Caesars Entertainment, Inc. annual report, FY2023

Caesars Entertainment, Inc. — FY2023 Form 10-K Summary

Reporting period: Fiscal year ended December 31, 2023. This is an annual Form 10-K; the filing does not provide a separate fourth-quarter-only income statement. Caesars operates 52 domestic properties in 18 states, with approximately 51,300 gaming machines, 2,700 table games and 44,700 hotel rooms. It also operates sports wagering in 31 North American jurisdictions and iGaming in five.

Financial performance and key metrics

Metric	2023	2022	Change
Net revenue	$11.528 billion	$10.821 billion	+6.5%
Operating income	$2.472 billion	$1.739 billion	+42.1%
Net income attributable to Caesars	$786 million	$(899) million	Improved by $1.685 billion
Diluted EPS	$3.64	$(4.19)	Improved
Adjusted EBITDA	$3.938 billion	$3.243 billion	+21.4%
Adjusted EBITDA margin	34.2%	30.0%	+4.2 points
Cash flow from operations	$1.809 billion	$993 million	+82.2%
Capital expenditures	$1.264 billion	$952 million	+32.8%

Revenue increased across the major categories: casino revenue rose 6.2% to $6.367 billion, food and beverage revenue rose 8.3% to $1.728 billion, hotel revenue rose 6.8% to $2.090 billion, and other revenue rose 5.7% to $1.343 billion.

Las Vegas: Revenue increased 4.3% to $4.470 billion and Adjusted EBITDA increased 2.6% to $2.016 billion. Hotel occupancy improved to 96.8% from 92.2%, but the margin declined to 45.1% from 45.8% because of labor costs and construction and roadwork disruption.
Regional: Revenue increased 1.3% to $5.778 billion, while Adjusted EBITDA declined 1.2% to $1.962 billion. New temporary facilities and the reopening of Horseshoe Lake Charles were offset by competition, weather, construction disruption and higher labor costs.
Caesars Digital: Revenue increased 77.6% to $973 million. Adjusted EBITDA improved to $38 million from a $666 million loss, reflecting higher sports-betting hold and materially lower promotional and marketing expenses. Sports-betting handle was $12.089 billion with a 6.3% hold; iGaming handle was $10.622 billion with a 3.1% hold.
Managed and Branded: Revenue increased 8.9% to $307 million, while Adjusted EBITDA declined 9.5% to $76 million. Results included $25 million of revenue related to termination of the Caesars Dubai management agreement, excluded from Adjusted EBITDA.

Liquidity, debt and balance sheet

Cash and cash equivalents were $1.005 billion at December 31, 2023; total cash, cash equivalents and restricted cash were $1.143 billion.
Available revolver capacity was approximately $2.1 billion after letters of credit, regulatory commitments and reserves, producing reported cash plus available capacity of approximately $3.099 billion.
Total debt face value was $12.439 billion, with $12.305 billion of book value and $12.4 billion of long-term debt reported for market-risk purposes. Variable-rate debt was approximately $3.2 billion.
Financing obligations related to VICI and GLPI leases totaled approximately $12.7 billion, comprising $11.4 billion for VICI and $1.3 billion for GLPI. Estimated 2024 rent payments to VICI and GLPI are approximately $1.3 billion.
2023 cash interest paid was $846 million on debt and $1.286 billion on rent related to financing obligations. Estimated 2024 debt service is approximately $915 million.
The Company was in compliance with applicable debt and lease financial covenants at December 31, 2023. It does not pay cash dividends and does not anticipate doing so in the foreseeable future.

Material changes versus the prior comparable period

The Company returned to profitability, primarily due to higher operating income, improved Caesars Digital economics and an $888 million income-tax benefit.
In the second quarter, Caesars reversed approximately $940 million of valuation allowance on certain federal and state deferred tax assets after concluding that realization was more likely than not. The tax benefit materially affected reported net income and is not indicative of recurring operating performance.
Caesars issued a $2.5 billion term loan and $2.0 billion of 7.00% senior secured notes due 2030, using proceeds to repay approximately $4.4 billion of CRC term loans. It also prepaid the $400 million Convention Center Mortgage Loan and repaid the $267 million Baltimore Term Loan.
Debt extinguishment losses increased to $200 million from $85 million in 2022, primarily from refinancing and debt prepayments.
Regional impairment charges included $81 million for gaming rights and $14 million for goodwill, driven primarily by lower projected cash flows and increased competition.
Caesars acquired the remaining 24.2% interest in Horseshoe Baltimore for $66 million. It also ended operations at Rio when the lease ended on October 2, 2023, and exited the Caesars Dubai management agreement on November 16, 2023.
Caesars launched or expanded digital products, including the Caesars Palace Online Casino application, the Liberty sports-betting platform in Nevada and temporary gaming facilities in Virginia and Nebraska.

Guidance, outlook, risks and unusual items

Management expects current liquidity, revolver availability and operating cash flow to fund operations, capital requirements and debt service for the next twelve months. Estimated 2024 capital expenditures are $1.020 billion to $1.240 billion, including $720 million to $890 million from unrestricted cash and $300 million to $350 million for Caesars Virginia. The Company expects the permanent Caesars Virginia facility to open in late 2024 and Harrah’s Columbus Nebraska to open in the second quarter of 2024.

Other planned commitments include approximately $325 million of required investment at Harrah’s New Orleans by July 15, 2024; the project’s current capital plan is approximately $430 million, with $289 million spent through December 31, 2023.

Refinancing after year-end: On February 6, 2024, Caesars issued a $2.9 billion term loan maturing in 2031 and $1.5 billion of 6.50% senior secured notes due 2032. Proceeds and revolver borrowings were used to retire the 2025 secured notes. The Company estimated approximately $50 million of resulting early-extinguishment losses.
Cybersecurity incident: A September 2023 social-engineering attack on an outsourced IT vendor resulted in unauthorized access to the loyalty-program database, including driver’s license and/or Social Security numbers for a significant number of members. Class actions, individual claims and state regulatory inquiries are pending or threatened. The Company says the incident has not materially affected operations or financial condition, but the ultimate costs, insurance recoveries and legal exposure cannot yet be estimated.
Demand and competition: Results remain sensitive to discretionary consumer spending, inflation, interest rates, travel costs, regional casino openings, Native American gaming, online competition and sports-betting hold rates.
Lease and leverage risk: Significant fixed debt service, CPI-linked rent escalators, long-term lease obligations and covenant requirements could constrain capital allocation and flexibility.
Regulatory and labor risk: Gaming licenses, gaming taxes, online-market approvals, union negotiations, labor shortages and potential work stoppages could materially affect results.
Impairment and estimates: Goodwill and indefinite-lived intangible assets totaled approximately $10.990 billion and $3.577 billion, respectively. Further impairment could result from weaker volumes, higher discount rates or underperformance.

Most important facts for investors to verify

Whether the $940 million deferred-tax valuation-allowance reversal is nonrecurring and how much deferred tax asset remains subject to valuation allowance.
Post-February 2024 debt balances, interest rates, maturities and the effect of refinancing on annual interest expense and liquidity.
The sustainability of Caesars Digital’s positive $38 million Adjusted EBITDA, given hold-rate volatility and competitive promotional spending.
Actual 2024 capital spending, Caesars Virginia and Columbus Nebraska opening dates, and the required Harrah’s New Orleans investment.
The ultimate financial, regulatory and reputational effects of the Data Incident, including litigation, remediation costs, insurance recoveries and customer behavior.
Compliance with leverage, fixed-charge coverage and lease covenants as debt service, rent escalators and capital expenditures increase.
Potential additional impairments in the Regional segment and other reporting units with limited excess fair value over carrying value.