes Caesars Sportsbook, posted sales of $335 million and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $48 million. That sparked a question from Truist Securities analyst Barry Jonas on the gaming company’s conference call about plans for a potential spin-off.

As I said on the last call, our job is to deliver the numbers that we have laid — that we laid out starting in 2021. We’re well on that path,” said CEO Tom Reeg in response to the analyst’s query. “The goals are in our windshield now as we approach them. And we’ll see where we’re at when we get there in terms of are we getting value for what we’ve created.”

In a note out late Tuesday, Stifel analyst Steven Wieczynski said “we are optimistic about CZR eventually monetizing their digital platform.”

Caesars Digital Progress Not Reflected in Share Price

Speculation about the fate of Caesars’ online gaming business is now long-running and was further fueled last month when two allies of investor Carl Icahn were added to the gaming company’s board of directors.

Icahn is again a Caesars shareholder and while he has said he isn’t considering activism at the gaming company, he also noted he’d like to work with the management team to explore alternatives for Caesars Digital, which he described as “underappreciated.”

“We’ve hit our goals, and we’re moving through them, and we’re just not seeing it in the equity,” said the chief executive officer. “Again, I’ll tell you, we will look at any and all options to create value for shareholders. But we are mindful that the first thing we need to do is continue to deliver numbers on the path that we have.”

Inside Q1 Caesars Digital Numbers

Despite customer-friendly outcomes on the Super Bowl and the NCAA Tournaments, Caesars Sportsbook posted a 9% increase in first-quarter revenue. Management is targeting a 10% hold rate by the second half of next year and is forecasting “hundreds of millions” of sports betting EBITDA over the next 18 months.

iGaming impressed as well and that trend is continuing in April with month-to-date revenue up 70% on a year-over-year basis.

“In iGaming, CZR posted another record quarter with revenue growth of 53% driven by 28% handle growth, higher hold and lower reinvestment,” adds Jonas. “CZR’s newest app The Horseshoe continues to progress already contributing 7% of iGaming revenue. Management is also pleased with its recently launched Live Dealer Studios in Pennsylvania and New Jersey. Management expects the current ~50% growth trend to continue for the rest of the year.”