The owner of Caesars Sportsbook is aiming to beat bettors at a higher rate with tougher trading but also with tactics deployed by some of its rivals involving same-game parlays and increased in-game wagering.
Getting the hold rate at the sports betting sites offered by Caesars Entertainment Inc. to 7.5% to 8% from its current level of around 6.4% is a “reasonable expectation,” according to Eric Hession, the president of the company’s digital operations.
That’s even with some of the massive straight bets the company takes at its Las Vegas books, Hession said. Caesars offers legal sports betting in 30 North American jurisdictions, and it expects to see customers dabbling more in-play wagering, props, and same-game parlays that generally have higher hold percentages for the operator because bettors lose them more often.
“I think we've made a lot of improvements over the last kind of year, year-and-a-half, with respect to just the trading team getting more experienced, but also on the tech side,” Hession said during a conference call for analysts and investors on Tuesday.
“I think, as we go forward, you will continue to see a higher percentage of customers not betting straight wagers.”
Crunching the numbers
The hopes for a more parlay-happy customer base come as Caesars is striving to make its digital business consistently profitable.
Nevada-based Caesars reported financial results on Tuesday for the second quarter of 2023, which ended June 30. In addition to net revenue and profit increasing to $2.9 billion and $920 million, respectively, the company reported its digital segment’s same-store adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $11 million for the second quarter, compared to a loss of $69 million a year earlier. The positive quarterly EBITDA was a first for the digital business.
Following the release of the results, shares of Caesars were down more than 4% as of around 11 a.m. ET on Tuesday, trading at approximately $55 apiece. Despite this, at least one investment bank sees potential for the stock to bounce back and rise even higher with a Formula 1 race and the Super Bowl coming to Las Vegas, and the digital business continuing to generate better returns.
“In the nearer term, we believe the positive outlook in Las Vegas and for digital gaming through 2024 warrants further upside,” research analysts at Jefferies wrote in a note to clients.
Caesars Sportsbook is beating bettors at a higher rate this year, although customers are wagering less. Figures reported yesterday by the company show its sports-betting hold for the six months ended June 30 was 6.3%, up from 4.8% in 2022, but that handle was down around $1.4B: pic.twitter.com/U7nCU9kdAC
— Geoff Zochodne (@GeoffZochodne) August 2, 2023
On a non-adjusted basis, net revenue for Caesars Digital — which consists of the company’s retail and online sports betting sites, as well as its iCasino operations (including a new app) and wagering on horse racing — saw net revenue rise to $216 million during the three months that ended June 30 from $152 million for Q2 of 2022.
Again, without any adjustments, the segment registered a $22 million loss for the second quarter of 2023, although that was reduced from a $116 million deficit reported a year earlier.
Caesars also reported its sports-betting handle for the three months that ended June 30 was just shy of $2.5 billion, down from $2.6 billion for the prior-year period. Caesars still managed to beat its customers at a higher clip despite the weaker wagering levels, as the bookmaker's sports-betting hold rate for the second quarter was 6.4%, up from 4.6% a year earlier.
Management is suggesting the digital business will eventually generate around $500 million in EBITDA annually, and it’s a “three-legged stool” that will help Caesars get there, CEO Tom Reeg said during the call on Tuesday.
“One is continued execution in the [online sports betting] arena that we've discussed in terms of continuing to grow, continuing to drive EBITDA there,” Reeg said.
“The second piece is our iCasino share moving toward our OSB market share. And then the third piece is the roll-off of partnership and talent contracts over the next three years.”
