Caesars Entertainment, Inc. (NASDAQ:CZR) Q4 2025 Earnings Call Transcript

Caesars Entertainment, Inc. (NASDAQ:CZR) Q4 2025 Earnings Call Transcript February 17, 2026

Caesars Entertainment, Inc. misses on earnings expectations. Reported EPS is $-1.23153 EPS, expectations were $-0.18.

Operator: Thank you for standing by, and welcome to Caesars Entertainment, Inc.’s Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] As a reminder, today’s program is being recorded. And now I’d like to introduce your host for today’s program, Brian Agnew, Senior Vice President, Corporate Finance, Treasury and Investor Relations. Please go ahead, sir.

Brian Agnew: Thank you, Jonathan, and good afternoon to everyone on the call. Welcome to our conference call to discuss our fourth quarter 2025 earnings. This afternoon, we issued a press release announcing our financial results for the period ended December 31, 2025. A copy of the press release and our investor presentation are both available in the Investor Relations section of our website at investor.caesars.com. Joining me on the call today are Tom Reeg, our CEO; Anthony Carano, our President and Chief Operating Officer; Bret Yunker, our CFO; Eric Hession, President, Caesars Sports and Online; and Charise Crumbley from Investor Relations. Before I pass the call to Anthony, I would like to remind you that during today’s conference call, we may make certain forward-looking statements under safe harbor federal securities laws, 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 Regulation G. Please visit our press releases located on our Investor Relations website for a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure. I will now turn the call over to Anthony Carano.

Anthony Carano: Thank you, Brian, and good afternoon to everyone on the call. Caesars delivered solid results in 2025 with full year same-store enterprise net revenues increasing $266 million or 2% year-over-year. These strong results were driven by the diversity of our portfolio, our omnichannel focus and the delivery of unique experiences for our guests. Turning to the fourth quarter. Results were in line with our expectations. Our diversified portfolio delivered fourth quarter consolidated net revenues of $2.9 billion, up 4% year-over-year and adjusted EBITDAR of $901 million, up 2% year-over-year. During the fourth quarter, our Digital segment delivered an all-time quarterly EBITDA record of $85 million despite experiencing poor hold in October.

Our Las Vegas segment delivered a quarterly sequential improvement in occupancy and rate trends as expected, leading to a 6% EBITDA decline in Q4, an improvement versus Q3. And finally, our Regional revenues were up 4% year-over-year, driven by continued strong returns in our Danville and New Orleans and the benefit from strategic reinvestment in our Caesars Rewards customer database. Regional EBITDAR declined slightly and was negatively impacted by poor winter weather in December. Absent the weather impact, Regional EBITDAR would have grown year-over-year. Starting in our Las Vegas segment, we reported same-store adjusted EBITDAR of $447 million versus $477 million last year. Segment results were driven by 92% occupancy versus 96.5% last year and an ADR decrease of 5%.

During the fourth quarter, we benefited from a strong event calendar, which produced a record F1 event for Caesars, a strong New Year’s Eve and 17% group and convention room night mix during the quarter. We continue to elevate the customer experience in Las Vegas during the quarter with the addition of 2 new presidential villas at the top of the Colosseum Tower as well as 29 new Sky Villas at the top of the Octavius Tower, both at Caesars Palace. I’m excited to say feedback from our VIP guests on this product has been very strong. These recent investments into our flagship Caesars Palace asset, including a fully remodeled Palace Court slots area, helped the property set the all-time record for slot volume in 2025. We also remain excited about additional upcoming CapEx projects in Las Vegas, including a new OMNIA Dayclub by Tao at Caesars Palace, a complete remodel of the Augustus Tower at Caesars Palace, a full renovation of Palace Court, our high limit table games area and salons, the rebrand of the Cromwell to the Vanderpump Hotel and the recently announced Project 10 by Luke Combs that will occupy the vacant Margaritaville space at the Flamingo, just to name a few.

These projects continue our commitment to reinvest in our assets while providing our guests with unique experiences. As we look ahead to the outlook for Las Vegas, we continue to see trends improving sequentially throughout the year, driven by stabilizing leisure trends and a strong group and convention calendar. In our Regional segment, we reported adjusted EBITDAR of $407 million, down slightly to last year. Absent the negative winter weather in December, EBITDAR would have grown in Q4 on a year-over-year basis. Results from our strategic customer reinvestments remain promising, driven by strong rated play trends in the quarter. As we mentioned last quarter, we will continue to refine our marketing approach as we remain focused on delivering strong returns on these investments.

As we look ahead to 2026 in our Regional segment, we expect to benefit from a strong group mix in Reno, the transition of Windsor from a managed to an owned property in March, the completion of our $200 million Tahoe master plan renovation this summer, hosting of select property events around the World Cup and continued return on investment on recent changes in marketing. And finally, we’re looking forward to the opening of our newest managed property, Harrah’s, Oklahoma, which is expected to open on April 9. I want to thank all of our team members for their hard work during 2025. Their dedication to exceptional guest service has been the driving force behind our accomplishments this year. And with that, I will now turn the call over to Eric for some insights into the fourth quarter performance of our digital segment.

Eric Hession: Thanks, Anthony. During the fourth quarter, Caesars Digital delivered net revenue of $419 million, adjusted EBITDA of $85 million and hold normalized adjusted EBITDA of $90 million. Flow-through during the quarter was better than target at 56%. Our core KPIs remained strong during the quarter with mobile sports handle growing 4% and total parlay mix improving by approximately 210 basis points year-over-year. In addition, we saw growth in average legs per parlay and a higher cash out mix versus the prior year period. In i-Casino, we delivered 28% net revenue growth driven by continued strength in volume and average monthly active users. We continue to elevate our product offering during the quarter to include new in-house games, improved bonusing capabilities and an elevated live dealer product.

Overall, in Q4, our total monthly unique payers increased by 19% to 585,000. Our strong Q4 results drove our full year net revenues to $1.4 billion, up 21% year-over-year and EBITDA to $236 million, up 100% year-over-year, the combination of which resulted in flow-through of 50%, in line with our target. From a tech perspective, we continue to convert new jurisdictions to our universal digital wallet and proprietary player account management system, which is now live in 26 jurisdictions and should be live in all jurisdictions by the end of this quarter. This enhancement gives our customers a significant upgrade to their wagering experience. During the quarter, we also successfully launched sports betting in Missouri, which was the first state, where we offered a shared wallet experience to our customers on day 1.

As we look forward to the full year of 2026, I’m pleased with the significant progress on the technology side of the business that’s driving strong customer engagement in both sports and i-Casino. The continuous progress we are making is showing up in our top line results and our focus on spending efficiency will drive solid flow-through to EBITDA. We continue to see a business capable of driving 20% top line growth with 50% flow-through to EBITDA, which keeps us on track to achieve our goals. I’ll now pass the call over to Bret for some comments on the balance sheet.

Bret Yunker: Thanks, Eric. In 2025, we continue to reduce debt alongside executing opportunistic share repurchases. As we move into 2026, we expect to benefit from decreasing CapEx, decreasing interest expense and well below $100 million of cash taxes. Our nearest debt maturity is our relationship bank financing, which matures 24 months from now. Over to Tom.

Thomas Reeg: Thanks, Bret, and thanks, everybody, for joining. For some additional color, last we talked to you, we were coming off a very, very soft summer in Vegas with the softness dominated by the leisure traveler. The leisure traveler still remains soft on a year-over-year basis, but not as pronounced as it was this summer. We told you that group business would help us fill in, in the fourth quarter, and you saw that, that happened and our — on a sequential basis, the year-over-year decline was less. As I look into ’26. You’d excited expect first quarter the same thing, group business offsetting leisure softness and further improvement on a sequential basis versus fourth quarter. And then as we get into second quarter, group business, including our — the State Farm conference at our properties should put us in a position, where we’re looking at year-over-year gains.

And then you get to the summer where it will be dependent on leisure recovery, but we feel good generally about the rest of the year. In Vegas, the way I’d characterize the business is peak events, peak weekends, big conferences the cities and all of our properties are doing quite well. It’s the shoulder periods when there’s not a big event or a big conference, where demand is challenging. And from an operating perspective, that’s a unique challenge for us and all of us in the market because you’re operating a property in a softer period that may be occupied for us in the 80s for others lower and then you’re ramping up to fully occupied that weekend or that next event. So it’s quite a labor staffing challenge. So Sean and his team in Vegas did a fantastic job of managing the business through that volatility in the fourth quarter and continue to — you can see our margins are still holding in the mid-40s, which we’re proud of.

In the Regional business, as Anthony said, October and November were quite strong for us, significant year-over-year growth. The last 2 weeks of the year, we had some ill-timed snow that probably cost us a little over $10 million of EBITDA, but we ended up flat for the quarter. As you look out, recall the first quarter last year had the Super Bowl in New Orleans. So that’s a little over $10 million of incremental EBITDA in New Orleans that does not recur in the first quarter. But post the first quarter — at the end of the first quarter, early March, Windsor comes online. You get the largest group of bowlers in Reno, that’s primarily second quarter. You’ve got Tahoe’s completed expansion coming online for the third quarter. So we feel very good about regional growth for the year and particularly in the back 3 quarters of the year.

Digital, as Eric said, we’re still pacing kind of 20% top line growth with 50% flow-through. Everybody knows the targets that we have out there for digital. We still expect to exceed them as we move forward. One thing to call out in digital, fixed marketing expense is going to be significantly different in ’26 and ’27 as we have big contracts roll off. In ’26, there’s a little over $35 million that runs off that will primarily impact the second half of the year, the majority of that hits in the second half basically in football season. And then you’ve got another $20 million plus in ’27, also football season, so first half of that year. The vast majority of that should flow straight to EBITDA, but we will take some of it and reinvest in marketing that has a return.

So we think that, that’s a significant booster for growth for us as we move forward. Prediction markets, I know everybody’s got prediction markets questions we’re no smarter than you in terms of what will happen. To me, this is clearly gambling. I think it will take a couple of years to wind its way through the courts, and you’ll have a patchwork of states where they’re not allowed, states where they’re allowed. In our — in the current regulatory environment, you shouldn’t expect us to be participating in prediction markets. We are — some of our most valuable assets are our gaming licenses in each of the states that we operate, and it’s been made clear to us in a number of states that if we pursue that avenue, some of our bricks-and-mortar licenses could be at risk.

You shouldn’t expect us to do that. But notwithstanding, if there becomes clarity that there is a legal path for prediction markets that satisfies regulators on the brick-and-mortar side, we will find a way to participate. But I would tell you, unequivocally, we view this as gambling that should not be regulated. These are not swaps. They’re not miraculously finding the other side of a 5-team parlay at the same time one side comes in, but we’ll let that play out through the courts. Notwithstanding, our handle grew you in the fourth quarter, continues to grow. We’re not seeing any impact that we can see in our regulated markets as we operate today. And Bret touched on, we expect to be a significant free cash flow generator in ’26. We were in ’25.

And you should expect us to utilize that cash between a mix of debt paydown and share repurchases. And with that, I will open the line to questions.

Operator: Certainly, and our first question for today comes from the line of Dan Politzer from JPMorgan.

Q&A Session

Daniel Politzer: Tom, I was hoping to just check in on Vegas here. I know you spent a good amount of time talking about that leisure customer and the uncertainty there. But as you look out in terms of the booking window in terms of the kind of near-term trends, are you gaining any traction? And what do you think needs to be done from either a promotion or a value proposition perspective that needs to — in order to get that customer back?

Thomas Reeg: I think this is normal economic cycle activity in leisure for us. You’ve got — there’s a unique flavor of what’s going on with Canada in terms of international visitation. But I think this is just a kind of normal economic cycle. What we are seeing is F1 was a very strong event for us. Super Bowl, despite what you read on social media was an extremely strong event for us year-over-year. The big event weekends, the big conferences are delivering. It’s those soft patches in between. And keep in mind, we were, what, 92.5% occupied for the quarter across 20,000 rooms. If you look back over the history of Caesars in Vegas. This was probably the third or fourth best fourth quarter of all time. So there’s really no crisis happening in Vegas.

It’s normal cyclicality, and it will play itself out. We — I know that the pricing gets focused on social media. I’m sure if I say the wrong thing in the next 30 seconds, I’ll read it on Bloomberg or in the Journal tomorrow. But that’s not really what’s driving what’s happening in Vegas. Center Strip is holding up quite well. The mix of what’s available in Vegas, Bill and team at MGM do a good job of running down between the Sphere and the Raiders and all of the entertainment and the food and beverage and all of the options you have here they’re unsurpassed. And the fact that we’re 93% instead of 96% occupied, of course, we’re going to work to get back to 96%, but this is not — there’s nothing unusual happening here. I’d expect it to recover as time goes by, and we’re already seeing that happen over fourth quarter and into first quarter.

Daniel Politzer: Got it. And then just turning to the digital side. In terms of iGaming, there’s been headlines certainly in Maine and more recently in Virginia in terms of the potential legalization. I guess where do you stand in terms of the expectation there and the possible lift? And I mean, are these — how close to these being done are they from a regulatory perspective?

Thomas Reeg: So I’m not a good predictor of politics, but Maine appears highly likely to launch. And you should think of an iGaming state like Maine, something along the lines of what we saved in the NFL contract in terms of EBITDA at maturity for us. Virginia, as I’m sure you’re aware, there’s a bill that passed the House. There’s a separate bill to pass the Senate. It will go to conference and then to the governor’s desk. The fact that we’re still alive at this point in the session is a good sign for brick-and-mortar operators. There’s make well payments as part of the legislation that would benefit us. So our fingers are crossed in Virginia, that would be a very good outcome for us. I would say just — I get asked to predict what’s the next one to go.

I would tell you, in both Maine and now Virginia, weeks before we were in the position that we’re in now, we would have told you we don’t — we’re not particularly optimistic. So this stuff can come together very, very quickly and not necessarily on our radar on anyone’s radar what will be next. The overarching truth is you’ve got a lot of states that have budget issues that are looking for revenue, in many cases, with new leadership, Virginia has a new governor that’s looking for revenue sources. that can be a good outcome for the casino business. I know in the last 18 months, that’s been not a great outcome. We’ve seen taxes on OSB move up. We’ve seen per wager taxes were due for some good news in the political cycle, and it looks like there may be some coming.

Operator: And our next question comes from the line of Lizzie Dove from Goldman Sachs.

Elizabeth Dove: I guess sticking with Vegas, obviously, a lot of moving pieces. I appreciate your comments on leisure and the peak weekends and whatnot. You’ve got some capital investments that you’ve mentioned. Obviously, some good guys from conferences first half of this year and one for you, especially in 2Q. So just thinking — I know it’s early, but high level, how are you thinking about those puts and takes of how Vegas might play out this year overall?

Thomas Reeg: Okay. Let me — I don’t — we don’t provide guidance, as you know. But I’d tell you, as I said, first quarter, I’d expect continued sequential improvement versus fourth quarter. Second quarter starts to look even better. The second half of the year is dependent on what happens with that leisure customer. One take that I should highlight is we’re redoing the Octavius Tower at — I’m sorry, the Augustus Tower at Caesars Palace over the summer. That’s a little less than 1,000 rooms. So we’ll time it so that it’s — the bulk of the work happens in that softer leisure period. And we’d expect to have those rooms back online for F1, but that is one take for us by — in ’26 that you should consider.

Elizabeth Dove: Got it. That makes sense. And then I guess on the OpEx side, you’ve done a pretty good job of managing that overall and your margins are still higher than certainly some of your public peers and one of your private peers that comes to mind. How do you think about that long term in terms of where you can still kind of manage that cost side over time?

Thomas Reeg: Lizzie, we manage it every day as do everybody else in the market. The labor contract increases are more manageable starting last year than they were in the first year of the deal. But we’re — as I said, — what will help is as occupancy smooths out, it’s much easier to schedule. You’re not running 1,500 basis point occupancy swings during a week in a property. So I would tell you the margin numbers that we put up in the fourth quarter, that was about as challenging a period as you’ll have in a non-COVID environment. I would expect that, that will get better as demand continues to firm.

Operator: And our next question comes from the line of Brandt Montour from Barclays.

Brandt Montour: So first is on regionals. Looking at the flow-through in the fourth quarter, it looks like it got a little bit worse quarter-over-quarter. You mentioned calling back some of the programs that you have in place next year is a key tailwind for growth. When do you think we’ll see that metric flip? And when you talk about it as a tailwind for growth, what are you sort of baking in for that sort of — that factor to sort of turn into a tailwind?

Thomas Reeg: Yes. I think you started to see it in the third quarter, fourth quarter when you get hit by — when you get by a weather events that hit visitation, you had costs associated with promotional events that were happening in those periods that you can’t recoup. So it looks that number — it makes that number look a little janky. I don’t think it’s changed for us. You should expect to see continued improvement in first quarter and then on through the year. I think what you saw in fourth quarter was really the last 2 weeks of the year.

Brandt Montour: That’s great. And then just a follow-up on Las Vegas. I was hoping we could maybe go one more layer deeper on some of the more tangible pain points that you kind of referenced international inbound, but California, interstate traffic, discount airline seats, some of these things that we can kind of put some at least qualitative feelings around, what’s gotten better into the first part of the first quarter here? And what’s sort of still staying as depressed as it was in the fourth quarter?

Thomas Reeg: I mean I would say between the fourth quarter and the first quarter, I wouldn’t say there’s been a meaningful shift in any of what you named. The difference is there’s more group business in first quarter than there is in fourth quarter, generally speaking. What you’ve talked about — what you touched on with Canadian business is a small percentage of total visitation to the market, but was an outsized percentage of room night loss in ’26. Southern California drive-in was softer in ’25. That was coincided with immigration crackdowns that left people, let’s call it, less willing to leave home and drive hours away. And I think as you put more quarters behind you from when those administrative — when the administration made those changes, I think it will gradually come back. The allure of the market has not changed. And we’re optimistic as you move through ’26 and beyond.

Operator: And our next question comes from the line of Steven Pizzella from Deutsche Bank.

Steven Pizzella: As you look at the free cash flow generation you expect to generate in 2026, how are you thinking of balancing debt reduction and buybacks considering where the stock is trading today?

Thomas Reeg: So that we’re looking at the same thing you’re looking at in terms of the free cash flow yield on the stock. You’re going to look at how much cash flow you generate in the quarter. First quarter is a low free cash flow quarter. Actually, second quarter is a big one. So if you think about timing-wise, you should expect us to be more active in the second quarter than the first in a normal year, but we’re going to continue to balance as you’ve seen us throughout ’25 as we go forward.

Steven Pizzella: Okay. And then in Las Vegas, it looks like the other revenue line item was up about 7% year-over-year and a nice increase sequentially. Can you talk about the drivers of that line item and how we should think about that moving forward?

Thomas Reeg: Let us get you to that on a call back. I don’t have that level of detail off my head — off the top of my head.

Operator: And our next question comes from the line of John DeCree from CBRE.

John DeCree: Maybe one broad question. I don’t think we touched on yet, and I know it’s difficult to quantify, but kind of early days in tax refund season. Tom, how are you thinking about from your consumers’ perspective, any uplift possibly from tax cuts under the Big Beautiful bill, what you’d typically see? I’m not sure if property managers have kind of reported anything at this point, but do you think that’s a meaningful tailwind for either regionals or Vegas?

Thomas Reeg: Yes. I agree with you, John. I think that’s a tailwind this year. You’re just — obviously just now getting to refund season, but you’re in withholding change, January 1. So I think people are starting to see my checks a little bigger in ’26 versus ’25 and money that comes to consumers like that in kind of an unexpected fashion. I don’t know that the average consumer is focused on tax policy as much as the sample size we have on this call, as that money comes into the system, that’s the kind of money that benefits all consumer discretionary businesses, entertainment-based businesses. So we think that can be a tailwind across the enterprise in ’26.

John DeCree: Maybe another kind of topic for this year, Olympics, World Cup, key events. Maybe Eric, specifically, have you seen any kind of material volumes around the Olympics? And do you have any expectations for World Cup as it relates to the digital business for this year?

Eric Hession: Yes. There’s always interest around the Olympics. The Summer Olympics, though really drive a lot more volume than the Winter Olympics. And candidly, it’s 80% on basketball. The Winter Olympics are fine, and we offer a great menu for the customers, but it doesn’t drive a huge amount of volume for us. Conversely, we do think that the World Cup will be very interesting. We plan to offer a number of promotions. We’re planning to really revamp the offerings that we have in terms of the markets that we list for soccer leading up to the World Cup. And so from that perspective, the World Cup is something that will drive significant volume and some hopefully good outcomes on the winter side.

Operator: And our next question comes from the line of David Katz from Jefferies.

David Katz: I wanted to just look at Regional Gaming holistically. And it certainly looks like there’s — not just for you, but for everyone, there is sort of a lot of pressures from a number of different directions. If I’m characterizing the right way, whether it’s skill games in some places or HRMs and others and potentially iGaming, if you would consider that a competition. How are you thinking about sort of the Caesars value proposition in that context, which looks like just a busier landscape than it’s been?

Thomas Reeg: I mean our benefit there is Caesars Rewards. It’s — we have a unique offering. We used — as you know, David, we used to run a one card program at Eldorado. And the reality was not a lot of people wanted to go from Erie, Pennsylvania to Shreveport, Louisiana or to Reno between those places. The difference in Caesars is we’ve got 20,000 rooms on the strip. We’ve got destination properties likely Tahoe, New Orleans, Atlantic City that really create that hub-and-spoke system and allows us to differentiate ourselves, to your point, the convenience-based slot dominant product it is hard to differentiate yourself from the product standpoint. So you do it in service and everybody — us and all of our peers would tell you we’re very good at service.

We’re better than others. As we know, that can’t be the case for all of us, but we all believe that. But the Caesars Rewards network is truly a unique animal in that space and has been beneficial in Regionals for us for a very long time. If you look at the legacy Eldorado properties that came into Caesars Rewards in the merger, your average revenue lift was in the mid-single digits. And that was purely by entering the Caesars Rewards network. So that is our chief benefit in our chief calling card in Regionals.

David Katz: Okay. Got it. And if I can just go back to Las Vegas for a minute. One of the debates we have with everybody around the sort of K-shaped economy. When you talk about sort of leisure weakness, are you able to sort of segment some of that weakness between higher end, lower end and whether that’s discernible and whether you’d call it out and whether you’d classify it as K-shaped or not?

Thomas Reeg: I mean I would say premium does hold up better. But I would point you to look at our — look at our hotel numbers and look at MGM’s hotel numbers for the quarter, they’re pretty similar. And MGM has a higher skew toward premium play or premium room, sorry, premium properties. So it’s not as simple as the low end is not doing well, the high end is doing well. That is part of it. But I think also location in the market plays a part. Center strip has held up better than either end. And going back to the MGM and Caesars comp, MGM has more down at the south end versus our center, and maybe that explains why the numbers look fairly similar. But I think it’s too simple to just say premium, good value, bad. There’s a little more nuance in there.

Operator: And our next question comes from the line of Steven Wieczynski from Stifel.

Steven Wieczynski: So Tom, kind of sticking to what David’s question just was, — you’ve mentioned a couple of times the leisure traveler is still somewhat soft, but has stabilized. And I guess what I’m trying to figure out is, is there any kind of data point that you could point us to that would make you say you’ve kind of indeed seen a bottom here in that traveler. And I’m not sure the right way to ask that question, but obviously, that customer booked very close in. And is there anything whether there you’re starting to see those folks book a little bit further in advance or anything else you could point to?

Thomas Reeg: The booking window is not changing much, Steve. What I’d tell you is we — our best measure is activity among our rated players, and that’s been improving since the summer. But it’s still not back above where it was, but it continues to get better. And then you roll in stronger group calendar, that’s how you get to sequential improvement as we move forward.

Steven Wieczynski: Okay. Got you. And then, Tom, you talked about the reinvestments you guys have done in the Regional markets. It sounds like that’s going well given you mentioned there. Rated play was strong in the fourth quarter. Anything you could point to that would help us maybe a little bit understand better that those reinvestments are working like you expected?

Thomas Reeg: Yes. I look at what you saw third — I’m sorry, second quarter, third quarter, fourth quarter, I wish you saw in November, December on its own. We’re seeing it flow and we’re getting better at calling what’s not working. I think you’ll see more of that in first quarter. Part of it is what we’re doing, part of it is you get further from competitive openings in terms of properties that are facing a competitor that added or just came into the market that has not anniversaried that’s a lower percentage than it’s been in prior quarters. And then as you look out to the rest of the year, we have more kind of Caesars or Caesars market-specific stuff that helps us like the Bowling calendar in Reno, the spend in Tahoe coming online and Windsor going from a managed property to an owned property. So our Regional picture should look pretty attractive in ’26.

Operator: And our next question comes from the line of Barry Jonas from Truist Securities.

Barry Jonas: There’s obviously been activity in Virginia now beyond just iGaming. There’s a bill for a Northern Virginia casino and one for skill games legalization. Tom, how are you thinking about those expansion bills? Would you be interested in participating if the Northern Virginia happens? And any thoughts on impact from skill games beyond what you’ve already commented?

Thomas Reeg: Yes. I would say we’re always open to looking at new opportunities. Obviously, Danville, Virginia for us was a huge success. So that’s a state that we have warm feelings — the Commonwealth, we have warm feelings for the Commonwealth. Skill games, you’re not going to see us involved in skill games. But if there’s an opportunity in Northern Virginia, yes, we would take a look.

Barry Jonas: Got it. Okay. And then just as a follow-up, I think there remains a real variance between wholly-owned versus leased EBITDAR performance. Just curious how we should think about that variance playing out over time.

Thomas Reeg: There’s nothing unusual happening in terms of how we operate, wholly-owned versus leased-leased was — has been and I guess, over impacted by competitive openings. If you think about our properties that have faced significant competitive openings in the last couple of years, they tend to more likely be leased rather than wholly-owned. That’s coincidental. As you move forward and that impact abates, I’d expect leased and owned to look similar in terms of performance.

Operator: And our next question comes from the line of Stephen Grambling from Morgan Stanley.

Stephen Grambling: Maybe to piggyback on that, certainly starting to see interest rates come down, even some modest cap rate compression in broader real estate. I know you’ve been thinking about monetizing real estate on the strip in the past. But as you look at the broader landscape and think about the structure of some of these agreements, how would you balance monetizing real estate on the strip going forward?

Thomas Reeg: Yes. I mean, Steve, when we’ve talked before, we are always open for business. So if there’s interest in any of our assets, we’re happy to talk about them. You shouldn’t expect to see us running a process on an asset anytime soon. While the capital markets — the debt markets are strong — the debt market has been strong for quite some time. And these are chunky assets that have a fairly short list of potential buyers. So it’s more likely not a change in the capital markets that drives activity. It’s somebody deciding I’d like to own a strip asset and becoming aggressive.

Stephen Grambling: Fair enough. And then maybe one other one on the digital front. I saw strong monthly actives year-over-year, particularly relative to the growth in sports betting handle. Can you elaborate a little bit more on how these new consumers or customers compare and contrast to the base? And are you finding generally this is more iGaming customers first? And does that change your view of the mix of online sports betting versus iGaming contribution to EBITDA longer term?

Eric Hession: Yes. I would say that there really hasn’t been a change in the value of the customers that we’re signing up. We are improving our retention slightly so that if you look at the lifetime value of the average customer, it does trend up somewhat as the retention improves. The cost of acquisition has fallen slightly, however. So we’re actually able to spend slightly less money, acquire slightly more customers and then those customers tend to retain a bit longer. And so when you look at our monthly active users, it is trending up through a combination of those factors.

Operator: And our next question comes from the line of Chad Beynon from Macquarie Capital.

Chad Beynon: Sticking on the digital value. I know lately, there’s been some valuation declines just on the back of the Prediction Cloud. Obviously, it sounds like there hasn’t been much of an impact to you guys or others in the space. So hopefully, that understanding or valuation changes. But how are you thinking about spinning out this business, kind of the path of that, that you’ve talked about before? Or maybe just providing any more spotlight on the value of this business?

Thomas Reeg: Yes, Chad, I’d say we’re — we will do what maximizes value to shareholders over the long term. I would say given what we’ve seen in valuations in the space over the past 6 to 9 months, this doesn’t seem like a market that screams you should come and offer some equity of any kind. So unlikely you see something in the near term. And what we’ve told you in the past is our focus is on hitting our numbers, scaling the business, proving it’s scalable. And we’re still in the midst of that and making great progress, expect to continue to make more. But in the current market environment, it’s unlikely you should see us pursue a separation transaction.

Chad Beynon: Okay. And then lastly, on just AI benefits, whether it’s searching for travel on the leisure side. I know that’s been a big topic this quarter, GEO versus SEO and maybe some potential savings. I’m not sure if there’s still opportunities there, but maybe just in terms of search or other marketing or purchasing, should we expect any financial benefits from AI improvements that you guys are doing in-house or using with some vendors to help in the near term?

Thomas Reeg: Yes. The short answer is yes, Chad. We price all sorts of stuff, every day, hotel rooms being an obvious example. That’s a place where AI can be helpful. AI can be helpful in the digital business in terms of the trading aspect of it. You think about how customers make reservations, how they interact with you on the front end, there’s opportunity there. There’s a lot of different areas, where we’re looking at applying AI to further enhance our profitability and our margins, and you should expect to see benefits from that over time.

Operator: And our next question comes from the line of Jordan Bender from Citizens.

Jordan Bender: Eric, maybe to start with you on the long-term structural targets. It looks like on average, about 100 basis points of improvement every year. Is it kind of fair to assume that trend line continues and we can see 10% by ’27? And I just to unpack that maybe a little bit more, kind of like what’s left in the tank between like parlay mix, average legs, improvement in the trading teams, anything that kind of helps us bridge between what we’re seeing today to how we get to that 10%?

Eric Hession: Yes. I think you’ve done it — said it pretty well. It’s — we’ve consistently improved our hold, and it’s not through any single action that’s taken. It’s through a combination of lots of different efforts towards basically creating a product that the customers want. So what we do is we go through, we say, what are they trying to bet and why is it that they’re not able to get their bet through? Or why is it that we’re not able to offer this product or what are the types of things that they want to do that our app is causing them to be unable to do. And then we fix those things or make it easier for them to find or bet. And typically, what customers like to do is they like to bet more parlays and they like to bet live parlays and they like to bet it with more legs and then cash it out.

And all those things contribute to hold. And so the pricing department is not so much determining what specific margin we’re going to charge for various wager. What they’re doing is making sure that the pricing is available and that the price is up so that the customers can bet it whenever they want. And then through the simple weighted average expected value that we get per bet, that increases over time as those higher hold bets come through with a higher frequency than the lower hold bets. And so what you’re seeing is that. I do feel very confident that we’re going to get to 10% and hopefully, we’ll do better than 100 basis points in 2026. But as you’ve seen, it’s been pretty steady for the last 3 years.

Jordan Bender: Great. And Tom, just a follow-up. On the Regional side, I think you said you feel good about growth for the whole year, but you feel better about the last 3 quarters of the year. We kind of talk to the puts and takes in the first. Is it fair to assume you’re implying 1Q could be down and then the remainder of the year should be up? Was that what you’re kind of saying?

Thomas Reeg: I was saying 1Q, we’ve got to overcome a little over $10 million of Super Bowl benefit in New Orleans to grow. And then we have really nothing, but tailwinds the last 3 quarters of the year.

Operator: And our next question comes from the line of Trey Bowers from Wells Fargo.

Raymond Bowers: I just wanted to build a little on an earlier question around the monthly unique payers. You guys are really a standout in that category, especially against some of the peers out there. Just curious, one, how high do you think that number can go? Is this the right KPI for us to focus on? Should that growth continue to accelerate? I know you talked about retention, but at 19% growth in the quarter, and that’s accelerated every quarter last year. Just would really like you guys to dig in a little more there because it seems like a real standout in the industry.

Eric Hession: Yes. I appreciate the compliment on standing out. This is — it’s a metric that we mainly report because it’s an industry metric that others use. What we do is we try to drive the components up that contribute to that metric. So like I had mentioned, retention is a big one for us. Number of active wagers per customer is also important because that indicates their retention is going to be higher. Number of states where they play with us. If they go to a brick-and-mortar property, that customer becomes very loyal. And so what we try to do is provide them opportunities to do that. And through a combination of all of those things, it really is a metric of retention. The acquisitions that we get go up and down based on competitive natures and states opening.

But really, if we can change the retention over, say, an 18-month period by even a few points, what you’ll see is a shift fairly significantly in these unique players. And so I would expect it to continue to increase. 19% is strong. So I don’t really have any guidance on that. But every activity that we do from the tech perspective, from the customer service perspective and from the marketing perspective, all ultimately result in that improvement in terms of the unique customers that are using our product.

Operator: And our final question for today comes from the line of Daniel Guglielmo from Capital One Securities.

Daniel Guglielmo: Just one for me. With Caesars Windsor moving into the Regional segment this March, you obviously had to do some work with some of the folks in Canada. Are there additional opportunities for expansion up north? Or was this just a unique situation that worked out?

Thomas Reeg: This was a unique situation for us, Daniel, in terms of we’re a long-time manager of the asset. We effectively bought the OpCo EBITDA at 2x what it’s doing now and think we’ll be able to improve upon that as a wholly owned entity. We would look elsewhere in Canada, but I’d tell you, most of what you find in Canada comes with to get a property the scale of Windsor, you have to operate a number of very, very small properties in tough locations, and that’s not typically been interesting to us.

Operator: Thank you.

Thomas Reeg: All right. Thanks, everybody. We’ll see you next quarter.

Operator: Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.