Caesars Entertainment Q4 2025 Earnings Call Full Transcript

Introduction to Q4 2025 Financial Results

For the entire year, same-store enterprise net revenues at Caesars Entertainment rose by $266 million, marking a 2% increase compared to the previous year. This impressive performance stemmed from the broad diversity across our property portfolio, a strong emphasis on omnichannel strategies, and the provision of distinctive experiences tailored for our guests. Shifting focus to the fourth quarter specifically, the outcomes aligned closely with our prior projections. The varied nature of our holdings produced consolidated net revenues totaling $2.9 billion for the period, reflecting a 4% year-over-year gain, alongside adjusted EBITDAR reaching $901 million, which showed a 2% improvement over the same timeframe last year. In the digital operations during this quarter, we achieved a record-breaking quarterly EBITDA of $85 million, even amid challenging hold percentages in October.

The Las Vegas division posted a sequential uptick in both occupancy levels and average daily rates as anticipated, resulting in a 6% drop in EBITDA for the fourth quarter—a better showing than the third quarter. Meanwhile, revenues from our regional properties climbed 4% year over year, fueled by robust performances in locations like Danville and New Orleans, as well as gains from targeted reinvestments into the Caesars Rewards loyalty program database. EBITDAR in the regional segment dipped marginally and faced headwinds from unfavorable winter weather conditions in December. Without those weather disruptions, regional EBITDAR would have expanded compared to the prior year.

Las Vegas Segment Performance Breakdown

Delving into the Las Vegas segment details, we recorded same-store adjusted EBITDAR of $447 million, down from $477 million in the corresponding period last year. These figures were influenced by occupancy rates of 92%, compared to 96.5% a year earlier, coupled with a 5% reduction in average daily rate. Throughout the fourth quarter, a packed schedule of high-profile events bolstered results, including a record-setting Formula 1 race for Caesars, a vibrant New Year’s Eve celebration, and a 17% share of room nights from group and convention bookings.

We kept enhancing the guest experience in Las Vegas by introducing two luxurious presidential villas atop the Colosseum Tower and 29 premium sky villas at the summit of the Octavius Tower, both situated at Caesars Palace. Guest feedback on these upscale offerings from our VIP clientele has been overwhelmingly positive. Recent capital infusions into our premier Caesars Palace property, such as the comprehensive overhaul of the Palace Court slots zone, enabled the venue to establish an all-time high in slot machine volume for the 2025 calendar year.

Looking forward, we are enthusiastic about a pipeline of additional capital expenditure initiatives in Las Vegas. These encompass the launch of a fresh Omnia Day Club developed by Tao Group at Caesars Palace, a thorough refurbishment of the Augustus Tower at Caesars Palace, an extensive upgrade of the Palace Court high-limit table games section and salons, the transformation of the Cromwell into the Vanderpump Hotel, and the innovative Project 10 by Luke Combs, which will repurpose the empty Margaritaville area at the Flamingo—among several other ventures. Such endeavors underscore our ongoing pledge to reinvest in core assets, ensuring guests enjoy unparalleled and memorable experiences.

As we peer into the Las Vegas outlook for the coming periods, sequential enhancements in trends are expected throughout the year, propelled by steadying leisure travel patterns and a robust lineup of group and convention activities.

Regional Segment Insights and Future Prospects

In the regional segment, adjusted EBITDAR came in at $407 million, representing a slight decrease from the prior year. Excluding the adverse effects of December’s winter weather, this metric would have shown growth on a year-over-year basis. The outcomes from our deliberate customer reinvestment strategies continue to yield encouraging returns, supported by solid trends in rated play during the quarter.

As noted previously, we are committed to fine-tuning our marketing tactics while prioritizing high returns from these expenditures. For 2026 in the regional arena, we anticipate advantages from an elevated group booking presence in Reno, the shift of the Windsor property from managed to fully owned status in March, the culmination of our $200 million Tahoe master plan renovation this summer, selective property-hosted events tied to the World Cup, and sustained returns from recent marketing adjustments. Additionally, we eagerly await the debut of our latest managed venue, Harrah’s Oklahoma, slated for opening on April 9.

A heartfelt appreciation goes to every team member for their tireless efforts throughout 2025. Their unwavering commitment to superior guest service has been the cornerstone of our achievements this year.

Caesars Digital Segment Q4 Achievements

Turning attention to the digital segment’s fourth-quarter performance, Caesars Digital generated net revenue of $419 million, with adjusted EBITDA at $85 million and hold-normalized adjusted EBITDA at $90 million. The flow-through rate for the period exceeded our objectives, reaching 56%. Key performance indicators in our core areas stayed resilient, as mobile sports handle expanded by 4%, and the total parlay mix rose by roughly 210 basis points year over year. We also observed increases in the average number of legs per parlay and a greater proportion of cash-out activity relative to the previous year.

On the iCasino front, net revenue surged 28%, propelled by sustained volume strength and growth in average monthly active users. We advanced our product suite in the quarter by incorporating fresh proprietary games, enhanced bonusing mechanisms, and an upgraded live dealer platform. Across the board in Q4, our total monthly unique payers grew 19% to 585,000.

These solid quarterly figures propelled full-year net revenues to $1.4 billion, a 21% increase year over year, and EBITDA to $236 million, doubling from the prior year. This combination delivered a 50% flow-through rate, aligning precisely with our targets. Technologically, we progressed in migrating new jurisdictions to our universal digital wallet and proprietary player account management platform, now operational in 26 jurisdictions and on track for full rollout by quarter’s end.

This upgrade substantially improves the wagering journey for our customers. In the quarter, we effectively introduced sports betting in Missouri—the inaugural state where we provided a shared wallet capability from launch day. Gazing toward the full 2026 year, the notable strides in our technology infrastructure are fueling heightened customer interaction in both sports betting and iCasino offerings. The steady advancements are manifesting in revenue expansion at the top line, and our dedication to expenditure efficiency will ensure robust conversion to EBITDA.

We perceive a business model poised for 20% revenue growth paired with 50% flow-through to EBITDA, maintaining momentum toward our strategic milestones.

Balance Sheet Updates and 2026 Financial Outlook

In 2025, we persisted in deleveraging our balance sheet while pursuing timely share repurchase opportunities. Entering 2026, we project gains from declining capital expenditures, reduced interest costs, and cash taxes well under $100 million. Our closest debt maturity involves the relationship bank financing, due in 24 months.

CEO Commentary on Market Dynamics

Since our last discussion, Las Vegas was emerging from an exceptionally subdued summer, primarily affected by leisure travelers. That segment continues to show year-over-year softness, though less severe than during the summer months. We anticipated group business to bolster the fourth quarter, which it did, leading to a milder sequential year-over-year decline.

For 2026, the first quarter should mirror this pattern, with group bookings countering leisure weakness and further sequential progress from Q4. Moving into the second quarter, substantial group activity—including the State Farm conference at our venues—positions us for year-over-year increases. Summer performance will hinge on leisure rebound, but overall sentiment for the year remains optimistic.

In Las Vegas terms, peak events, high-traffic weekends, and major conferences see the city and our properties thriving. Challenges arise in the interims without marquee events, presenting staffing complexities amid fluctuating occupancy—from the 80s to full capacity. Our Las Vegas team, under Shawn’s leadership, expertly navigated this variability in Q4, sustaining mid-40s margins, of which we are proud.

Regionally, October and November delivered strong year-over-year growth. Late-year snow over the final two weeks likely shaved more than $10 million off EBITDA, resulting in a flat quarter. Note that Q1 last year benefited from the Super Bowl in New Orleans, adding over $10 million in non-recurring EBITDA. Post-Q1, Windsor’s ownership transition activates in early March, Reno hosts its largest bowling group mainly in Q2, and Tahoe’s expansion launches for Q3. This sets up promising regional expansion, especially in the latter three quarters.

Digitally, we maintain roughly 20% top-line growth with 50% flow-through, on course to surpass established targets. A key highlight: fixed marketing costs will shift markedly in 2026 and 2027 with major contracts expiring. Over $35 million rolls off in 2026, mostly impacting the second half during football season, followed by more than $20 million in 2027, also football-focused. Most will accrete directly to EBITDA, though some will fund higher-ROI marketing, acting as a potent growth accelerator.

Regarding prediction markets, we view them as gambling, not swaps. Legal resolution may take years, yielding a fragmented state landscape. In today’s regulations, participation risks our valuable gaming licenses, as flagged by several states. We won’t engage unless a clear, regulator-approved path emerges. That said, our handle grew in Q4 without discernible impacts in regulated markets.

We anticipate substantial free cash flow in 2026, following 2025’s generation, to be allocated between debt reduction and share buybacks.

Q&A Session Highlights

The first inquiry came from Daniel Brian Politzer of JPMorgan. He sought updates on Las Vegas leisure trends, booking windows, near-term momentum, and strategies like promotions or value enhancements to recapture that segment.

The response framed this as standard economic cyclicality in leisure travel, with some international nuances from Canada. Major events like F1 and Super Bowl excelled year over year, while softer intervals persist. Despite 92.5% occupancy across 20,000 rooms—marking one of Caesars’ top Q4s historically—no crisis exists. Center Strip resilience, abundant entertainment options via Sphere, Raiders, dining, etc., sustain performance. Recovery signs emerged from Q4 into Q1; social media pricing chatter isn’t the core driver.

Politzer followed up on digital iGaming, citing headlines in Maine and Virginia, inquiring on legalization odds, potential uplift, and regulatory proximity.

Maine seems poised for launch, with EBITDA impact akin to NFL contract savings at term end. Virginia’s bills advanced through House and Senate, heading to conference and governor; survival this late bodes well for operators, including make-whole provisions. Political predictions are tricky—both states surprised positively recently. Broader trends: revenue-hungry states with fresh leadership favor casinos after recent tax hikes on sports betting.

Next, Elizabeth Dove from Goldman Sachs queried Vegas’s yearly trajectory, factoring capital projects, conferences (strong in H1, especially Q2), leisure, and peaks/valleys.

No formal guidance, but Q1 sequential gains expected via groups offsetting leisure; Q2 stronger with events; H2 leisure-dependent. Note: Augustus Tower redo at Caesars Palace (~1,000 rooms) timed for summer softness, back for F1.

Dove also asked about long-term OpEx control, noting Caesars’ superior margins versus peers amid volatility.

Daily management is key; labor hikes eased post-first contract year. Smoother occupancy aids scheduling, avoiding wild swings. Q4 margins reflected peak non-COVID challenge; firmer demand should enhance them.

Brandt Montour from Barclays posed the next question on regionals.