Good day, and thank you for standing by. Welcome to the Caesars Entertainment, Inc. 2022 Fourth Quarter and Full Year Earnings Conference Call. 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.caesars.com. As usual, joining me on the call today are Tom Reeg, our Chief Executive Officer; Anthony Carano, our President and Chief Operating Officer; Bret Yunker, our CFO; and Eric Hession, our President of Caesars Sports & 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. Such forward-looking statements are not guarantees of future performance, and therefore, one should not place undue reliance on them. 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 most 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.caesars.com by clicking on the press release regarding today's fourth quarter financial results. I'd like to turn the call over to Anthony.

Thank you, Brian, and good afternoon to everyone on the call. We generated fourth quarter EBITDA records in both our Las Vegas and Regional segments during the quarter, and our Digital results continue to show impressive quarterly sequential improvement all year leading to our best performance during Q4. Trends in Las Vegas remained strong during Q4, delivering both 11% revenue and EBITDA growth versus last year. Excluding real rent payments, Las Vegas generated $549 million of adjusted EBITDA with a margin of 48%, up 1,000 basis points versus 2019. Occupancy during Q4 was 95.5%, up to pre-COVID levels for the first time since the pandemic. Strong occupancy in ADRs 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 the full year 2022. For the full year, 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 '23 and beyond. Forward occupancy remains strong and rates are trending ahead of '19. Group and convention paid for 2023 is up to 2019, driven by strong ADRs, 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 '23. In 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. Temporary casinos in both Danville, Virginia and Columbus, Nebraska remain on track to open by midyear. Renovations in Atlantic City are nearing completion and should be essentially complete ahead of the peak summer season this year. We also expect to benefit from expanded casino offerings in Pompano and Harrah's 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 Hession for some insights on the fourth quarter and full year performance in our Digital segment.

Thanks, 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. The key to taking advantage of scale in a mostly fixed cost business is 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. I'm pleased that in Q4 year-over-year, our volume was up 7%, hold up 100 basis points and promotional expense down 43%. The combination of these three metrics resulted in us reporting the highest quarterly net revenue results to date growing by over 100% year-over-year and the smallest adjusted EBITDA loss since rebranding to Caesars Sportsbook in August of 2021. On the sports betting side, we continued to focus our product and technology improvements on 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 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 Isle Casino side, work is well underway toward creating a significantly improved 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 iGaming. In the meantime, we continue to add new content, which has been well received. iGaming 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 and Kansas and launched online sports betting in Maryland. In addition, on January 1, we launched sports betting online 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. I'll now 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 from 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 4.5x on a traditional debt-to-EBITDA basis or mid-5x rent adjusted. 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, further decreasing our exposure to short-term rate hikes from the Fed. Our next debt maturity is over 2.5 years away. 2022 CapEx spend, excluding Atlantic City, 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, Bret. And 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 about nine years now as a public entity and have gone through a series of acquisitions, a series of financings. And every time we ask the debt markets to step up for us, you step up and strengthen 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. Know 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 calls step 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 on in January and February so far. In Digital, as you saw in our results, we were nearly breakeven. Our well-publicized MLB exposure around the World Series was about a $30 million swing. So on a hold-adjusted basis, we are well into the positive in the fourth quarter. First quarter, we launched Ohio. Given the launch cost there, you should expect a modest loss in the first quarter. But we're anticipating that Digital on a full-year basis will be an EBITDA contributor for us this year. When we started this Digital launch about a little over 1.5 years ago, we told you that cumulative EBITDA losses would be something north of $1 billion. Looks like they're going to finish at somewhere a little over $1.1 billion. We expect at maturity that we’ll generate in excess of 50% of that in annual EBITDA out of the Digital business. That has not changed at all from when we launched; it remains in our sights. We'd expect to be generating that level of EBITDA for the full year of '25. We're hopeful we'll 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 expenses of commercial, as you noticed you didn't see us at the Super Bowl, but more importantly, the granular changes in individual marketing have slowed dramatically. This is the quarter when we launched New York and Louisiana last year. So you're going to see over $0.5 billion 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, there's going to be a significant change in trailing credit statistics that we're excited for. In the brick-and-mortar arena, the business remains exceedingly strong. Consumers continue to spend. Regionals continue to do well. The only thing I can point to really in terms of weakness is weather-related in the fourth quarter. I peg about $20 million of lost EBITDA in December, primarily in the Midwest, but kind of throughout the Regional business. First quarter, you've got Northern Nevada has been inundated with snow. It's the worst winter 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. It 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, I'd expect that our 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 property. So on a net basis, our ROI there should be 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 is largely done, should be done by the time we hit 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. Occupancy in January for us was up over 1,700 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, the back half of the quarter tends to be more important than the front half. But as we look at forward bookings in Vegas, they're 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, and all of our forward indicators for booking look very strong. So as we sit here today, it feels fantastic. And with that, I'll open it up to questions.

Our first question comes from Joe Greff with JPMorgan.

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 each of the quarters in 2022, really kind of focusing more on the second quarter and the second half of this year, so I 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'd tell you that right now, we are high single-digit percentage points above 2019 levels. Recall that we never reached 2019 levels in '22. Obviously, the back half of the year from a calendar basis, citywide sets up very strongly. So we feel very good about group business in '23.

Great. And can you talk a little bit about F1 later this year in November and how much you think that can be in terms of incremental EBITDA and maybe what it can generate in the 4Q? There seems to be the expectations all over the place, but is it something that could contribute say, relative to what you just reported in the fourth quarter in Las Vegas, an incremental 5% of EBITDA, all other things being equal?

Yes, Joe, I think that's certainly possible. The important thing is when it happens. So I would be expecting Super Bowl-level activity, if not stronger. But if you lost the Super Bowl in February, you're still going to have a strong weekend. There's obviously incremental lift from the Super Bowl. But when you're talking about November, that's our softest period of the year. So the lift is far more dramatic on a year-over-year basis. So yes, I'd be looking at something along those lines, 5% or better in terms of EBITDA lift for the quarter that's driven by that weekend.

Our next question comes from Carlo Santarelli with Deutsche Bank.

Bret, could you share your thoughts on leverage right now? Also, what does the timeline look like for you to reach your target on a static basis moving forward?

Yes. And again, the Digital losses are coming out. We got upgraded by Moody's. So we're mid-5x rent adjusted. With Digital and collecting positive, but that will come down. So we expect to be below the 4x gross rent adjusted target by the end of '24.

And is that where you guys will comfortably kind of run the business going forward?

Yes. I expect that we will still be a significant free cash flow generator. So I don't think that ends the deleveraging. But yes, we want to be below 4x leveraged; that's been consistent since we closed the Caesars transaction.

Great. And then, Tom, if I can 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 and the iCasino side? And obviously, I imagine that estimate assumes the second half of this year with a lot of the rollouts that you're doing on the iCasino side, that business provides a pretty healthy growth in the '24 and beyond?

Yes, that's true, Carlo. I prefer not to get super granular; I'd say the mix in that 550-plus number will lean towards sports betting, but on a per state basis, obviously, iGaming is overrepresented.

Our next question comes from Barry Jonas with Truist.

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, where do you expect to see more recession or macro resistance?

Yes. I mean, I'm no economist. So I don't know that I'm surprised by what's happening. I think we locked people up in their homes 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 don't know if you think about how lives have been reordered in terms of time as an example. There's less working from an office; there's more working remotely. We've always viewed these businesses as the limiting factor was cash. If your customer didn't have cash, your business is going to fluctuate based on how much cash your customer has. Obviously, that's going to have significant correlation. I don't know if 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, and where you know we're up against strong comps going back for a few quarters now, and we're still growing. So with all the handing over what will happen, I expect when we do get a turn in the cycle, I'm 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's some overlap. But as you think about a recession or some macro hits, which player do you think would be more resistant?

That's more uncharted territory. The answer is we don't know. I suspect that the digital player is primarily driven by money. If you're comparing money versus time constraints, it seems that the digital player leans towards money as they face limitations, while brick-and-mortar has a blend of both. However, how they will react during an economic downturn is uncertain, and I don't believe there's enough of a difference between the two to predict a significant divergence.

Our next question comes from Steven Wieczynski with Stifel.

Tom, I don't believe you addressed in your prepared remarks that aside from weather, there's really nothing you can highlight regarding consumer weaknesses. Could you share any insights on the unrated play and how it has been performing lately? Also, have there been any significant changes in spending patterns among your database peers, particularly for low-tier rated players? I would assume the answer is likely no, though.

Yes, regarding your last question, no. In terms of unrated, we experienced a significant decline as we passed the anniversary of the stimulus, but that's in the past now. The results reflect this, including the fourth quarter and into the first quarter. Unrated seemed to peak when the stimulus checks were distributed. Rated continues to perform well and remains stable after the initial increase.

Our next question comes from David Bain with B. Riley.

Great. First, I would like to delve deeper into the potential iCasino ramp in the second half of the year. I'm trying to understand the significance of major technological improvements, such as having enough slot content to manage churn when it begins, and how crucial that is. Are there any other significant factors that could influence our market share? It certainly appears that the EBITDA guidance does not reflect a substantial cash promotional effort.

Yes. Maybe I'll jump in and take this one, David. So the big change that we're going to make is 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. We'll also be offering a casino app that then you can do the same thing and go back to the sports betting side, but it will be much easier to use from a customer perspective who's looking just for the casino side. We'll also be creating some branded live table games in 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're unable to use the learnings from the years' and years' experience we have on the brick-and-mortar side on the iCasino side. And so we'll be having that come along as well. From a 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'll be making steady releases, adding more games, particularly on the iOS side where we don't have as many as 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 life cycle journeys, and then the stand-alone app that you'll see in the second half.

Okay, great. Tom, in the past, you've provided us with data on land-based contributions from online, which was around $150 million of high-margin revenue last year at this time. Can you give us an update on how that's performing now? Additionally, regarding the omnichannel marketing approach, do you have any specific plans to enhance customer acquisition and loyalty?

Yes, Dave. I want to move away from providing that specific number. You should assume that it is continuing to grow. Our rewards database is becoming increasingly important in this business. As states open up and every customer is available, we are actively engaging with them. As states mature, we focus on utilizing our rewards database to attract new customers, and we are seeing a lot of integration across markets. Anecdotally, I receive daily reports of significant winners and losers in both sports betting and iGaming. A year ago, the data would reflect their brick-and-mortar history, especially in iCasino, without much connection between top iGaming players and those who play in physical locations. Now, if there are 25 people listed each day, around 20 of them have substantial brick-and-mortar experience. This trend demonstrates that our rewards system is effectively building customer relationships, which is exactly what we aimed to achieve.

Our next question comes from Daniel Politzer with Wells Fargo.

First, on Las Vegas. I would like to know more about the room night mix in 2023 compared to 2022. I understand that you mentioned there would be a record group and convention mix. However, I am curious about the cohort from which this is emerging. Additionally, how should we consider the relative profitability of the group compared to the casino and lead customers as it shifts from last year?

Yes. You're seeing group come in increase over '22 at the expense of OTA and lower-end FIT business. So you're getting a dramatic lift in rate. That customer is going to skew more toward non-gaming offerings. So you'll have some impact on casino revenue. But overall, in some cases, particularly early in this quarter, you're filling a room that was unfilled last year. As you move through the year, you're basically trading up to a more valuable customer. And while their mix of spend may be a little different, their profitability is significantly higher than what they're replacing. Yes. I'd expect with 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 next year.

Our next question comes from David Katz with Jefferies.

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 pre-existing put calls or ROFRs, et cetera?

We are not active in that market, so I can't speak with first-hand knowledge. I'd tell you today would have been a tough day to try to do something. But the deal that we did in January, by a number of metrics was one of the largest ones that's happened in the credit markets generally and certainly in gaming in quite a while. So I wouldn't describe it as the credit markets are wide open. At this point, they have been getting better, but in an environment where the Fed is still raising, it's still a dicey environment where you 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 Bret talked about getting to a leverage level by the end of next year that I think was sub 4 was suggested, if I heard correctly?

Yes, we assume that those proceeds would add lease adjusted debt and would be used to pay off conventional debt, resulting in no significant change to the net outcome.

Our next question comes from Stephen Grambling with Morgan Stanley.

As a clarification, I believe I heard Bret mention 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?

Yes. That's free cash flow. So no asset sales for '23. And what was the second question about maintenance CapEx ROI?

Can you explain how you are thinking about maintenance CapEx compared to ROI investments in 2023?

I said, 300 and 500.

Yes. So 500 growth; 300, maintenance.

Got it. And then as a follow-up on Digital, how are you thinking about new states legalizing in capturing the 50% ROI run rate in 2024?

We don't assume anything beyond what's known to the markets today. So we're not anticipating there's a big state shoe that's going to drop. All right. Thanks, everyone. We'll talk to you at the end of the quarter.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.