The operator introduces the Caesars Entertainment Inc. 2023 Fourth Quarter and Full Year Earnings Conference Call and reminds participants that the call is being recorded. Brian Agnew, Senior Vice President of Corporate Finance, Treasury and Investor Relations, welcomes everyone and introduces the other speakers on the call. He also reminds listeners that forward-looking statements and non-GAAP financial measures may be discussed during the call. Anthony Carano, President and Chief Operating Officer, then discusses the company's financial results for the fourth quarter, which showed growth in net revenue and stable adjusted EBITDA.

The results for the quarter were mainly driven by strong growth in the digital segment, while the Las Vegas segment faced some one-time challenges. Overall, Caesars saw a 7% increase in revenue and 22% increase in adjusted EBITDA on a same-store basis. The Las Vegas segment had a record year with high occupancy and ADRs, and the group segment also saw a record year. Despite some challenges in the regional segment, Caesars still delivered strong results for the full year. The outlook for 2024 and beyond remains positive, with strong occupancy and ADRs and a robust event calendar in Las Vegas.

The company's annual results in 2023 were affected by new property openings, competition, construction disruptions, and poor weather. However, they expect to finish several construction projects in 2024 that will generate strong returns and drive growth. The CEO thanks the team for their hard work and dedication to providing exceptional guest service. The CFO then discusses the strong performance in the digital segment, with record net revenues and adjusted EBITDA in Q4. Sports betting volumes grew, but were negatively impacted by hold rates, while iGaming saw significant growth. Caesars Palace Online contributed to the segment's first $100 million in GGR for a quarter.

In 2023, the Digital segment of the company saw a significant increase in net revenue and adjusted EBITDA, driven by improvements in the sports betting and iCasino offerings. The company introduced a new online app for Caesars Palace, which has been well received by customers and has shown growth in active customer counts and volume. The company also announced plans to launch a second iGaming brand in Michigan, which will benefit from the company's existing market access and scale.

In 2023, the company expanded its sports betting offerings to 31 jurisdictions, with 25 offering mobile wagering. The company's focus on driving return on investment and building brand awareness has led to profitable growth and a goal of achieving $500 million in adjusted EBITDA. The company also refinanced its debt and expects to see benefits from floating interest rates. In the fourth quarter, the company had some one-time expenses, including a catch up payment for a new union contract in Las Vegas.

The Versailles Tower at Horseshoe was transformed into the Versailles Tower at Paris, resulting in 65,000 fewer room nights and a $20 million decrease in EBITDA. Construction disruptions in Indiana and New Orleans also affected earnings. Despite this, Vegas saw an increase in room revenue, food and beverage revenue, and slot handle. The F1 event had a 4% lift on EBITDA, and the company hopes to see even more benefits in the future when the entire city is involved.

The company is working with partners to ensure that next year's F1 event is even more successful than this year's. Despite a slow start in January due to weather, the company expects growth in all three segments, with digital showing the most significant increase. The team is particularly pleased with the progress of iCasino, which saw a 50% increase in revenue in the fourth quarter and is continuing to accelerate. The launch of Caesars Palace Online has also resulted in a shift towards more slot play and a higher hold business. Overall, the iCasino business is expected to have a higher margin than OSB, which is promising for the company's future.

The company has had significant capital projects and expenses due to the merger with Caesars, including $400 million for Atlantic City and rebuilding the Lake Charles property. However, these projects are coming to an end and the company expects a reduction in CapEx and an increase in free cash flow in 2023. They have also executed a $4.5 billion financing in January and have a balanced mix of fixed and floating interest rates. As they pay down debt and interest rates decrease, free cash flow is expected to improve even further.

Tom Reeg thanks and congratulates team members for a successful year, with $4 billion in EBITDA and $700 million in lift. He is excited for what 2024 holds and opens for questions. The first question is about the potential success of F1 as a non-high end event and how it can drive growth at mid-price properties. Reeg mentions the importance of pricing and making the event more approachable for all properties. He also expects improvements for the event in 2024. The second question is about operating expense growth in Las Vegas, and Reeg suggests considering flat revenue growth in 2024 compared to 2023.

Tom Reeg and Joe Greff discuss the expected growth and expenses for Caesars Entertainment in 2024, with Reeg stating that OpEx growth will be in the mid-single digits and margins will be similar to revenues. Carlo Santarelli asks about the growth of the digital business, specifically iCasino, and Eric Hession highlights the impressive performance of the Caesars Palace Online casino, which has seen double-digit growth in actives and gaming revenue since its launch in August.

The speaker is discussing the growth of their iCasino business and their plans for the future. They have been receiving positive responses from customers and plan to continue direct integrations and launch a new branded product. They also expect the performance of the iCasino business to continue its current trend. When asked about the ability to keep margins flat in 2024, the speaker does not have any specific plans and believes it will depend on revenue.

Tom Reeg, CEO of the company, stated that they are constantly working on improving their margins and have a list of items that will help increase revenue and decrease expenses. They are not expecting a decline in margins, despite the new union contract being a headwind. They expect to grow EBITDA in both the Vegas and regionals segments this year. They plan to use their free cash flow to reduce debt and potentially buy back stock if the stock price reaches a certain level.

During a conference call, Dan Politzer from Wells Fargo asked about the performance of regional properties and the company's expectations for EBITDA. CEO Tom Reeg responded that the regional business remains strong, with the recent addition of the Danville property contributing to revenue growth. He also mentioned that the company expects to see an increase in EBITDA from digital operations in the future. When asked about the bridge from EBITDA to free cash flow, Reeg stated that the company expects to see a reduction in interest and lease expenses, as well as an increase in maintenance capital.

In response to a question about cash taxes, Bret Yunker confirms that they will start being a cash taxpayer in 2025 but do not have an estimate at this time. They also discuss the expected growth and mix of the convention business in Las Vegas, which is driving cash ADRs on the leisure side. Eric discusses the pros and cons of having a second brand, WynnBET, and how it may attract a different customer base.

Eric Hession compares their online gambling business to the Las Vegas Strip, where customers visit multiple properties for different experiences. They believe customers have the same behavior online and have launched a second brand to cater to this. They will focus on customer acquisition rather than brand building, and the cost to launch a second brand will be lower. Tom Reeg mentions that while everything is for sale in a public company, they are not actively looking to sell any assets.

The speaker discusses the company's investments in digital products, specifically in sports betting, and how they have closed the gap with competitors. They also mention plans for enhancements to the app throughout the year. The speaker then addresses a question about the New Orleans property and the expected return on investment, noting that the property has undergone a significant transformation and faced restrictions when it first opened.

The speaker discusses the transformation of the property into Caesars New Orleans, which includes a new hotel tower and renovated casino floor. They also mention upcoming restaurants and nearby hotels that will contribute to the success of the property. The speaker expects the property to be one of their largest regional properties, with an estimated EBITDA of $200 million per year. They also mention the upcoming Super Bowl as a potential catalyst for the property's success. The speaker does not mention any current expansion opportunities.

Tom Reeg, CEO of Caesars Entertainment, stated that the company is currently focused on its ongoing projects and is looking forward to a break in capital expenses. He also mentioned that the size of the market for online sports betting and iGaming has exceeded their expectations, and the legalization of these activities has not been surprising. The company's performance in iCasino has been better than expected, and the termination of an unprofitable agreement due to the Penn/ESPN transaction has been a positive development. In terms of structural hold, the company expects it to be around 7.5% to 8% due to the presence of larger players in the market.

The company's percentage of parlays and legs per parlay continue to grow, leading to a 100 basis point increase in hold. In order to reach the 7.5% to 8% range, the company will need to increase parlay mix or change the number of legs for existing parlays. On the regional side, competition has settled down in markets that overlap with Caesars properties, such as Tunica and Chicago. The company has managed this competition well and expects to see continued stability.

The company has lapped the impact of the Spectacle property in Gary on the highway and the Lincoln properties in Nebraska are now online with the Omaha properties expected to come online by the end of the year. This means that the majority of the impact has been accounted for in the Council Bluffs market. The analyst asks about EBITDA flow through for digital and the company expects a 50% flow through with potential for improvement as iCasino gains momentum and marketing contracts roll off. The next question is about regional markets, and the CEO responds that after the weather in January, February has seen a return to normal.

Tom Reeg and John Decree discuss housekeeping items during a conference call. Reeg confirms that the room disruptions in Las Vegas are complete and there should be no notable disruptions in the future. Chad Beynon asks about the upcoming launch in North Carolina and Reeg expects it to perform similarly to Michigan. Beynon also asks about potential future projects in Las Vegas and how the outcome of the Oakland A's situation may affect them.

Tom Reeg, CEO of Caesars Entertainment, discusses the company's plans for the future, including the impact of the Oakland A's situation on their pursuits, improving the strip frontage at Flamingo, and labor turnover at their properties. Reeg also mentions that post-reopening, the employment turnover has stabilized and feels more like pre-pandemic times. When asked about their capital flexibility in 2025, Reeg states that they will focus on share repurchases and debt, and there are no other plans at this time.

The speaker discusses VICI's option to exercise at the end of 2024 and states that they do not expect to exercise their own option. They also mention the new app and how it will shift towards more slot play, with potential upside for iGaming hold. The speaker also mentions picking up the Wynn database in the state and how it is similar to their own database in terms of customer demographics. The speaker thanks everyone for their time and concludes the call.

The operator thanks the participant for their involvement and informs them that they can now end the call.

This summary was generated with AI and may contain some inaccuracies.