Q4 2022 Caesars Entertainment Inc Earnings Call
Okay.
Good day and thank you for standing by welcome to the Caesars Entertainment, Inc, 2022 fourth quarter and full year earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.
To ask a question. During this session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one again.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Brian Agnew Senior Vice President of corporate Finance Treasury and Investor Relations.
Thanks, Josh and good afternoon to everyone on the call.
Welcome to our conference call to discuss our fourth quarter and full year 2022 earnings. This afternoon, we issued a press release announcing our financial results for the period ended December 31 2022.
A copy of that press release is available on the Investor Relations section of our website at Investor <unk> Caesars Dot com.
As usual joining me on the call today are Tom Reed, our Chief Executive Officer, Anthony Carano, Our President and Chief operating Officer, Bret Yunker, our CFO and Eric <unk>, our president of Caesars Sports and online gaming.
Before I turn the call over to Anthony I would like to remind you that during today's conference call. We may make certain forward looking statements about the company's performance.
Forward looking statements are not guarantees of future performance and therefore, one should not place undue reliance on them forward.
Forward looking statements are also subject to the inherent risks and uncertainties that could cause actual results to differ materially from those expressed.
For additional information concerning factors that could cause actual results to differ from those discussed in our forward looking statements you should refer to the cautionary statements contained in our press releases as well as the risk factors contained in the company's filings with the Securities and Exchange Commission.
Caesars Entertainment undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances that occur. After our call. Today also during today's call. The company may discuss certain non-GAAP financial measures as defined by SEC regulation G. The GAAP financial measures.
It's directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company's website at investor Dot Caesars Dot com by clicking on the press release regarding today's fourth quarter financial results I'd like.
To turn the call over to Anthony.
You, Brian and good afternoon to everyone on the call we.
We generated fourth quarter EBITDA records in both our Las Vegas, and regional segments during the quarter and our digital results continued to show impressive quarterly sequential improvement all year, leading to our best performance during Q4.
Trends in Las Vegas remains strong during Q4, delivering both a 11% revenue and EBITDA growth versus last year exclude.
Excluding Rio rent payments Las Vegas generated $549 million of adjusted EBITDA with a margin of 48% up 1000 basis points for 2019.
Occupancy during Q4 was 95, 5% up to pre Covid levels for the first time since the pandemic.
Strong occupancy and ADR has led to records in cash hotel revenues and food and beverage results.
Group demand strengthened during Q4 and represented 16% of occupied room nights during the quarter.
Our group and convention segment in Las Vegas generated a new EBITDA record in both Q4 and full year 2022.
For the full year of Las Vegas segment generated over 25% growth in both revenues and EBITDA, leading to annual records of approximately $4 3 billion in revenue and $2 billion in adjusted EBITDA, While we clearly had a strong year in Las Vegas, we remain optimistic for 'twenty three and beyond.
Occupancy remains strong and rates are trending ahead of 19.
Group and convention pace for 2023 is up to 2019, driven by strong ADR higher room nights and higher banquet revenues.
The event calendar in Las Vegas continues to strengthen with several high profile new events entering the market in 'twenty three.
And our regional segment in Q4, we delivered $443 million of EBITDA up 3% versus last year. Despite the impact of negative weather in December .
Adjusted EBITDA during the quarter, excluding Lake Charles grew 21% versus 2019 with margins expanding approximately 700 basis points.
For the full year, our regional segment delivered $5 7 billion in revenues and $2 billion in adjusted EBITDA, delivering 34, 8% margins.
On a same store basis versus 2019, excluding lake Charles our regional segment delivered 24% EBITDA growth and margins expanded 700 basis points.
As we have stated on prior earnings calls, we expect to benefit from several capital investment projects in 2023.
Our new land based Horseshoe Lake Charles property opened late in Q4 2022 to strong demand with initial results exceeding expectations temper.
Temporary casinos in both Danville, Virginia in Columbus, Nebraska remain on track to open by mid year.
Renovations in Atlantic City are nearing completion and should be essentially compete complete ahead of the peak summer season. This year.
We also expect to benefit from expanded casino offerings in Pompano and Harris Hoosier Park this year.
I want to thank all of our team members for their hard work in 2022.
Our record results are a reflection of their dedication to delivering exceptional guest service.
And with that I will now turn the call over to Eric <unk> for some insights on the fourth quarter and full year performance in our digital segment.
Anthony I'm very pleased with the progress that we made in our digital business. During 2022, if you recall our objective is to drive a solid return on investment for our shareholders as our business grows and matures over time.
Our thesis was grounded on a reasonable Tam and early estimate and effort to build our brand awareness and harvesting the benefits of a very scalable business with a high portion of fixed costs.
Key to taking advantage of scale on a mostly fixed cost businesses to drive improvements in net revenue net revenues for sports and online are primarily determined by a combination of volume hold and offset by the cost of promotions Im pleased that in Q4 year over year, our volume was up 7% hold up a 100 basis points and promotional expense down 43.
<unk> the combination of these three mattresses resulted in us reporting the highest quarterly net revenue results to date growing by over 100% year over year and our smallest adjusted EBITA loss since rebranding to seize our sports book in August of 2001 on the sports betting side, we continued to focus our product and technology improvements.
And the overall experience for our customers. They responded very favorably to the improved in game parlay product enhancements the in game wagering improvements streaming technology and the introduction of live scores.
During the quarter. We also started to see the results of our segmented marketing campaigns that allow us to a result reward customers.
More directly for their loyalty and play as referenced earlier. These efforts were direct contributors towards our net revenue growth as they allowed us to improve our promotional spending efficiency. We anticipate continued enhancements in this critical area over the course of 2023 on the casino side work is well underway towards creating a significantly improved <unk>.
Product experience for our customers that will be rolled out in the second half of 2023, the new product experience will also include enhanced marketing capabilities, such as segmented and lifecycle triggered offers which we currently do not have for <unk>.
In the meantime, we continue to add new content, which has been well received I gaming remains a critical component of our digital growth strategy for 2023 and beyond from an expansion standpoint in Q4, we opened retail locations in Puerto Rico in Kansas and launched online sports betting in Maryland. In addition on January one we launched sports betting on.
Align in Ohio, and retail we now offer sports betting in 29, North American jurisdictions, 21 of which offer mobile wagering, we plan to launch our mobile sports App in Massachusetts. Later, this week to accept registrations and deposits and pending final regulatory approvals, we anticipate accepting wagers starting in mid March.
Ill pass the call to Bret for some additional comments on Q4 and the full year.
Thanks, Eric consistent with our historical track record, we continued to aggressively reduce debt in the fourth quarter by paying down over 200 million for free cash flow, bringing our full year debt reduction to $1 2 billion.
Our leverage also came down significantly during 2022 and now stands at just under $4 five acts on a traditional debt to EBITDA basis or mid buybacks rent adjustment.
Alongside a one notch rating upgrade from Moody's in January we refinanced $4 5 billion of debt at highly attractive rates roughly half of which came in the form of 7% fixed rate notes.
They're decreasing our exposure to short term rate hikes from the fed.
Our next debt maturities over two and a half years away.
2022, Capex spend excluding AC came in at just under 800 million, which remains our expectation for 2023.
Our plan includes $300 million of maintenance, Capex and $500 million of growth capital.
As of December 31, we had federal net operating loss carryforwards of $1 9 billion, which will continue to shield operating income in 2023 and well beyond.
We averaged just over $1 billion of annual debt reduction over the past two years, which sets a nice target for us to achieve yet again in 2023, I'll turn it over to Tom.
Thanks, Brad.
On the financing piece I know these calls.
End up skewing to the equity markets I want to thank our banks and our credit investors. We've been at this for nine years now as a public entity.
And Ted what has gone through a series of acquisitions a series of financings and every time, we ask the debt markets to step up for us.
Step up in strength in numbers.
Well beyond expectations in this case allowed us to upsize by $1 billion and start dealing with 25 maturities in advance of when we expected no that that's not taken for granted that.
We really do appreciate you, believing in us each time, we come to market.
You should expect that we'll be back to deal with the remaining 25 maturities at some point after the call steps down stepped the calls stepped down in the middle of this year.
In terms of operating results.
For the quarter since we already pre released I'll make a few comments on last quarter, but I'll focus on what's going at what's gone on in January and February so far.
In digital.
As you saw in our results we are nearly breakeven.
Our well publicized MLB exposure around the World series was about a $30 million swing. So on a hold adjusted basis, we're well into the positive in the fourth quarter first quarter, we launched.
Ohio.
Given the launch costs. There you should expect a modest loss in the first quarter, but we are anticipating that digital on a full year basis will be an EBITDA contributor for us this year.
And when I say that I'm talking about overall and bowls verticals I'd expect sports betting and gaming to be EBITDA positive this year.
For us when.
When we started this.
Digital launch.
About a year and a half a little over a year and a half ago. We told you that cumulative EBITDA losses would be something north of $1 billion. It looks like they're going to finish up somewhere a little over 1.1 billion.
We expect to add maturity that will generate in excess of 50% of that in annual EBITDA out of the digital business that has not changed at all from when we launch remains.
In our sites, we would expect to be generating that level of EBITDA full year of 25, we're hopeful will be run rating at least.
A quarter or two in 24 at those levels. So.
The.
Switch to getting out of brand building getting out of advertising.
In terms of big expensive commercials, you'll notice you didn't see us.
The superbowl, but more importantly, the granular changes in here.
Individual marketing have flowed dramatically.
This is the quarter when we launched New York in Louisiana last year, so you're going to see over half a billion dollars of trailing EBITDA losses in digital disappear. This quarter January alone on a consolidated basis.
EBITDA improved over $450 million for the month, so obviously theres going to be a significant change in trailing <unk>.
Credit statistics that we're excited for.
In the break and more in the brick and mortar arena.
The.
The business remains exceedingly strong consumers continues to spend.
Regional has continued to do well the only thing I can point to really in terms of weaknesses weather related in the fourth quarter.
I'd peg about $20 million.
Lost EBITDA in December our.
Primarily in the Midwest, but kind of throughout the regional business first quarter, you've got northern Nevada has been inundated with snow.
This horse winner in about 70 years so.
You've got a little bit of impact there, but despite that our regional business grew in the fourth quarter continues to grow in the first quarter and as Anthony said, we have pieces that are coming online that will add to that I was at the lake Charles opening in December .
Really pleased with the way that product turned out.
If you look at how it's been doing since opening.
Expect that our <unk>.
Incremental EBITDA on the spend is going to be in excess of 25% on a gross basis, but recall that we had insurance proceeds there from the disruption of the original properties on a net basis, our ROI there should be.
You know approaching 50% so extraordinarily strong in Lake Charles We're excited that we've got temporary casinos coming in Danville, Nebraska, We've got the Indiana project coming online in the back half of the year the Atlantic City spend largely done should be done.
By the time, we had prime.
Prime season, so really excited for the way.
23 sets up for us from a regional basis.
Vegas.
It's hard to express how strong Vegas is right now.
No.
Occupancy in January for US was up over 17 100 basis points versus omicron impacted 22.
We're off to on a consolidated basis and in Vegas in particular, an exceedingly strong start to the first quarter, but recall that in the first quarter or the back half of the quarter tends to be more important than the front half, but as we look at forward bookings in Vegas.
There is strong and getting stronger March sets up to be one of the best months that we've ever had in Las Vegas.
Forward bookings are strong group attrition is declining so that we are now seeing group business.
In excess of 2019 numbers for the first time, it looks that way going forward in all of our forward indicators for booking look very strong so.
As we sit here today feels.
The business feels fantastic and with that I'll open it up to questions.
Thank you.
Binder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Our first question comes from Joe Greff with Jpmorgan you May proceed.
Good afternoon guys.
Tom just wanted to dig a little deeper.
Into your Las Vegas strip group and convention commentary.
Based on pace and or what is booked presently.
Can you talk about room nights by quarter for this year and how it compares to you know each of the quarters.
In 2022 really kind of focusing more on on the second quarter in the second half of this year could understand.
The first quarter strength.
So I don't know that I want to get into that level of granularity in terms of quarter by quarter I would tell you that right. Now we are a high single digit percentage points above 2019 levels recall that we never reach 2019 levels in.
'twenty two.
Obviously, the back half of the year from a calendar basis citywide sets up.
Very strong so we feel very good about group business in 'twenty three.
Great.
And.
Can you talk a little bit about F. One later this year in November and how.
How much you think that can be in terms of incremental EBITDAR and maybe what it can generate in the <unk>.
There seems to be the expectations all all over the place but is it something that could contribute.
Relative to what you just reported in the fourth quarter in Las Vegas, an incremental 5%.
Of EBITDA, all other things being equal.
Yes.
Yeah, Joe I think that certainly possible. We are the important thing is.
When it happens so I would be I'm expecting Super Bowl level activity, if not stronger, but if you lost the Super Bowl in February Youre still going to have a strong weekend, there's obviously.
Incremental lift from the Super Bowl, but when you're talking about.
In November that's our softest period of the year. So the lift as he is far more dramatic on a on a year over year basis. So yeah I'd be looking at for us.
Something along those lines, 5% or better in terms of.
EBITDA for the quarter Thats driven by that weekend.
Thank you very much.
Thank you.
Our next question comes from Carlo Santarelli with Deutsche Bank You May proceed.
Hey, guys. Thanks, good afternoon.
Brett could you talk a little bit about how you're thinking about leverage right now and when what the timeline looks like until you believe you could more or less achieved kind of where you want to be on a static basis going forward.
Yes again.
Digital losses are coming out we got upgraded by Moodys were mid <unk> rent adjusted.
With digital and collecting positive that'll come down so we expect to be below the four times.
Gross rent adjusted target by the end of 'twenty four.
And is that where you guys will comfortably kind of run the business going forward.
Yes, I would expect that we're going to it will be a.
Again free cash flow generator still so I don't think that and the.
Deleveraging, but yes, we should we want to be sub four times less.
That's been consistent since we closed the Caesars transaction.
Great. Thank you and then Tom if I could follow up on the more or less kind of 550 target EBITDA from the digital business.
To the extent you're willing to share how do you kind of think about the split between the OSB side in the casino side, obviously I imagine that that estimate assumes the second half of this year with a lot of the rollouts that you're doing on the casino side that that business provides pretty healthy growth.
The 24 and beyond.
Yes, that's true Carla.
I prefer not to get Super granular I'd say the mix.
In that $5 50, plus number will lean towards sports betting, but is on a per state basis, obviously gaming is overrepresent.
Thank you both.
Thank you.
Our next question comes from Barry Jonas with Truth, you May proceed.
Great. Tom are you surprised at how resilient the consumer has been anything you think could explain it and then just as a follow up as you think about digital versus land based players.
Or do you expect to see more recession or macro resistance.
Yeah, I mean, I don't I.
I'm no economist so I don't.
I don't know that I'm surprised by what's happening I think.
We lost people in their homes too.
For some period of time throughout the country and then.
We're comparing.
Periods of time that are not apples to apples because that's never happened before.
So I.
I don't know how you think about how.
<unk> been re ordered in terms of time as an example.
Less.
Working from an office there is more working.
Mostly we've always viewed these businesses as the limiting factor was cash.
If you're a customer didn't have.
Customer your business is going to fluctuate based on how much cash you're customer has.
Obviously, that's going to have significant correlation.
Now this time was a limiting factor as well that people can now spend time doing things that they enjoy longer than they could before because they're not commuting to a city center and they're not spending the money to do that.
But all I can tell you is what we see in the business.
Is continued strength in very you know we're up against.
You had strong comps going back for a few quarters now and we are still growing so with all the handwringing over.
What will happen.
I expect when we do get a turn in the cycle I am expecting a normal business cycle recession, where.
You get a substitution effect to regional properties out of destination, but we certainly don't see anything in our destination business today that suggests that that's on the horizon.
That's great and then just a follow up was I'm curious to get your thoughts on the digital versus the land based player. Obviously, there is some overlap but.
As you think about.
A recession or some macro hits, which play or do you think would be more resistant.
I mean, that's another that's more uncharted territory and the answer is we don't know.
Suspect that the digital player is.
More just money.
If youre looking at money versus time.
Strained I would suspect the digital player is more leans toward money as they achieve constrained and brick and mortars or mix.
But how will they behave in a downturn.
I don't know that Theres enough difference between the two to say youre going to see a significant.
Divergence.
Got it alright, thank you so much Tom.
Thank you.
Our next question comes from Stephen <unk> with Stifel. You May proceed.
Hey, guys good afternoon.
Tom I don't I don't think you mentioned in your prepared remarks, and I know you said, besides whether theres nothing you can really point to in terms of consumer weakness, but.
Maybe can you provide us any comments around what you've seen from unrated play and maybe how that's fared recently in.
There have been any material changes in Europe .
Patterns across your database peers, meaning that.
That low tier rated player has there been any softness there I would assume the answer is probably no though.
Your last question there is no.
In terms of unrated.
You saw we saw a material step down in unrated as we anniversaried stimulus, but that's behind us now.
You've seen the results including.
The fourth quarter and into the first quarter. So on rate. It kind of peaked when stimulus checks were going out rated continues to.
Behave strongly and on rate, it's still holding in after that initial stepped up.
Okay got you.
Second question and I'm look I'm not even sure. If this is even relevant but we've gotten this question a couple of times from investors.
Is there any way to help us understand if theres any impact we need to think about around the <unk>.
William Hill.
At Mt function in Nevada around the Super Bowl or is that.
Kind of over and done with at this point.
That's over and done with that's E tect.
Technology issue, we're running Nevada on old technology, not Liberty Liberty needs approval, it's actually the Pam provider that needs approval, we expect that.
Relatively soon and so we expect Nevada to be on Liberty for next football season. So that's certainly not something that we were that we enjoyed while that was going on but it's in the rearview mirror at this point, okay. Perfect. Thanks, Tom I appreciate it guys.
Thank you.
Our next question comes from David Bain with B Riley you May proceed.
Great. Thanks, so much.
First I was hoping we can get a little bit more granular on the potential casino ramp in the back half just trying to get an idea of major tech improvements like sufficient slot content for churn when that kicks in how important that is and maybe any other major catalyst that move the needle in terms of share.
Are there because certainly it doesn't look like what the EBITDA guidance and thank you for that by the way it doesn't seem like that includes a lot of big cash promotional push.
Yeah, maybe I'll jump in and take us on David.
So the big change that we're going to make it to have a standalone casino app. So right now if you want to play on the casino you have to go download the sports betting App and then find the casino icon click on it and go through the casino will also be offering a casino app that then you can do the same thing you can go back.
To the sports betting side, but it will be much easier to use.
Customer perspective, who is looking just for the casino side will also be creating some.
Branded live table games.
The various states more so than we have right now we'll also be introducing the ability to do segmented and triggered marketing. So much like if you recall a year ago, we were unable to do that on the sports betting side, we're now able to do segmentation on the sports betting side, but we're not on the casino side and so we are unable to use the learnings.
The years and years of experience, we have on the brick and mortar side on the casino side, and so we'll be having that come along as well from our games content perspective, that's something we can address now and so what you'll see is over the next say two to three months, we will be making steady releases, adding more games, particularly on the iOS side.
Where we don't have as many on the ads on the Android side. So the game content will be coming along we'll be adding.
Custom table games that are branded as Caesars, but the big changes will be the segmented marketing the ability to do triggered lifecycle journeys and then the standalone app that youll see in the second half.
Okay awesome.
And then just kind of I think this will bleed into Eric Your comments, just now but Tom in the past you've given us data points on on land based contributions from online I believe sometime last year around this time it was $150 million of high margin revenue.
Can we get an update on how thats trending now and in terms of the Omnichannel marketing approach are there. Some specific plans you can share to sort of ramp that for.
More valuable customer acquisition and loyalty.
Yeah, Dave side.
I wanted to get out of updating that number you should consider.
I assume that it continues to grow.
Our rewards database that we're leaning on in this business more and more as time goes on as states open and <unk>.
Every customer is up for grabs.
In there, but as states mature what you see us doing is leaning into our rewards database.
And bringing those new customers into our database and we're seeing a lot of cross market play and I get.
Anecdotally I get a report of.
Big winners and losers in both sports and <unk> gaming everyday and a.
A year ago there was.
The report will show their brick and mortar history and this is particularly true.
I casino.
I didn't see a lot of correlation between big I gaming players in brick and mortar players and now youre seeing if it's.
25 people on the sheet everyday 20 of them have significant brick and mortar history. So you can see it continuing to build through the reward system, which is exactly what we were hoping would happen.
Okay, great. Thanks, so much.
Thank you.
Yes.
Our next question comes from Danielle <unk> with Wells Fargo. You May proceed.
Hey, good afternoon, everyone. Thanks for taking my question.
First on Las Vegas, I was hoping to learn a little bit more about the room night mix in 2023 versus <unk> 22, I know you mentioned that you'd had record convention mix, but I guess, what kind of a cohort in the business coming out of and how should we think about the relative profitability.
Versus.
From purchase casino versus the leisure customer as it shifts this year last year.
Yes, Youre seeing group.
Com come in increase over 22.
<unk> expense of <unk>.
Ta in lower end business, so youre getting.
A dramatic lift in rate that customer is going to skew more toward.
Non gaming offerings, so you'll have some impact on <unk>.
<unk> revenue, but overall your.
In some cases, particularly in early in this quarter you are filling a room that was unveiled last year as you move through the year, you're basically trading up to a more valuable customer.
Are there mix of spend may be a little different their profitability is.
Significantly higher than what they are replacing.
Got it and then it.
Digital is there any way you could just help us bridge a little bit.
From 2023 kind of.
Modestly positive big jump into 2024, and then even more significantly significant jump in that 2025 is that.
Larger longer term deals kind of coming out of the business or is it just the <unk>.
<unk>, new states or any way to help us better understanding the moving pieces there.
Sure Yeah, it's all of the above.
<unk> COO.
Continued momentum from what we're doing here you've got a business that's growing organically and has added a bunch of states some more recently than others.
There doesn't appear to be a huge new state pipeline coming on obviously, we've got a significant ramp expected in gaming as we get into back half of 'twenty. Three and then you do have all of that.
The original partnerships that were stock.
<unk>.
That should be rolling off starting in 'twenty four 'twenty five.
And.
Some of the chunkier ones that flow directly to EBITDA.
Yeah.
Thanks for the color.
Thank you.
Our next question comes from Shaun Kelly with Bank of America, You May proceed.
Hi, good afternoon, everybody. Thank you for taking my question.
I just wanted to follow up on that on that last question around online could you help us just give us any thoughts on kind of the underlying margin structure. There are number of.
People who've given some formal targets had talked about a 30% overall style contribution margin is what would be underlying.
The targets that you've kind of laid out as you start to get out into 'twenty four 'twenty five would it be similar to that can you do even better given some of your own in house capabilities, just kind of how would you think about the puts and takes relative to some of the margin goals have been put out there by others.
Yeah.
Yeah, so without giving a target I think we've.
Got an advantage against some others in terms of we own all of our licenses.
We think we've got a customer acquisition cost.
Advantage.
Tying into our database against against.
All to some degree but.
Some significant advantage there.
We think Ted sports will be lower margin than high gaming, but that both will be.
Significantly material margin and we have a long history of performing well on a margin basis.
On a relative basis, and we would expect that to be the same in digital as it's been in brick and mortar.
Got it thank you and then.
Sorry, I just wanted to pivot on the land based side to maybe just the cost environment, a little bit we're starting to hear a number of operators on the hotel side talk a little bit more about sort of cumulative inflation over the last three and four years little bit of a.
Different animal than in Vegas, I know Caesars has a decent amount of union contract as well, which probably provide some visibility but can you just discuss about the overall labor and hiring environment and then specifically maybe drill in on any upcoming union contracts and how that might how any negotiation there might might impact the operating expense.
Yeah, So I'd say we have.
Been dealing with labor cost inflation.
Since the reopening we've got.
Lots of it are the Nevada Union contracts are up in the middle of this year.
<unk> begun discussions with.
The unions and to put it plainly.
We're doing well we've been doing well our employees should do well. So we've built into our analysis, we expect labor cost inflation through this new union contract in the back half starting in the back half of 'twenty, three and with what we have.
Got going on in the business.
We think we'll be able to navigate that just fine.
Thank you very much.
Okay.
Thank you.
Our next question comes from Brian <unk> with Barclays. You May proceed.
Hey, good evening, everybody. Thanks for taking my questions.
Just starting out with Las Vegas on the pace that you gave Tom I was wondering if you would.
Be kind enough to break that out into volume versus rate. I know you said rates were up and what I'm getting at is the broader hotel world in the U S is still seen a lot of.
In the year for the year volumes being booked and so I'm curious how much upside do you think there is on that front in Vegas this year.
Yeah, So brand we've seen a significant lift in.
Demand as we measure it in terms of forward bookings in the last few weeks.
As I said March is setting up for one of the strongest months we've had.
Certainly from a rate and occupancy standpoint.
As you get toward.
The back half of the year, you're comping against quarters, where we were full so youre going to see more of a rate lift it's really the first half of the year that has benefited and filling in.
Occupancy that wasn't there in 'twenty two primarily midweek.
Thanks for that.
And then.
A question about gaming and Tom I'm curious when you think about that market.
Think about your ASP your company's aspirations for growing that your business there in the second half.
Do you think that you can do that.
By growing the overall market by engaging in your with your database and and things that you can do there or is there a significant amount of your lift going to come from gaining share from other operators in your mind.
Yeah.
I think it'll be a mix of both that will tap into.
Our own <unk>.
At work, but that also there'll be some market share gain as well you've seen.
Even in this environment, where we've not been aggressive at all from a promotional perspective.
Go back and look at what's happened in Illinois market share for us.
You'll see us.
Turning to claw share, we're certainly still nothing to write home about but when you give the customers a better product.
We've got a lot of customers that are.
That lean towards doing business with us if we've got the right product.
We think that we're going to be there shortly and we'd expect similar experience.
Great color thanks, everyone.
Our next question comes from Chad Beynon with Macquarie You May proceed.
Hi, good afternoon, Thanks for taking my question.
Eric You mentioned hold was up I believe of 100 basis points in the fourth quarter and I'm guessing that was a combination of game outcomes, but probably more importantly game mix with with single game parlays into like can you kind of help us think about structurally what's happening with withhold.
Kind of where your single game parlay in maybe in play product is.
Against you know, where you want to be and maybe your peers and if you think this will have a positive outcome for 2023, particularly as we get deeper into the year. Thanks.
Yeah sure you're right. It was it was I would say mostly structural changes that we made there was definitely a favorable outcome on some some key sporting events, but.
One of the things we measure is multi wager tickets. So it could be same game <unk>, our multi game parlays or however.
The customer wants to bet and those the percentage of those is a function of our overall best is steadily rising.
Kind of a third year that we have good data on it and we're continuing to see improvements and as you know the hold and those products are much higher we've also done a better job merchandising. It. So if you go on our App now Youll see we have pre can parlay. So they are effectively prebuilt.
Right now they are the same for everybody, but in the future, we'll be able to use some segmented marketing to display different pre can parlays, which I think will be really.
Customers will be really receptive to that.
We also have boost that we offer on the titles across the top and the boosts our well received by the customers and those also.
Help improve the hold overall for the product in.
In addition, we've made a number of changes on our trading team. We now have the trading team organized by sport.
We fully separated from the William Hill team.
And we also have.
The modeling being done for the most part now in house.
Our analytics team has built a lot of the models that we use for in play trading which also helps have more customization for our <unk>.
<unk> with the book, but it also just over time will help our whole percentages.
Great. Thank you.
And then separately can you just update us on in terms of the size and scope I guess the spend in New York for a land based.
Casino and maybe the timing for that opportunity and when we'll find out.
The next steps thank you.
Yeah, So I'd say.
And to date has been modest we see the same documents that you see.
That suggests they're looking to.
Awards, something by the end of the year, but there is a.
Potential cut through the location boards of the various properties.
Upcoming in the next quarter or so.
We continue to believe we've got the project that we will open the quickest.
I'll start paying New York the taxes, the quickest it's in an area that doesn't need zones.
Zoning approval.
Obviously as already tourist focused but I can assure you we are not going to be the one that wins.
Because we built the biggest housing development outside of our casino, we're going to win this on the merits of the property.
How quickly we can get open and how well it fits into the local environment.
If it becomes an arms race of who is going to spend the most money we won't win.
Thanks, a lot of sense. Thanks, Tom.
Thank you.
Our next question comes from John Decree with CBRE Securities You May proceed.
Hi, everyone. Thanks for all the color so far maybe.
Two easy ones Tom.
If you could give us a little bit of insight on how we should think about the seasonality in Las Vegas. This year, obviously, the last couple of years have been pretty noisy.
<unk> in 2022.
Your largest quarter. It's obviously I think <unk> had some benefit from from <unk> trips being deferred but curious to get some insight for this year.
Okay.
Yeah, I would say you should expect a more normal.
Year of seasonality in Vegas this year were.
Early in the year your Sofia ramp up in the kind of right about now in the first quarter and that goes till it gets really hot here.
Third quarters the.
The seasonal slowest 0.4th quarter.
<unk> got November is typically your slowest months of the year, but that's when F. One will hit this year. So I think you get that bump that we talked about earlier in John's question.
Got it that's helpful and then <unk> in Las Vegas, I think maybe Anthony is prepared remarks, he mentioned 16, or 17% I forget which group room nights.
It's relatively high for you guys is that.
The right level that you guys think you'll you'll be out on an annualized basis going forward or is there more upside or what's the right mix. If you think about your kind of customer segments.
Yes, I would expect with.
Full full on group business with Forum.
Operating I think you should expect us to continue to creep higher into the high teens in terms of.
Percentage of overall room nights here.
Great. Thanks, a lot Tom I appreciate it.
Yes.
Thank you.
Our next question comes from David Katz with Jefferies. You May proceed.
Yeah.
Good day, everyone I wanted to go back to the subject of prospective asset sales and where you think the credit markets are in terms of support for that.
Both within and perhaps outside any preexisting put calls of roofers et cetera.
We are not active.
In that market, so I can't speak with <unk>.
First 10 knowledge I would tell you today would have been a tough day to try to do something.
<unk>.
We were.
The deal that we did in <unk>.
January by a number of metrics was one of the largest ones.
As happened in <unk>.
The credit markets generally and certainly in gaming in quite a while so I wouldn't describe it as.
Credit markets are wide open at this point.
<unk> been getting better but in an environment, where the fed is still raising its still a dicey environment, where you've got to pick your spots.
Understood. So if we can just sort of focus on.
The potential opportunities that are contractual obligations are those factored into your thinking for this year and next I know Brett talked about getting to a leverage level by the end of next year, but I think we're sub four we suggested if I heard correctly.
Yes, we're presuming that we're presuming that those proceeds would be.
They add lease adjusted debt to be used to pay off conventional debt. So that that would be that wouldn't change. The net result.
That materially.
Okay perfect. Thank you.
Thank you.
Our next question comes from Stephen Grambling with Morgan Stanley You May proceed.
Hey, Thanks for sneaking me in as a clarification I believe I heard Brett mentioned, the $1 2 billion in debt reduction this year could be repeated next year is that the rough math to think about free cash flow for 2023, and how should we generally be thinking about ROI investment versus maintenance capex in the year ahead.
Yeah, that's free cash flow so no asset sales for 2003.
And what was the second question about maintenance Capex ROI.
Yes is there just any maintenance can you split basically how youre thinking about maintenance capex versus ROI investments in 2023 as well.
I said 305 hundred so 500 grows 300.
Maintenance.
Got it and then as a follow up on digital.
How are you thinking about new states legalizing.
And capturing the 50% ROI run rate in 2024.
We don't assume anything beyond words.
One to the markets today, so we're not anticipating.
There is a big state shoe that's going to drop.
Got it thanks, so much.
Alright, thanks, everyone.
I'll talk to you at the end of the quarter.
Oh.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
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One one.
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