Q4 2024 Caesars Entertainment Inc Earnings Call
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Speaker Change: Good day and thank you for standing by. Welcome to the Caesars Entertainment Inc. 2024 4th Quarter and Full Year Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question, please press star 11 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. Please go ahead.
Speaker Change: Thank you, Tanya, and good afternoon to everyone on the call.
Speaker Change: Welcome to our conference call to discuss our fourth quarter and full year 2024 earnings.
Speaker Change: Joining me on the call today are Tom Reeg, our Chief Executive Officer, Anthony Carano, our President and Chief Operating Officer, Brett Yunker, our Chief Financial Officer, Eric Hession, President, Caesars Sports and Online Gaming, and Cherise Crumbly in Investor Relations.
Speaker Change: Before I turn the call over to Anthony, I would like to remind you that during today's conference call we may make
federal securities laws.
Speaker Change: And these statements may or may not come true. Also, during today's call, the company may discuss certain non-GAAP financial measures as defined by SEC Reg G.
Speaker Change: Please visit our press release located in our Investor Relations section of our website for a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure.
Speaker Change: I will now turn the call over to Anthony. Thank you, Brian, and good evening to everyone on the call. During our fourth quarter, regional performance improved sequentially as we opened our Caesars New Orleans expansion in October and Caesars Virginia in December.
Speaker Change: In Las Vegas, we posted roughly flat year-over-year results, despite a tough comparison versus last year's inaugural Las Vegas Grand Prix F1 race.
Speaker Change: Excluding customer-friendly outcomes in our digital segment in October and December, consolidated EBITDAR in Q4 would have been flat year over year.
Speaker Change: For the full year of 2024, the company delivered consolidated same-store results of $11.2 billion in net revenues and $3.7 billion in EBITDAR, delivering an EBITDAR margin of 33.2 percent.
Speaker Change: Moving to our segments and starting with Las Vegas, same store net revenues during Q4 were $1.1 billion and adjusted to EBITDA was $478 million, down 1% versus last year.
Speaker Change: We were pleased with results in Las Vegas, especially when compared against the inaugural F1 race held in 2023.
Speaker Change: Margins in Las Vegas were 44.4% in line with expectations. Occupancy for the full quarter was 96% down slightly to last year against F1 comp. Our group business delivered another great performance representing 16% of occupied room nights.
Speaker Change: And recent investments in our Las Vegas room product and gaming offerings have delivered some of the strongest returns in our Las Vegas portfolio's history, driven by strong cash ADRs and increased gross gaming revenues.
Speaker Change: Turning to our regional segment in Q4, net revenues declined 1% and adjusted to EBITDA decline 5% and improvement sequentially in the rate of EBITDA decline versus the second and third quarters in 24.
Speaker Change: During the quarter, we finished a complete remodel of Caesars New Orleans on October 22nd and opened the permanent facility in Danville, Virginia on December 17th.
Speaker Change: Results in our regional segment were driven by continued competitive pressures in certain markets, offset partially by contributions of the two new facilities we opened later in the quarter, with both new properties exhibiting strong early results.
Speaker Change: We are excited to capture a full year of results from both New Orleans and Danville in 2025.
Speaker Change: 2024 was the conclusion of an intensive capital investment cycle that began at the close of merger in July of 2020. We completed several large CapEx projects that will have meaningful contributions in 2025 and beyond, and we are cycling through competitive pressures in our regional segment that are becoming less negative.
Speaker Change: Our investments in our property portfolio are evident, and our properties have never looked better.
Speaker Change: We expect that the returns on our investments and continued strength in both brick-and-mortar properties and Caesars Digital will produce a dramatic increase in free cash flow in 2025 and 2026.
Speaker Change: Finally, I want to thank our team members for continuing to execute at the highest level and delivering on our commitment to exceptional family-style service. With that, I'll now turn the call over to Eric for some detail on our Caesars digital segment.
Eric Hession: Thanks, Anthony. 2024 delivered all-time records in net revenue, EBITDA, and cash flow within our digital segment.
Eric Hession: Total net revenue was $1.2 billion, up 20% year-over-year, and adjusted EBITDA was $117 million versus $38 million a year ago.
Eric Hession: For the quarter, we generated net revenue of $303 million and $20 million of adjusted EBITDA. Absent low hold in Q4, our digital segment would have generated approximately $370 million of net revenues and approximately $60 million worth of EBITDA.
Eric Hession: Turning to segment results, iGaming delivered exceptionally strong performance all year, culminating with 65% net revenue growth during Q4.
Eric Hession: Our iGaming franchise continues to deliver industry-leading net revenue growth driven by our improved product offerings within the Caesars Palace Online app and our new Horseshoe app which is now available in all the jurisdictions in which we operate.
Eric Hession: In January, we announced the launch of our first branded online Caesars Casino live dealer studio in Pennsylvania, and we plan to roll out similar branded studios in New Jersey and Michigan later in the first half.
Eric Hession: We also announced a partnership with Bragg Gaming to develop Cesar's own slot and table content that will help differentiate our offering versus peers.
Eric Hession: Turning to sports betting during Q4, net revenue declined during the quarter as a result of customer-friendly outcomes in October and December. In addition, our overall volume declined slightly as we limited activity and reinvestment in unprofitable customer segments.
Eric Hession: Our parlay, SGP, and cashout percentages achieved all-time records during the quarter, and absence of sport-friendly outcomes to customers would have resulted in record hold percentage.
Eric Hession: The increases in these types of wagers, along with our improved customer user experience, support our belief that we will achieve an excess of 10% hold over time.
Eric Hession: As we look to 2025, we're excited to complete the rollout of our proprietary player account management system, which will lead to a single wallet across all of our sports jurisdictions.
Eric Hession: Continued improvements in technology, structural hold, and customer experience will drive another strong year of revenue and EBITDA growth in 2025 and keep us on track for our $500 million EBITDA goal. I'll now pass the call to Brett for some comments on the balance sheet.
Brett Yunker: We had a productive fourth quarter, utilizing non-core asset sale proceeds from WSOP and Link Promenade to repay $500 million in debt and repurchase additional stock.
Eric Hession: During calendar year 2024, we acquired 5.1 million shares for $190 million at an average price of $37 per share.
Eric Hession: Our 2024 debt refinancings have positioned the company to take advantage of a lower cost of debt, driving significant interest expense savings in 2025. We also extended our nearest maturity out to 2027.
Over to Tom.
Tom Reeg: Thanks, Brad. Thanks, everybody, for joining. I'll fill in some detail on fourth quarter.
Tom Reeg: talk about full year 25 and since we're almost two months into first quarter I'll give you some color on what we've been seeing during this quarter as well.
Tom Reeg: As Anthony spoke to fourth quarter in Vegas, we were proud of our performance versus last year's inaugural F1.
Tom Reeg: You can see we were roughly flat. Our volume indicators also flat. So room revenue, cash room revenue for us.
Tom Reeg: was down less than 1% for the quarter, despite the lack.
Tom Reeg: of the F1 business. F and B revenue similarly down a little less than 1%. And our volume indicators in gaming were up. Slot coin in.
Tom Reeg: was an all-time record for us in Las Vegas. Tablewind was up year over year, helped slightly by a little bit better hold.
If you look at
Tom Reeg: Regional has $500 million or so of trailing EBITDA out of our $1.9 billion that's in the middle of
Tom Reeg: facing new competitive threats in those markets with about 200 million of properties that have tailwinds behind them.
Tom Reeg: In the fourth quarter, you can see that even with just...
Tom Reeg: About ten weeks of New Orleans and two weeks of Virginia, our year-over-year performance in regional is down about five percent. As we talked about on the last...
quarterly call. We talked about the headwinds versus the tailwinds.
What I tell you is, since that call in October,
We've been...
pleasantly surprised that the competitive impacts that we were anticipating
Tom Reeg: have not been as severe as we anticipated, and the performance of our newly opened properties has been stronger than expected.
Tom Reeg: said I'd expect regional, instead of being a down slightly to flat year in EBITDA, should be flat on the left side of the range and up slightly on the right.
So, please, with that, Eric talked about...
Tom Reeg: We're up 64% in iCasino in the quarter, and that's on top of a full quarter of Caesars Palace Online last year, where I think we were up 50-something percent. So we're stacking.
Tom Reeg: on top of each other now. Feel very good about that. Everybody knows about the...
Tom Reeg: sports outcomes that were unfavorable in the fourth quarter. We can see our structural hold efforts continuing to bear fruit.
Tom Reeg: We're off to a good start in the first quarter, though. I'll get into a little more detail.
as we go.
Tom Reeg: In terms of 25, I spoke to you about regional, expect flat to slightly up in EBITDA across that vertical. In terms of first quarter, we're kind of right on top of last year. Recall that we lose a...
Tom Reeg: A day with the leap year last year between now and the end of the quarter.
Frankly, that could be the difference between
Tom Reeg: We're flat or we're down a couple million bucks, but it's our regional business continues to improve You know we are now attacking properties that have opened our typical operating philosophy is
Tom Reeg: For the first quarter or two, we don't try to spend into trial, but once our customers have had the trial period, we're in fighting and we're increasing investment in battleground markets, and I'd encourage you to look at
Tom Reeg: state monthly revenue reports out of Iowa, out of Indianapolis that show what's happening with share and revenue as we fight for those markets.
following competitive openings. If you think about regionals going forward,
Virginia has been...
beyond our wildest expectations in terms of performance.
Typically, when you double capacity, gaming capacity, your revenues,
Don't keep up with that pace
Tom Reeg: There's some dilution because you're adding so much product Virginia has kept pace. We've effectively doubled revenue after doubling capacity margins are obviously not quite as strong as
Tom Reeg: They are in the 10th, where they were over 60%, but we're well into the mid-40s in terms of EBITDA margin, so that's driving strong results.
Tom Reeg: New Orleans had a spectacular Super Bowl. It had a very good fourth quarter. January was difficult. Recall that the terrorist event in New Orleans four blocks from our site.
Tom Reeg: It was December 31st, we had a citywide convention that canceled shortly after that and then you had the first
Tom Reeg: snow, measurable snow in the city of New Orleans since 1895. So we've had
Tom Reeg: About three and a half months now of performance, almost four months in New Orleans, but it's been a roller coaster given what's happened. We're super proud of the property that we've built. We've been able to show it to our best customers.
Tom Reeg: during the Taylor Swift show shortly after opening and then the Super Bowl. It's been very well received. The numbers are very strong excluding the noise around the terror and weather.
Tom Reeg: So we feel very good about where those two properties in particular are heading into 25 and through the first couple of months.
Thanks for watching!
Speaker Change: In Vegas, if you think about 25, oh, I'm sorry, to finish on regional.
By the end of 25, the sole remaining...
Speaker Change: competitive opening of any substance that we'll have not faced is the second Penn-Chicago area move from their current site to the new land-based site.
Speaker Change: The bulk of what impacted us in 24 will be well over 12 months behind us, and there's very little coming behind that.
Speaker Change: So, as I've said, we're more sanguine on 25 and regional 26 should be even better as competitive threats abate and New Orleans and Virginia continue to grow following those investments.
in Las Vegas.
Speaker Change: We obviously had the Super Bowl last year, and our peers have commented on headwinds relative to not having Super Bowl this year. If you recall...
Speaker Change: In this quarter, we're back into our normal range, although not heroic. We're still at the left side of that range for the first two months, but.
The recovery back to normal hold should just about offset
Speaker Change: the loss of the Super Bowl room revenue. So depending on how March comes in, we should be about flat in the first quarter, which I think is.
Speaker Change: different from what you're hearing elsewhere in town. And group business will increase this year over last year. Group increases significantly again in 26.
Speaker Change: with CONAG, Citywide, and the State Farm Conference that's specific to Caesars early in 26.
Recall that that State Farm group is big enough.
Speaker Change: It comes every three years. It's big enough that the final event three years ago, or two years ago now, was a sold-out Garth Brooks conference at Allegiant Stadium. So that's an awfully big group.
Speaker Change: That's CESAR-specific. So 25 and 26 set up very well for us in Las Vegas, in digital.
Digital has had a
Speaker Change: An exceedingly strong first quarter for us. If you look at iGaming for us, January was up 64% in net revenue. Keeping in mind that first quarter last year was up 54%.
Speaker Change: February is tracking to the same number but again we'll have one last day so I'd expect February to end up somewhere in the 50s in terms of growth rate. Cash flow continues to increase.
Speaker Change: I'd expect you're going to start seeing the best quarters that we've ever posted to date shortly and all of our targets remain the same. Recall that we laid out our targets
Speaker Change: Before we even launched Caesar Sports, that we could reach $500 million of EBITDA, we're well on that path.
Speaker Change: The remaining piece at the end of 25 will be the roll-off of some big partnership contracts in the beginning of 26.
Speaker Change: And then I'd expect that we'd be at our targets and recall those targets.
Speaker Change: have not moved since those were just numbers on a spreadsheet almost four years ago at this point. So the combination of that, Anthony talked about how our capital expense has come down significantly, we should have
in the neighborhood of between.
Among
Speaker Change: interest expense, lease expense, total capital expenditures, and cash taxes, and
Speaker Change: Our outflows will be around $3 billion, so you can take whatever your EBITDA estimate and subtract that, and that's our free cash flow number.
We did start to buy back stock in...
24, you should expect that our...
Thank you.
Speaker Change: And with that, I'll throw it back to the operator for Q&A.
Speaker Change: Certainly, as a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.
One moment for our first question.
Thank you.
Speaker Change: And our first question will be coming from Carlo Santorelli, an analyst. Your line is open.
Speaker Change: Hey guys, thank you for taking my question. Tom, Anthony, Brett, you guys, Tom, you just laid out kind of, you know, rough guidance for 25 for both Vegas and the regionals and
Speaker Change: Obviously, if you look at Las Vegas in 2024 and you look at the regionals in 2024, I think regional labor expenses were down, you know, almost 1% year over year.
Speaker Change: Same store, Las Vegas, looks like it was up, but certainly, you know, not as much as some of the contract hit and stuff from the labor union negotiations. Within the context of how you're thinking about 2025,
Speaker Change: How do you kind of foresee the expense side for both Las Vegas and the regionals?
It's a pleasure to be here. Thank you. Thank you.
Yeah, Carlos, Anthony, team did a fantastic job fading.
Speaker Change: That $50 million increase this year, it's a smaller increase in the contract for 2025 in Las Vegas.
Speaker Change: There's also a smaller increase in Atlantic City union contract in 2025 as well. That coupled with our operators who do an amazing job on the efficiency side, I think we'll be in a very good position on expenses in 2025. And keep in mind that $50 million of labor, Carlo, in Vegas.
We had...
Speaker Change: I wish I knew the number off the top of my head, call it a dozen or more.
Speaker Change: F&B outlets and bars that were open in 24, that were not open in 23.
So that is obviously increased expense.
Speaker Change: So, Anthony and Sean and the team did a fantastic job of managing costs while increasing our offerings to our customers.
Speaker Change: Great. Thank you for that. And then if I could, one follow-up.
Speaker Change: You know, obviously it's hard, you know, to look at at peer
valuations and kind of identify your hybrid owned leased
Speaker Change: mix, and where, you know, the respective pieces of that mix are trading.
Speaker Change: but I don't think it's overly hard to look at a comparable valuation and identify that the credit for the digital segment is
Hard to kind of distinguish
Speaker Change: I know, you know, clearly that the space could foresee some, there could be some activity in 2025, 2026. How are you guys thinking about, you know, ways to monetize and or unlock some of the value that's presumably within the digital segment and maybe not reflected in the stock?
Yeah, Carla, we see the same thing that you see.
To me, the hardest part is...
Speaker Change: building the business that has the value that we can talk about in this way and we laid out
Speaker Change: You know, that plan in the middle of 21 in terms of where we anticipated getting and we, you know, now it's right on.
the horizon, and we recognize that
Speaker Change: You know a digital business trading at our our blended brick-and-mortar multiple of you know seven eight times
that there's dollars left on the table.
operationally, it makes the most sense to
Speaker Change: known us for a long time. We look to drive as much shareholder value as we can.
Speaker Change: I have our own Pam, which we're in the middle of rolling out, but it's a natural time to start to think about, you know, should you be doing something else strategically that allows investors a path to investing in that business on a pure play basis?
And if the, if the...
Speaker Change: market dynamics remain the same and the business continues to grow as it has you should expect that we would look at any and all avenues in terms of how we can drive the most value to our shareholders.
Speaker Change: That's helpful. Thank you, Tom. Thanks, everyone. Thank you. And that message came from Carlos Santarelli of Dochi Bank. One moment for our next question, which will come from David Katz of Jeffries. David, your line is open.
Thank you. Bye-bye.
Speaker Change: Afternoon, everyone. Thanks for taking my question. I do want to...
just double-click on the discussion about stock buybacks.
Speaker Change: for the moment and how we think about that rolling forward and, frankly, balancing it with leverage reduction along the way.
Sure, we have talked since...
the merger, that we want to get our...
Speaker Change: least adjusted leverage toward four times and that remains our number one priority where you have seen us
Speaker Change: start to buy back stock has been in asset sale transactions where we were trading assets out at significant premiums to our
in current trading multiple and current leverage multiple.
You shouldn't expect to see us do any...
Speaker Change: share buybacks that are leveraging and really nothing that's close to that.
Speaker Change: You should expect that if you're looking at something in the neighborhood of a billion dollars of free cash flow in 25 the vast majority of that would go toward debt pay down
Speaker Change: Is there along the way, I know it's been a discussion in past quarters, but do you sort of have any updated thoughts in terms of the asset base of the company where there may be things
That, you know, could be worth looking at selling.
Speaker Change: Yeah, David, you've heard me say many times we're a public company.
Everything's for sale every day.
No M&A is an easy list, but the easiest list...
Speaker Change: in some form or fashion are harder to monetize quickly, but we're in active dialogue, you know, kind of around this stuff all the time. I would say since...
Speaker Change: In the fourth quarter, we've seen an increase in incoming calls in terms of...
Speaker Change: Somebody saying, hey, what about this asset? What about that asset? I wouldn't tell you that that's.
Bob
Speaker Change: imminent or even highly likely, but that's after a couple of years where nobody was making calls at all. So that's
Speaker Change: a step in the right direction. We are not married to any of our assets, any of our markets. If we can...
Sale transactions, we'll look at those as well.
Very helpful. Thanks a lot.
In one moment for our next question.
Speaker Change: Our next question will be coming from Brandt Montour of Barclays. Brandt, your line is open.
Brandt Montour: Thanks for taking my question. So Tom, on Las Vegas, you guys gave some...
Brandt Montour: some helpful stats on the convention calendar and strengths you're seeing in those bookings.
Brandt Montour: Wondering if you could look at the bigger picture for Las Vegas. I know you guys, you talked about 1Q, but for the full year, you know, what are the puts and takes in terms of, you know, the 2Q through 4Q scene growth in that market in Nevada?
It's really going to be driven by...
Brandt Montour: increased yield out of our room product that's part of the building of group business or the increase in group business.
will replace lower value business. We've got
Brandt Montour: A number of projects that are coming online, or have recently come online.
We opened Gordon Ramsay's Burger and...
Brandt Montour: Pinkies at Flamingo activating the strip frontage at Flamingo for the first time.
since we've owned
Caesars,
Brandt Montour: We opened Carmela's at Planet Hollywood. There's a number of food and beverage product that's come online. We've still got returns from our hotel projects. We have an anniversary, the opening of.
Brandt Montour: the balcony rooms at Versailles, so we feel very good about what 25 looks like and then as I said 26 is a major group year on top of 25.
Brandt Montour: We also just opened a beautiful new high-limit slot area at Caesars Palace. The previous high-limit space hadn't been touched in about 25 years. The response has been tremendous.
Brandt Montour: out of that room, and in addition to that, we opened a new high limit pit area that's adjacent to the high limit slot. Again, that came out beautiful and has had great response from our customers in there as well.
Thank you. Thank you.
Speaker Change: Great, thanks for that. And then just to follow up maybe for Eric, you know, the iGaming results continue to be very impressive. I'm sure you're looking for another big year in terms of iGaming top line.
Speaker Change: When you look at your KPIs and your drivers of that top-line growth, are you thinking more about direct casino activation from your database or cross-sell from OSB, structural hold? It continues to creep up. I know that's a function of your mix, but maybe you could flesh out some of the things that are driving that growth and help us think about how it will evolve in 2025.
Sure.
Speaker Change: You know, I believe we've said previously, and perhaps if not, about 30 to 35% of our iCasino business comes from the sportsbook side of the side, and the balance is being made up of the Caesars Palace Online standalone app, and then the newly introduced Horseshoe app. If you think back a year and a half, neither of those apps existed, and so largely...
Speaker Change: The majority of the growth is coming from Caesars Palace Online App and now the Horseshoe.
Speaker Change: And so the customers that we're acquiring from there, some of them are Caesars Rewards customers, but the majority of the customers that we acquire are coming from other avenues such as the affiliates or Facebook and Google advertising and so forth.
The difference is that the customers that we get...
that do participate in brick-and-mortar.
Speaker Change: are worth many times more than customers that only participate with us either in brick-and-mortar or online.
Speaker Change: And so, when we think about a lot of the potential growth that we have, it's having customers experience both products.
Speaker Change: And then being more loyal and sticking with us for a longer period of time and consolidating their spend both on the property level and on the online level with us.
Speaker Change: And then we look at, of course, our daily actives and then the volume that we have. And as you've noted, the hold has started to improve, which we think will continue. And so if we're able to drive the volume up in all the different businesses that we have, as well as the hold, then that will translate into great gaming revenue.
Speaker Change: And then as you've also seen, we've been very disciplined with our reinvestment levels.
Speaker Change: both on Sportsbook and on the casino side and so that flows through to net revenue and then the other costs as well we maintain those or reduce them and that will allow us to get the flow through that we've guided to before of around 50% or slightly above that
Excellent. Thanks, everyone.
One moment for our next question.
Thank you for watching. Bye.
Thank you very much. Thank you.
Speaker Change: And our next question will be coming from Dan Pulitzer of Wells Fargo. Dan, your line is open.
Hey, good afternoon everyone. Thanks for taking my question.
Speaker Change: First, taxes across both digital as well as brick-and-mortar have been a very topical year to date.
Speaker Change: I was hoping maybe, Tom, if you could kind of just give us a lay of the land of the landscape from a regulatory standpoint and how you're thinking about that risk.
Speaker Change: and maybe kind of, I don't know, give some context this year versus prior years if you feel like this is, you know, an increasing area of focus or just kind of the headline cycle we're in.
Speaker Change: I think it's a headline cycle we're in. It's a function of where state budgets are versus where they've been the last couple of years and I think that you're
Speaker Change: I know that whatever the headline of the day is grabs attention if you look at past
Speaker Change: History in gaming, you know, you're at, you're likely to see a mixed bag of activity. You've seen
Speaker Change: You know, states that have increased sports betting taxes. You've seen Illinois, you know, put a casino or a slot machine on every street corner, but you've also seen
Speaker Change: states legalized OSB, states legalized iCasino, and, you know, iCasino, this is going to be legalized. Thank you.
Speaker Change: Thank you. Please be seated. Thank you. Thank you. Thank you. I'm so glad you could make it. We are going to take a quick break. We'll be back in just a moment.
Thank you for watching. See you next time.
Speaker Change: If you're looking at three to five years of state service,
Speaker Change: is gone, you know, the surest way to raise the most revenue is to legalize iCasino, so I think the opportunities are going to present themselves, and yeah, there will be...
Speaker Change: determined to raise more money out of gaming through additional taxes and we'll adjust to that but we think that
Speaker Change: States looking for more tax revenue from our sector is likely over, you know, if you're looking beyond, you know, next month or the following month.
Speaker Change: is likely to lead to more iCasino jurisdictions. And that's an area where we're growing share or we're growing revenue about twice as fast as our peers. And as you know, we started from
Speaker Change: very little business in that area when we took over William Hill and very little in the way of employees and product. So we're quite keen to see what would a new iGaming jurisdiction, iCasino jurisdiction look like for us.
So I know that what gets the attention is...
Speaker Change: You know all of this is negative. Somebody's saying they want more tax revenue from
gaming the way you've seen it evidence itself over time.
is expansion of gaming, which would be good for us.
Speaker Change: Got it. That's helpful context. And then just to follow up on iGaming specifically, the hold really seems like it's picked up. I mean, my math is right. It was probably around 4% in the fourth quarter. I mean, I guess what's been driving that and, you know, if that level, you know, is that sustainable? You know, can that move higher? And, you know, is it as a function of customers or slot mix versus tables or any additional detail you could share there would be great.
Speaker Change: Yeah, it has moved up. I'm not sure it's as high as you quoted. I think probably more around 3, 3.5 or 3.6.
Speaker Change: for the fourth quarter, but certainly our goal is to get the hold into the force.
Speaker Change: I don't think that's an impossibility at all. We're able to continually improve the product working with the vendors on the slot side.
As I mentioned, we also have our...
studio that's going to produce some product.
that will be of higher hold.
Speaker Change: And then we also have side bets and other activities that we're able to offer people on the table game side, including the live dealer, with different game rules that will allow us to creep that hold up. But, you know, when you're talking about $11 or $12 billion or $14 billion worth of volume,
Modest hold increases really translate into significant gaming readiness.
Got it. Thanks so much.
And one moment for our next question.
Speaker Change: And our next question will be coming from Stephen Wyszynski of CFO. Your line is open, Stephen.
Thank you very much.
Stephen Wyszynski: Hey guys, good afternoon. So, Tom, I want to go back to your comments about regionals, you know, now being flat, two up slightly, versus...
http://TheBusinessProfessor.com
Tom Reeg: Yeah Steve as you know I'm telling you what I know as I sit here today and I know more than I did you know four months ago when we were back here before in terms of
Tom Reeg: How our properties are going to respond to competition, how our efforts to claw back in battlegrounds is going to bear fruit, and...
Tom Reeg: Line all those up. Every one of those is better in terms of...
where my thoughts were end of October when we released.
3rd Quarter
Tom Reeg: So it's really a function of that, you know, we had a poor weather quarter last year first quarter and the hope was
Speaker Change: That would be a boon for regional this year, and I think as Boyd told you, and we'd agree with, weather really hasn't been any better particularly.
Speaker Change: This year's first quarter. It's been about the same and yet, you know, we're still seeing that business perform better and if you look at
Council Bluffs, and you look at Indianapolis.
Speaker Change: and see us starting to claw back in areas where we're now fighting for that customer after we've gone through the trial period that bodes well for other markets that are in similar situations. So, it's really just...
Speaker Change: Four months has elapsed. You learn a lot in four months and a lot of assumptions that I was making in October have proven to be too conservative and this is where I sit today.
Speaker Change: Okay, gotcha. Thanks for that, Tom. And then if we if we kind of stay on the regional side of things, I mean, I guess, you know, you would probably characterize regionals as being pretty stable at this point. I don't want to put words in your mouth. But, you know,
Speaker Change: Can you give us any color around, and I don't know if you've said this in your prepare remarks, but any color around unrated play? And maybe how that has fared recently? And then maybe some, you know, have you seen any spend pattern changes across your you know, your database tiers? Just, you know, trying to figure out that low rated, you know, that low tier rated player, if you've seen any softness there, or it's been pretty stable.
Speaker Change: I would say pretty stable. Unrated has actually gotten a little better for us recently.
Speaker Change: after a number of quarters of softness post the stimulus checks, but at worst it's stabilized. It actually appears to be getting better. I see the same things.
that you see from our other consumer-facing...
Brethren in terms of concern about
Speaker Change: segments of the consumer or particular areas, what I would tell you is
Speaker Change: Our customer is pretty solid and stable across both regional and Vegas.
Speaker Change: We don't have a ton of visibility, you know, we've got 90 days.
Speaker Change: into Vegas, that looks strong regional. You really don't have a lot of forward visibility, but the tone seems.
Speaker Change: You stop seeing advertisements about how horrible everything was at every commercial break. I don't think that's a...
particular comment on the outcome just getting past that.
Speaker Change: seem to be good for our customer, and we've seen that over the last, you know, four months.
Thank you.
Okay, gotcha. Thanks, Tom. Appreciate the color.
And one moment for our next question.
Speaker Change: Our next question will be coming from Barry Jonas of Truist. Your line is open, Barry.
Barry Jonas: Hey guys. I wanted to follow up on the state tax increase question for digital, especially with Jersey just announcing something a few hours ago. Do you see that as a potential risk in the near term to hitting your $500 million target? Or are there offsets you and the wider industry can quickly pivot to? Thanks.
Barry Jonas: Well, Barry, I'd say give me more than a couple hours on New Jersey in terms of what we'd anticipate. But, you know, we are well on the path.
to our targets.
You know it does that
Barry Jonas: Can something move the date a month or two? Sure. But there's no...
Barry Jonas: There's no doubt in the room that we are getting to where we've been telling you for four years and also that that's
not the end of it, that we're going.
to continue to grow.
Speaker Change: You know, I see the estimates for our digital brethren out there and
Speaker Change: I have no reason to believe that there's anything wrong with those estimates, but I tell you if they're going to hit the numbers that you and your peers have out for them, we're going to do a hell of a lot more than $500 million of EBITDA out of digital.
Thank you.
Speaker Change: Great. And then just a follow-up for Vegas. Can you talk a little bit about how the Versailles Tower is doing and maybe talk about any other opportunities for kind of high ROI investment in Vegas beyond that? Thanks.
Speaker Change: Yeah, the Versailles Tower continues to improve. Cash ADR up $67 this year, so up 61%. We're seeing similar results in other hotel towers that we've remodeled. Caesars Palace.
Coliseum Tower and Octavius Towers.
both up 20% and 29%.
Out of the capital we're putting into our room product
Speaker Change: Other projects that we recently deployed, Pinky's at Flamingo and Gordon Ramsey's Burgers, Tom spoke to Carmelo's, all great.
Speaker Change: All great assets, and then we're getting ready to open a brand new pool at Flamingo. That will be one of the nicest resort pools on the Strip, so the return from that should be exceptional as well.
Great. Thanks, guys.
Thank you and one moment for our next question.
Thank you.
Hi. Good afternoon, everyone.
Speaker Change: I wanted to ask in the quarter on the sports betting handle, it goes down double digits year over year and I'm curious if you give us some color on that. Is that kind of customer mix that you're seeing or is there, you know, related to the big hold swing? I'm not sure if you have some additional color.
and many more. Thank you. Thank you.
Yeah, it's really related to two different things.
Speaker Change: One is, if you think back to last year, we'd commented on how we had introduced our marketing tool that allowed us to do segmented marketing in the middle of the year. Prior to that, we had been unable to have different offers go out to different segments.
Speaker Change: And so as a result, we were over-investing in a lot of the lower-end segments, which made them unprofitable.
Speaker Change: And so we've changed that dynamic and really pulled back on the reinvestment to that segment.
Speaker Change: making it flip to a positive contributor. However, as you'd expect, the volume fell fairly significantly in that group.
Speaker Change: And then the other segment is kind of the very high-end customer. A lot of it's over-the-counter at the retail books.
Speaker Change: And those customers, we've also cut the reinvestment level, too, for those that have been particularly sharp and low hold. And we've reduced the limits in some of the cases as well.
Yeah, it's his anniversary beginning in the second quarter.
Speaker Change: Got it. Tommy, you jumped right to my second question, my follow-up, so maybe I'll throw one in into Las Vegas or broadly if you have comments or Anthony on the slot play, I guess particularly Saul in Las Vegas, some of your peers.
Speaker Change: said the same thing, also noting high-limit slot rooms in new areas that have done well.
Speaker Change: something that that's kind of budding with the slot customer that it's playing higher? Are they kind of new customers? Or was it, you know, a bit more of a fourth queue phenomena that we're seeing? But it seems like, you know, there's a little bit of a trend of high limit slot players that are
Speaker Change: playing more or coming back so curious if you have any any thoughts on that and that's it for me
Speaker Change: Yeah we've been seeing the slot business grow for a couple years now at our strip properties and and growing higher at that at the high end of the database obviously with the investment in the new Caesars Palace.
Speaker Change: I'd also say our hosts and Sean and the property teams are doing a phenomenal job at curating events around these slot customers and driving them to town. And it's really showing on the results of the last few quarters. And Anthony and team have made some...
Speaker Change: dramatic changes in slot 4 layout and design when we close.
the transaction, the Caesars
Family of properties, slot floors were not particularly.
well-laid-out, customer-friendly, and we found
Speaker Change: You know in a number of properties we didn't have enough slot machines, so we're adding additional slots and not seeing any degradation in
Speaker Change: win per unit, and we think there's still opportunity there, particularly in Caesars Palace.
Speaker Change: Is that Vegas specific or are there some opportunities in regionals as well? There's opportunities in regional as well. You know, you should see us
Thank you.
Speaker Change: We're spending a little bit more on slot capital in 25 in our capital numbers that allow us to tackle some floors that we think were
More dated, but you know what we're finding is.
Speaker Change: You as you bring new product on the floor you increase
Speaker Change: machine count, you increase open table hours across the regional business, you're seeing returns on that gaming revenue growing and you should expect us to continue to push that in 2025.
Got it. Great. Thanks, Tom. Thanks, all.
We have one moment for our next question.
Speaker Change: Our next question will be coming from Stephen Grambling of Morgan Stanley. Stephen, your line is open.
Stephen Grambling: Hey, thanks a couple of follow-ups on the digital side as you think about the 500 million gold Do you need sports betting handle for OSP to to hit that break even and then?
Stephen Grambling: On the monetization, is that $500 million target a fully loaded number comparable to public peers or should we, how should we think about any incremental product, technology or other kind of costs? Think about it apples to apples.
I'm not following your second question. The first one,
Thank you. Thank you.
Thank you.
Stephen Grambling: Steve, we would expect volume, as Eric talked about, once we get through the mixed segmentation in the second quarter to start to grow again in the back half of the year for sports. Obviously, you continue to see very strong volumes in the iGaming segment, but if you think about the components towards growth and marching.
and many more. Thank you. Thank you.
improvements Eric
So we'll drive higher parlay mix
Speaker Change: So it's a lot of variables, but yes to your specific question We would expect to see volumes on the sports side start to grow again in the back half of this year
Speaker Change: Got it. And just the second question, just to repeat it, I was breaking up or it seemed like there was some some background there, but is the 500 million just a fully loaded, you know, EBITDA, if you were to have that as a standalone business or there are incremental costs that have to be allocated?
Speaker Change: Oh okay, that's where you were. So yeah, there are, if you were to separate the business...
Speaker Change: There would be some modest synergies associated with that, because it does...
Speaker Change: Digital does rely on our centralized functions as they sit here today, but if you're talking about
You know something
Speaker Change: modest in terms of difference and a significant multiple discrepancy in terms of how the businesses are valued. I don't think that would be a determinative.
Bye.
Speaker Change: piece of the puzzle, but it would be something you'd consider.
Speaker Change: And would the data with the customer go along with that or there be any sort of tie-in to total rewards?
Speaker Change: Considering we're just talking about what we would explore, I'd rather stay out of...
how you would functionally separate the businesses.
Speaker Change: But you're getting along the lines of how would you go about doing it? You've got to document the way the businesses interact. The digital business, a key piece of it, in terms of advantages, is access to Caesars rewards. So you shouldn't expect a transaction that we would pursue that would shut it out of that.
Thank you.
Fair enough. That's helpful. Thank you.
Thank you. One moment, Brian.
Speaker Change: Our next question will come from Chad Beynon of Macquarie. Chad, your line is open.
Speaker Change: Hi, this is Sam on for CHaP. Thanks for taking our question.
Speaker Change: Based on your New York sports betting numbers in 2025, it looks like the hold rate improved quite a bit relative to the rest of the market sequentially. So just wondering, what were the main drivers? And with better KPIs and single wallet, any potential change to your player reinvestment strategy in certain states?
Thank you.
Speaker Change: It is a fact that we close the gap a bit more in New York, but it's a combination of all of the factors that we talked about, you know, we're getting more legs per wager on the parlay side, we're getting a higher percentage of SGPs.
Speaker Change: We're getting a higher percentage of cash out, and so all of those things contribute to the improved hold percentage that you're seeing.
Speaker Change: I'd also say that the good news is that our competitors have even higher percentages on all of those than we do and so there's a
Speaker Change: Good road map there to close the gap even further, or at least if they continue to improve on hold, then we will as well and can get to that 10% threshold.
Speaker Change: And then what was your second question? If higher hold rates and KPIs could lead to a change in the reinvestment strategy.
for the broader online segment.
Speaker Change: Yeah, we target a reinvestment as a percentage of the volume.
Speaker Change: , and they are the ones who are going to be doing the work. We have a lot of different dynamics but broadly speaking, it is not a competitive dynamic that would change that reinvestment decision. It is much more of a test and control type decision where we believe that we can make more money by changing it to a certain segment of the business.
Speaker Change: So, I would anticipate that the reinvestment level as a percentage of the volume would remain constant and it might change slightly between states or between segments, but not, broadly speaking, across the business. And that's really the key. We're getting much, have gotten much better, continue to get much better on
Speaker Change: identifying our most valuable players and incentivizing them to continue to play with us.
Speaker Change: and spending less money on those that are not valuable to us but kind of give you empty handle which has been part of the the remarks to date. If you're thinking we would say okay now
You know promo instead of being
Speaker Change: You know, one in change of handle, it's going to be three, that's not going to be what happens. But if you think you're going to invest more in your most valuable players and get a bigger share of their wallet, that's certainly part of the roadmap.
Speaker Change: Okay, great. Thanks for that. And then just quickly on Vegas, wondering if you guys have seen any changes in international visitation trends in 2025, just given stronger dollar and perhaps some political headlines, headwinds?
Thank you.
No, I mean, we, that, the...
That political headwinds argument gets a lot of.
Speaker Change: chatter on cable news networks that leaks into the investment community.
You know, you're...
Speaker Change: You don't really see a lot of political statements being made by our guests. They want to come, have a good time, they want to get away from the political environment. There's nothing to speak of in terms of change there.
Okay, great. Thank you.
And one moment for our next question.
Speaker Change: Our next question will be coming from Jordan Bender of Citizens. Jordan, your line is open.
Jordan Bender: Good afternoon, everyone. One more on the tax changes. I think we have a pretty good grasp on what happens when the sports betting tax rate increases, just given that we've seen it before. So generally, and not related to New Jersey, but are the levers to offset the tax increase
Jordan Bender: the same for an iGaming business compared to a sports betting business, or is there anything in that iGaming business model do you think that will differ in terms of promos and marketing if adjusted?
Jordan Bender: The short answer is it's the same. Tax rate is part of your calculation of return. And so if the tax is different from our standpoint, you can always speak for us.
The reinvestment rates will move.
Speaker Change: Easy enough. Okay. And then Eric, maybe just following up on the right sizing of the online customer base, does the changing customer mix change the flow through assumptions that you guys have provided around 50% at all?
Thank you. Thank you.
Thank you.
Speaker Change: No, I don't believe it does because, you know, the guidance that we've given on our flow-through was in relation to net revenue down to EBITDA. And so the mix that we're doing and changes that we're making in terms of our reinvestment levels is above the net revenue line on the P&L.
But you're basically replacing
high-volume, very low-hold customers with
Speaker Change: customers that are more apt to play parlays and more apt to play more legs of parlays so it's a piece of how our structural hold is improving as well.
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Okay, that makes sense. Thank you very much.
Thank you.
And one moment for our last question.
Speaker Change: And our last question will be coming from Daniel Guglielmo of Capital One Securities. Your line is open.
Daniel Guglielmo: Hi everyone, thank you for taking my questions. You mentioned attacking properties and battleground markets, which is great. Can you lay out the different metrics you look at to judge the team's success there?
Speaker Change: I mean, we're looking at what does, you're looking at a lot of things.
Speaker Change: In each market, you're looking at what is the relative strength of
My property versus
Speaker Change: the competitive property. So to give you an example in Council Bluffs
We have a highly developed two properties.
Speaker Change: on the Iowa side that are seven minutes further away from Omaha.
Speaker Change: than the commercial casinos that the tribes opened in Omaha, but they had financing constraints, so they didn't open properties that are physically
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Speaker Change: competitive with ours. So we're going to be very aggressive in that market in terms of
Speaker Change: getting people back because you're not asking them to go very far and you've got a superior product.
what it is in terms of scale.
Speaker Change: versus what we have in Indianapolis. So that's another one where we're gonna go back toward them. It's not gonna be just the middle. We're gonna be getting back into markets where we think we can gain traction. And what you're looking at is.
Speaker Change: You know, county by county, what's my investment in this county, what's that doing to share, is it bearing fruit? And you can see it happening in Indianapolis and Council Bluffs, you know, there's properties that are tougher where
a competitive asset like Porch Creek.
Speaker Change: opened right in the feeder market for Hammond that was already facing
Speaker Change: the move of Hard Rock into a better location on the interstate. So you've got a locational disadvantage and you have newer properties versus an older property.
Speaker Change: That's a tougher hand to play in terms of how aggressive you get, but the fundamentals are the same. You're going to decide how aggressive do I get in the various counties and what are my returns as I do.
Speaker Change: You've seen our history. We have a very long history of not just futilely flushing money if it's not driving returns.
Speaker Change: But that's where we are in the bulk of the assets that were impacted in 2004.
Speaker Change: and the early results are such that we're more confident about 25.
Speaker Change: That's great. I really appreciate all the color and helpful to understand that. As a quick follow-up, you all provided the 2025 CapEx ranges in the K. Can you highlight any chunkier regional projects that are implied in the growth or maintenance lines there?
Yeah, we've got Tahoe that's under construction as we speak
Speaker Change: The first phase of this Tahoe project, if you recall, it's the Harveys.
tower, great location close to the lake.
We are under construction on all...
Speaker Change: public areas, basically casino floor, valet, lobby, one of the hotel towers, we should have that wrapped up in mid to late June, open for the busy summer season up there.
Speaker Change: We'll take a break during the summer season and come back and finish the second half of the casino convention space.
and a few other areas.
Speaker Change: But we'll really transform that property. As I said, beautiful location, great destination market for all of our Cesar Rewards members to go to.
Daniel Guglielmo: So we'll really reposition our oldest property into a really very nice new property in Tahoe. And Dan, if you think about pacing of that, that's about $160 million.
Daniel Guglielmo: Total project, there was a little money spent on that in 24, the remainder split between 25 and 26.
Awesome, thank you
Daniel Guglielmo: And I'm showing no further questions. I would now like to turn the conference back to Tom Reeg for closing remarks.
Tom Reeg: Thanks everybody, appreciate your time and we'll speak to you pretty soon after first quarter.
Thank you for watching. See you next time.
Tom Reeg: And this concludes today's conference call. Thank you for participating. You may now disconnect.