Q3 2023 Caesars Entertainment Inc Earnings Call

Participants

Anthony L. Carano; President & COO; Caesars Entertainment, Inc.

Bret Yunker; CFO; Caesars Entertainment, Inc.

Brian Matthew Agnew; SVP of Finance, Treasury & IR; Caesars Entertainment, Inc.

Eric Hession; President of Caesars Digital; Caesars Entertainment, Inc.

Thomas Robert Reeg; CEO & Director; Caesars Entertainment, Inc.

Barry Jonathan Jonas; Gaming Analyst ; Truist Securities, Inc., Research Division

Brandt Antoine Montour; Research Analyst; Barclays Bank PLC, Research Division

Carlo Santarelli; Research Analyst; Deutsche Bank AG, Research Division

Daniel Brian Politzer; Senior Equity Analyst; Wells Fargo Securities, LLC, Research Division

Daniel Edward Guglielmo; Research Analyst; Capital One Securities, Inc., Research Division

David Brian Katz; MD and Senior Equity Analyst of Gaming, Lodging & Leisure; Jefferies LLC, Research Division

John G. DeCree; Director and Head of North America Equity & High Yield Research; CBRE Securities, LLC, Research Division

Joseph Richard Greff; MD; JPMorgan Chase & Co, Research Division

Joseph Robert Stauff; Credit Analyst; Susquehanna Financial Group, LLLP, Research Division

Samir Morris Ghafir; Analyst; Macquarie Research

Shaun Clisby Kelley; MD in Americas Equity Research & Research Analyst; BofA Securities, Research Division

Stephen White Grambling; Equity Analyst; Morgan Stanley, Research Division

Steven Moyer Wieczynski; MD of Equity Research and Gaming & Leisure Research Analyst; Stifel, Nicolaus & Company, Incorporated, Research Division

Presentation

Operator

Good day, and thank you for standing by. Welcome to the Caesars Entertainment, Inc. 2023 Third Quarter Earnings Conference Call. (Operator Instructions) 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.

Brian Matthew Agnew

Thank you, Josh, and good afternoon to everyone on the call. Welcome to our conference call to discuss our third quarter 2023 earnings.
This afternoon, we issued a press release announcing our financial results for the period ended September 30, 2023. A copy of the 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 CEO; Anthony Carano, our President and Chief Operating Officer; Bret Yunker, our CFO; and Eric Hession, President, Caesars Sports and 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 comments today, you should refer to the cautionary statements contained in our press release and also the risk factors contained in our 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 today's call.
Also during today's call, the company may discuss certain non-GAAP 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 investors.caesars.com by selecting the press release regarding the company's 2023 3rd quarter financial results.
With the disclaimer out of the way, I will now turn the call over to Anthony.

Anthony L. Carano

Thank you, Brian, and good afternoon to everyone on the call.
We delivered the strongest consolidated adjusted EBITDA quarter in the history of the company led by a new all-time quarterly adjusted EBITDA record in our regional markets, profitability in our digital segment and continued strength in our Las Vegas segment. All 3 segments grew adjusted EBITDA year-over-year.
Starting with our Las Vegas segment. Demand trends remained healthy during the third quarter, with occupancy increasing to 96.6% versus 93.6% in the prior year. Total Las Vegas segment revenues were up 4% driven by higher occupancy and higher ADRs, which drove record cash hotel revenues, record gaming revenues and record food and beverage revenues. Excluding real rent payments, our Las Vegas segment generated $494 million of adjusted EBITDA with a margin of 44%. During the quarter, our group segment also delivered an all-time Q3 record for adjusted EBITDA.
As we look to the remainder of the year, Las Vegas continues to benefit from strong leisure and casino guest demand, a robust events calendar and the continued strength of the group and convention segment. We're looking forward to the inaugural F1 race in November, the culmination of significant planning and infrastructure improvements executed by the city in order to deliver a great event. Heading into '24, we are also excited for Las Vegas to host the Super Bowl in February, in addition to many other new and exciting events planned throughout the year. Las Vegas continues to benefit from one of the strongest event calendars in the United States.
In our regional segment, revenues were up 2% versus last year and adjusted EBITDA grew to $575 million, the best regional quarter on record. Stable guest demand, combined with excellent performance from our completed capital projects and newly opened facilities, helped to offset competitive pressures in a few of our markets. Our regional segment is benefiting from a diversified portfolio across the United States.
Turning to our capital projects. We are anticipating a Q4 opening for our Harrah's Hoosier Park property expansion, and we expect to have the new Versailles Tower rooms in Vegas online by the end of the year. 2024 is a busy year, and we expect to complete the permanent facilities in Danville, Virginia and Columbus, Nebraska as well as the new hotel tower and completely remodeled Caesars New Orleans project.
We are looking forward to a strong finish to 2023. Consumer demand remains strong, and our capital projects are winding down. We will continue to remain focused on operating cost efficiencies, harvesting returns on project capital and driving long-term EBITDA growth.
I want to thank all of our team members for their hard work. Our success is a direct result of the dedication of our team members and their commitment to delivering exceptional guest experiences every day.
With that, I'll now turn the call over to Eric for some insights on the second quarter in our digital segment.

Eric Hession

Thanks, Anthony. During the third quarter, we delivered another positive adjusted EBITDA result and a significant improvement versus the same quarter last year. Caesars Digital generated $2 million of adjusted EBITDA versus a $38 million EBITDA loss last year, demonstrating significant and continued year-over-year flow-through improvements. Q2 represented a second consecutive quarter of EBITDA profitability in our Digital segment and makes us positive now on a trailing 12-month basis as well.
During the quarter, online sports betting handle increased 14% and iCasino handle improved 38%. Revenues were negatively impacted by lower year-over-year hold in both our online sports betting and iCasino segments, which we believe to be temporary.
We continue to remain balanced with our promotional spend during the quarter with a focus on investing in our best customers, resulting in an overall promotional spend being among the lowest in the industry.
During the quarter, we delivered our new stand-alone iCasino app, Caesars Palace Online. The product features enhanced game content and functionality in addition to facilitating segmented marketing. The results of which drove monthly GGR and NGR in its first full month of operation to a record. We anticipate realizing increasingly positive results in the months ahead.
Turning to online sports betting. We launched several new product features for football, including SGPs for NCAA, a live streaming product for nationally broadcast NFL games, a bet with reward credits feature and improved payment options.
As we head into 2024, we believe that our product in both sports betting and iCasino are significantly improved from prior periods and quite competitive. We have an exciting and robust technology plan, which will have a focus on retention enhancements. I will preview these with you over the coming calls. But initially, we plan to continue to roll out our proprietary TAM, which will enable a shared wallet, and to improve the customer experience through enhanced application stability, ease of use and app speed. We now offer sports betting in 30 North American jurisdictions, 24 of which offer mobile wagering. We also operate iCasino in 6 jurisdictions.
I'll now pass the call back to Bret for additional comments.

Bret Yunker

Thanks, Eric. Year-to-date, we've applied over $700 million of cash flow to debt reduction and the acquisition of the remaining equity interest in our Baltimore asset. Our leverage continues to reduce as we repay debt and grow EBITDA, with our total net leverage under our bank credit facility declining to 3.9x as of September 30, resulting in a 25 bps reduction in our Term Loan A and revolver spreads to 150 bps over SOFR. Cash CapEx, excluding Atlantic City and our joint venture project spend, is expected to land at just over $800 million for 2023.
We're looking forward to posting a strong fourth quarter heading into 2024. Over to Tom.

Thomas Robert Reeg

Thanks, Bret. As the group has detailed, it was an extremely strong quarter for us, all-time record for the company.
Those of you who've been on calls, going back for quite some time, this should be a familiar story for you. Vegas remains quite strong in terms of headwinds in Vegas in the quarter. Know that we are accruing for the anticipated expenses that will come with the new union contract, which I will touch on a little bit more momentarily.
We had Rio left the system on October 2, so kind of it went out the door in terms of how it was performing in the third quarter. We had more significant disruption in the Versailles Tower than we anticipated. We thought we were going to keep a fair amount of it active. But as you open the walls of a building that is as dated as that particular building, you find all sorts of surprises. We took the whole tower out of service.
So fewer rooms, labor cost headwinds, Rio as a drag, we still beat year-over-year. The slight margin reduction you see is related to labor costs. As Rio comes off-line October 2, you should expect us to recover that margin percentage, if not more going forward.
I know there will be questions on the union contract. We are in active dialogue with the unions. I'm involved with the union. I'm involved personally in the discussions. I'm optimistic we will reach a solution. You've heard me say before we have done quite well as a company post-merger, post-pandemic. Our employees should and will participate in that. So you should expect that when we reach agreement on the contract, it's going to be the largest increase that our employees have seen in the 4 decades since we started interacting with the Culinary Union. So that's well deserved. It's anticipated in our business model. And as I said, everybody should be participating in the results that we've been delivering.
In terms of regional, I know that a lot of you are expecting fairly dramatic moves in terms of what's happening with the customer, have been for many, many months, if not quarters, by this point. That's not what we're seeing. We're seeing stability in the customer. We're seeing weakness in properties that have competitive openings that we've named before, Tunica, Chicago market being chief among them. If you want to hang your hat on something that feels soft, Atlantic City feels soft, but that's not particularly news at this point. The returns from our projects that have come online, Lake Charles, Virginia, Horseshoe, Annapolis have been quite strong and have offset the weakness in the properties that are competitively impacted. And as you saw, we set an all-time quarterly record for EBITDA and margin was stable. So we feel very good about regional.
I would point to -- moving forward, New Orleans is in the midst of the significant construction project that we've got going on there. It's particularly disrupted now and for the next quarter or 2, basically 1/3 of the floor, the casino floor is tore up on any given day as we do the heavy work at that level. We topped off the hotel tower. We're on target to open that expansion completely, well in advance of Super Bowl of '25. And we also have, obviously, F1 coming to Vegas, feel very, very good, and no change in what we're expecting in terms of lift in the quarter in the neighborhood of 5%, which is what I told you a year ago, we'd expect to deliver that. At the high end, the amount of credit play that we have in the market that week will exceed New Year's Eve. So it's an extraordinary event. From a high-end perspective, Super Bowl and Vegas is filling in the same way, extremely strong, high end as well. So we feel very good about those events.
Digital, Eric touched on, our hold continues to grow in excess of 30%. You know that that's based on the way we've been operating. That's not promotional-driven. That's actual handle growth. We got dinged on hold in the quarter but still delivered a positive EBITDA quarter. We're particularly pleased with the way the fourth quarter has begun in digital. Excited about the momentum that we've got in online casino now that we've launched Caesars Palace Online and what we'll be able to deliver in the coming quarters.
As we have discussed, we are nearing the end of a significant capital cycle. So as New Orleans winds down, you should expect our project -- CapEx budget to come down. Our EBITDA is growing in both brick-and-mortar and digital. So our free cash flow is growing. We continue to use our free cash flow to pay down debt and reduce leverage. That's what you should expect until we see leverage in the 4x or below least adjusted areas.
So we feel very, very good about how the business is performing, how it's coming together. Looking forward, we feel very good about what we see in front of us. We see, of course, the volatility that you see in share prices in the space, not just us. It's not reflective of what's going on in the business. And we're just going to keep delivering numbers until that volatility subsides. And we expect the market to recognize the value in our equity.
And with that, I'll open it up for questions.

Question and Answer Session

Operator

(Operator Instructions) Our first question comes from Carlo Santarelli with Deutsche Bank.

Carlo Santarelli

Anthony, I believe you were talking about some of the event calendar for 2024 as it pertained to Las Vegas. I was wondering if you could perhaps provide kind of an update on where you guys are in terms of group pace and how you're thinking about kind of the in the year, for the year experience this year relative to what you could perhaps see next year.

Anthony L. Carano

Yes. Thanks, Carlo. Group pace, as we said, set a record in this quarter. We see an extremely positive calendar going into getting better by the day. I think mix is around 15% to 16% this year, should pace up to about high teens next year.

Carlo Santarelli

Perfect. And then, obviously, you guys benefited from some of the favorable baccarat results in the market in the 3Q. I was just wondering, I mean, we've seen a pretty healthy stretch here of materially higher baccarat holds. Is there anything that your folks are noticing just in terms of the changing dynamics that we seem to be seeing coming out of at least the Nevada published data as it pertains to baccarat?

Anthony L. Carano

No, we had a really good quarter in baccarat last quarter, Q2. Q3 normalized for us. We're seeing a really strong return of the international customer, a diversified return of the international customer, and we think that will continue to grow this quarter with F1. A lot of interest in international for both F1 and the Super Bowl. And then anticipating a great New Year's and Chinese New Year's for next year for international.

Thomas Robert Reeg

Carlo, on a consolidated basis for the quarter, hold didn't have a material impact one way or another for us.

Carlo Santarelli

Yes. No, no. No, I was just referring to the baccarat piece specifically and more of the market data that you guys said.

Operator

Our next question comes from Joe Greff with JPMorgan.

Joseph Richard Greff

I want to lead off with a question for Eric here. Obviously, a significant increase in iGaming handle, up 38% year-over-year. And that's great. Can you talk about the path for growth from here? What are some of the drivers to continue that accelerating momentum, particularly when you think about other brands or reskinned apps and how that could drive growth there, Eric.

Eric Hession

Yes, sure. Thanks, Joe. Yes, we feel like from a volume perspective, we had a very solid quarter on both sports and iCasino, up 38%. And keep in mind, during the quarter, we didn't have our app with the exception of basically for 1 month as we were putting it in for the first 2 months of the quarter. So again, most of the upside from the new app is going to accrue in the fourth quarter and into next year.
We feel that there's a lot of opportunity to improve the integration of the various game vendors that will give us more insight into the actual workings of the game and see what customers are playing and where the spins are. We also have an opportunity to improve our CRM. As we mentioned, during prior calls up to about a couple of months ago, we weren't able to do segmented marketing. And so now with our new app and with some of the new technology, we feel like that's going to really benefit us heading into next year.
And then to your point, we are exploring the possibilities of adding another skin to the portfolio as there are a number of states where we have additional licenses that we've reserved and would plan to potentially roll that out later in 2024. So all of those things contributing to the overall improvement. But what I would say is that the thesis of the new iCasino app is following exactly the script. We're seeing a much higher percentage of slot players which, if you recall, on our prior app, it was heavily table focused. And then as a result, we're seeing improved hold in that particular app, which we think over time will ultimately create a whole lot more value for us.

Joseph Richard Greff

Great. And then a question for you, going back to Las Vegas in the third quarter, casino revenue flat year-over-year. Food and beverage, hotel and other, all up to varying degrees, nicely up year-over-year. Table game dropped. It was down 6%. Was there anything specific to there, Anthony or Tom, that you would call out? In the Q, you do reference that the Las Vegas segment had faced some challenges related to construction disruption and road work on The Strip. Obviously, it didn't impact food and beverage and hotel. To what extent was that a driver?

Thomas Robert Reeg

I mean you could name a lot of things that impact that, but a big impact on casino revenue is shift in mix out of your database or tour and travel into group business. Those customers spend more money outside of the casino floor than those that they're replacing. So you're going to see some of that. You wouldn't really -- and obviously, table games drop, particularly in Caesars Palace where we are today, is dependent on when your big customers come and visit. And so there's -- I don't want to say seasonality, but there's volatility in that number based on when those customers show up.

Joseph Richard Greff

Great. And then just related to Las Vegas, Tom, do you think you benefited at all from a competitor's cybersecurity issue, which may have hurt them -- or which definitely hurt them based on their disclosures. Did you have an outsized benefit that you would call out?

Thomas Robert Reeg

No, I wouldn't call out a benefit. I would tell you, one thing I know for certain after this quarter is nobody benefits from a cybersecurity incident.

Operator

Our next question comes from Dan Politzer with Wells Fargo.

Daniel Brian Politzer

First, this is maybe for Tom or Anthony, as you think about next year and we're kind of rounding out this year here, how do you think about the growth in the segment -- between the segments as it relates to Las Vegas and regionals? Obviously, Tom, you mentioned in Las Vegas, you're seeing the Versailles Tower maybe shifted a little bit later than anticipated. And then in the regional segment, you have new properties ramping but also some new competition. So any high-level thoughts preliminarily as we think about the growth path here next year?

Thomas Robert Reeg

Yes. So I'd say on the Versailles Tower, timing really hasn't changed. What changed is we had to take far more rooms out of service than we anticipated before we started opening up walls. We'll still, as Anthony said, be getting rooms back before the end of the year. We think that's a driver in Las Vegas. I would be -- we're in the middle of budgeting right now. And I would say, if you're budgeting modest growth in both Vegas and regional and significant growth in digital, you're consistent with what we're thinking.

Daniel Brian Politzer

Got it. And then just pivoting to digital a bit, I mean, this is a business where I think it seems like, from an operating expense perspective, it looks like you've really reached scale there. As you think about the path forward here, are there any rules of thumb or high-level ways to think about the flow-through just as it looks like you've turned the corner in terms of the cost structure?

Eric Hession

Yes. I'm happy to give you a few thoughts. One of the things that I think we're particularly proud of over the last few quarters is that we've been able to hold our promotional spending constant and even down. This quarter, it was down 25 basis points versus prior year. And so it's staying in that range that we've kind of given you for guidance of the 1% to 1.25% of volume. And so I think that's one thing to help build the models.
If you look at our tax rate, along with the payments processing fees and a few other variable costs that we have, using 50% or thereabouts in terms of incremental flow-through is a good number to use. I think you're probably right about thinking we're kind of essentially at that point where we've covered all of our fixed costs now. And the marketing spend is still coming down. We were down about $50 million year-over-year this quarter versus same quarter last year. And that will start to kind of stabilize as we've pulled a lot of it out, with the exception of some of the league and other longer-term commitments coming out over the next year. But from a variable perspective, I would think you could take every incremental dollar and flow 50% through at this point.

Operator

Our next question comes from Steven Wieczynski with Stifel.

Steven Moyer Wieczynski

So Tom, as we think about 2024 in Vegas, maybe from a cost perspective, you're obviously going to have some labor pressure heading into next year, depending on how the labor negotiations end up. But as we think about flow-through for 2024, in that market, anything we should be thinking about on the positive side that could potentially offset some of that wage inflation?

Thomas Robert Reeg

Yes. I mean you've got continued shift into group business, which is higher margin for us. So if you look at Caesars, it was historically running at 14% or so, we're up a couple of points above that. We should be up a couple more points next year. That brings more banquet revenue, that brings higher room rate, which has very high flow-through. We've got Versailles Tower coming online as we've discussed. We'd expect that that's 15%, 20% ROI at a minimum on a $100 million project. So we have wind at our sails in addition to -- more than offsetting what you're noting on the cost side. And you've seen that even in third quarter, which had a number of headwinds, and we still posted growth in a quarter that's not particularly strong from a group perspective.

Steven Moyer Wieczynski

Okay. Got you. And then, Tom, in the past -- or I mean, actually as early as last quarter, you've laid out a path to $5 billion EBITDA by 2025. I'm just wondering, as you sit here today, is there anything out there that you're seeing that would impede you guys from getting somewhere around that target? And I'm guessing you're going to give me a one-word answer of no, but just wanted to check back in and kind of see how you're feeling about that target today.

Thomas Robert Reeg

Yes, Steve, I told you that I think there's $0.5 billion of opportunity in brick-and-mortar, $0.5 billion of opportunity in digital, and we still see that in front of us.

Operator

Our next question comes from Shaun Kelley with Bank of America.

Shaun Clisby Kelley

Tom, I feel like one of the themes from the kind of quarter that has rolled out so far is just broader operating expense inflation. You obviously -- I mean, based on just what we saw out of the regional margins alone, it seemed like you're able to find offsets to be able to kind of counteract that. But could you just outline a little bit more broadly, maybe kind of what expense pressures you're seeing in the business? And do you think you've got the ability kind of going forward to be able to offset that and hold or get close to at least holding margins across the regional segments?

Thomas Robert Reeg

Yes, Shaun. I mean, I think you've seen it for quite some time. You saw it this quarter. We've been good at this for a very long time. This is -- kind of how we built the business was being as good as we could be at blocking and tackling. And recall that we're still -- it seems like it's been forever, but it's been 3 years since we closed the merger. We're constantly continuing to find new opportunity to squeeze cash flow out of the business. The cost pressures that you're hearing from us and others in terms of labor and inflation-related costs, those aren't new. We've been dealing with those kind of since we got out of the pandemic. And we have said all along that we think our margins are -- you shouldn't expect significant degradation in margin, and you haven't seen that to date. So that's what I'd expect going forward.

Shaun Clisby Kelley

And then, maybe pivoting to Las Vegas, and I appreciate the comments that you make, especially given the sensitivity around the union side. Just kind of anything further you could provide to us around timing as we kind of do get ever closer to Formula 1? And then just are -- the accruals that I believe you're already taking in the quarter, are those in line with your comment about the kind of step function in costs that you expect that contract to ultimately yield?

Thomas Robert Reeg

Yes. You should expect that we're accruing at a level that we think is consistent with where the contract will shake out. So it's consistent with our view that our employees deserve what they're going to get here, and we intend to provide. In terms of timing, we're in active dialogue. I don't want to be delivering a play-by-play. This is a 5-year contract. So while it seems like, "Gee, why don't you just get it done next week," these are complex contracts that cover a long period of time, and we're going to do the work with the union to make sure that we do it right for all parties. And I can't tell you if that means it's going to happen next week, a couple of weeks from now or a month from now. But we are in dialogue constantly with the union and have further meetings this week.

Operator

Our next question comes from Brandt Montour with Barclays.

Brandt Antoine Montour

Congratulations on the strong results. Tom, your comment on the regional consumer, loud and clear that it's stable. Obviously, people are a little bit nervous on this particular segment. I was wondering if you could just go a cut deeper on what you're seeing and maybe talk about sort of maybe the month-to-month throughout the quarter or spend per visit trends, utilization of loyalty rewards across your system? Anything that I can kind of put a finer point on that?

Thomas Robert Reeg

Yes. So Brandt, I'd say I don't have anything intelligent to say about month-to-month. There's not a particular month that stood out for us. What we are seeing is, in markets that are not impacted by new competition, save for Atlantic City, you're seeing demand kind of equal to last year to, let's call it, plus or minus 2%, if you're looking across the whole portfolio, something that averages to a little bit of growth across those assets from a revenue standpoint.
Then you have assets that are competitively impacted like Tunica, like the Chicago market that are very different from a revenue and EBITDA perspective. They're under pressure. And then you've got properties where we were the new supply, whether either to a new project like Lake Charles or Virginia or an expansion like Indiana, and our revenue and EBITDA is going up. And the net result of that is what you saw in the business for the quarter that EBITDA grew and EBITDA margin was flat. And that's really been the case for about a year now for us.
Every quarter, we run into kind of, "Well, now it's got to be right around the corner," and we're just not seeing that. We saw the well-documented surge in unrated play with stimulus checks a couple of years ago. Unrated play is where you see the volatility, but our database is strong enough that it's able to withstand that decline in unrated playback from the pandemic -- or the stimulus day. So we feel very good about where we sit in our regional business.
And remember, this is -- the logic behind pursuing Caesars as a target in M&A was diversification is going to be a strength of the company. And that's what we've seen. From a broad perspective, you saw, as the pandemic ended, people didn't want to get on a plane. And regionals carried Vegas. Then regionals had the tough comp versus stimulus. And Vegas carried regionals. Now you have both of them kind of bumping along as modest growers, and we have digital kicking in. And within regional, we've got diversification across our portfolio. And we hear what's said by others. We heard one of our competitors in Reno say Reno is off because there's an international competitor. I don't know who that is because we had our best quarter ever in Reno. So I would just tell you that the diversification that we thought was going to be a huge asset for the company continues to prove itself to us, and we hope to you.

Brandt Antoine Montour

That's super helpful. And then over in digital, several weeks now into the NFL season, wondering if you were seeing anything from the competitive landscape that's surprising at all, from promotional and advertising perspective. And then if you could, separate but related, if you could just update us on your overall confidence levels of hitting that digital EBITDA target in '25? That would be great.

Thomas Robert Reeg

Yes. So the target has not changed. We continue to see a visible path to that end. And each quarter, we grow more confident. We're not seeing anything promotionally that's requiring us to respond. I'll let others talk about their own promo strategies. We huddle each other once in a while and say look at this, look at that. But we've kind of got our head down executing on our business model and driving that $500 million of EBITDA, which again would be a about a 50% return on the cumulative EBITDA losses our shareholders allowed us to invest in the business today. So we feel very, very confident about where we are in this business.

Operator

Our next question comes from Barry Jonas with Truist Securities.

Barry Jonathan Jonas

I was wondering if you could talk about next steps, maybe any updated expectations for the New York land-based casino process. I believe one bidder is exiting that process. And while we're at it, maybe any general thoughts on the potential for iGaming in New York as well.

Thomas Robert Reeg

Yes. So tongue in cheek, I'd say I don't have grandkids yet but I'm hoping it's awarded before my first grandkid is 25 years old. It's going slowly. They've just passed the second round of questions, the deadline for that, so then they'll answer all the questions. Then you get into the community Board process where you've got to -- they'll put out the RFP. You've got to be approved by your community Board. Those that are approved by their community boards will have an opportunity to submit the final application for the license. As I sit here today, I think the quickest that they could issue a license based on what needs to be accomplished between now and then, is the end of 2024. I would say my personal expectation is it's 2025 before a license is issued.

Barry Jonathan Jonas

Got it. And then just a follow-up on digital. I appreciate the comments on low hold in the quarter reversing. I guess you've talked in the past about -- maybe expectations for holds for bridging the gap with competitors. So just curious if any updated thoughts there and sort of the timing to narrow that gap?

Eric Hession

Yes, sure. I'll jump in on this one. We continue to see the -- an end point where we're going to have hold in the 7.5% to 8% range. If you look at this quarter in particular, we did continue to have sequential hold improvement for the last 4 quarters, actually. It's really just we had an anomaly in Q3 of last year, where we held almost 200 basis points on the sports betting side higher than any other quarter in the 2 years. So it's really just a reversal of that period. And that was primarily driven by the September last year football results, which then reversed this year. But we're steadily improving on that path.
It is important to note that if you look at last year's, our blended hold was around 5.5%. So if you increase it by 200 basis points on the volumes that we're producing, you're talking a couple of hundred million more of incremental GGR, which at those flow-through rates that we talked about, should be a big contributor towards the EBITDA. And as I mentioned, we're heading steadily in that direction. So that's one of those areas that if it's in the model to get to the $500 million, we have to execute on it, but it's not particularly dependent on either the consumer changing behavior or are our competitors doing something differently. We just need to execute on that.

Operator

Our next question comes from Stephen Grambling with Morgan Stanley.

Stephen White Grambling

I know in the past, you've talked about hitting the 4 turns of leverage and then keeping M&A in the toolkit. Would love to hear, as you look at the broader environment, obviously, there's been a lot of market volatility. Does that increase the likelihood of any M&A opportunities popping up? Or do you say, look, at this point, buying back your own stock makes the most sense?

Thomas Robert Reeg

Yes. So thanks for the question. So the uses of free cash flow that are available to us are deleveraging something internal from a growth capital perspective, something external from an M&A perspective or buying my stock. When we had the conversation last quarter, our stock was right around $60 and going up. As we sit here today, it's closed around $40 today. At that free cash flow yield, it's going to be very difficult for me to find an external opportunity that I have the same level of conviction I'd have in terms of driving returns and buying my stock at a 15-plus percent free cash flow yield.
So when we get to our the -- toward the end of the New Orleans project and leverage gets to our target, if I can drive the kind of free cash flow returns we could drive with our stock at $40, I'd much more likely be a buyer of our stock than using it in an acquisition where I'm effectively selling it. So it's going to depend on where we sit. Those are the tools available in the toolkit, but the stock at this level is very clearly the best alternative.

Stephen White Grambling

That's helpful. And perhaps a change in topic, but on iGaming, I think you referenced a bit of a pivot to more slot play. Is that effectively a different customer as we think about iGaming on tables versus slots? And there's always the question of is that impacting at all the brick-and-mortar customer and/or properties, are you still seeing incremental customers coming from digital?

Thomas Robert Reeg

Yes. So the answer is yes. The customer that showed up in our iGaming business before through our sports betting tab tended to be a sports better, which skews younger and male and table games player. If you look at the businesses we want to emulate in the iGaming arena, they look like our brick-and-mortar business in terms of skewing to slots and older and female. And since we've launched Caesars Palace Online, that's exactly what we've seen in that app. So very encouraging in terms of early days results.
In terms of cannibalization, we have seen nothing to date in terms of cannibalizing the brick-and-mortar business. It's been accretive to brick-and-mortar in that customers that we found through digital or reactivated in digital, showing up in brick-and-mortar, continues to increase as the quarters pass. So very pleased with how that business is developing. I know that it's early stage since we've launched Caesars Palace Online, but extremely encouraged by results.

Operator

Our next question comes from John DeCree with CBRE.

John G. DeCree

Maybe one back on iGaming. And I know most of your peers, competitors don't really provide active user information. But from your response to your prior questions, it sounds like, with the shift in demographics, are you seeing a meaningful increase in active users or frequency of play from customers? Or are you more seeing, since you've launched a stand-alone app, higher-paying customers come in or a mix of both? Any kind of color you could provide around those trends would be helpful.

Thomas Robert Reeg

Yes. You're seeing all of the above. You're seeing more active play, you're seeing increase in customers and you're seeing better customers coming into our network. So it's been, as I said, an encouraging start.

John G. DeCree

And maybe to pivot back to the M&A potential question, I guess bigger picture, I imagine the answer is potential target specific, but given the margin improvements that the industry realized, post-pandemic, when you look at possible targets, do you still see an opportunity for meaningful synergies or efficiencies that you and your team could find? It might make an M&A target particularly accretive when valuing that against the free cash yield of your stock today. I mean are there still some opportunities that you think you can harvest some additional EBITDA growth from?

Thomas Robert Reeg

Yes. I would say the risk of running out of opportunities where we think we can squeeze more EBITDA out of assets than a target is very, very low on my list of reasons why M&A might not happen.

Operator

Our next question comes from David Katz with Jefferies.

David Brian Katz

I wanted to just go back to Vegas and the Vegas margins in particular because Tom, you laid out some items in your earlier remarks about accruals about Rio leaving, about Versailles disrupting a little more than expected. Are you able to quantify that for us? And the nature of the question is always just trying to find what the normal Vegas margin is going to be with a lot of the noise going on.

Thomas Robert Reeg

Yes. So I'd say what I can quantify is Rio is a little over $40 million of revenue with 0 EBITDA, maybe even -- the way it runs, it was less than 0 since you had to run the lease payment through it. So we had -- with that coming out, that's a significant move in reduction in revenue, increase in EBITDA with it out of the system. I don't -- again, I don't want to touch on any details of the new contracts. We're in dialogue. And in terms of Versailles, really you're seeing rooms that were out of service that will come back online by the end of the year. So you can presume that versus third quarter last year, that was a margin headwind. And coming back online at a higher average rate should be accretive to margins going forward.

David Brian Katz

Got it. And if I can just follow up with Eric on the digital side. One of the observations today is that product is winning, things such as parlays and in-game and other kinds of features and functionality. How would you characterize your arc in sort of being caught up with the leaders in terms of doing that and presuming that you do have to do that in order to accomplish your goals? Or am I misreading that?

Eric Hession

Yes. I think it's a great question. I think you're right. Product is quite important. I think it manifests itself mostly in retention because trial, you can get that right away, and then it's a question of how much people are going to continue to play and then how much they play once they do. From our perspective, I think we've made a lot of steps in the last 2 years, and I feel like our product is comparable to the top products that are out there, not quite to the level. There are still some pieces of functionality that we just haven't developed yet or focused on. But having the same-game parlays for the NCAA, having live same-game parlays, having alternative-line SGPs out there were big steps rolling those out for the NBA coming up and then getting that same action into hockey and so forth are some of the things that we still need to close the gap on.
But broadly speaking, I feel like if a customer came to our app, the benefits that we have with Caesars Rewards with a lot of the other things that we can offer that some of our competitors can't, the app is going to allow them to stay with us and become a loyal customer. Whereas I think if you were to say that same thing about a year or 1.5 years ago, that may not have been the case.

Operator

Our next question comes from Chad Beynon with Macquarie.

Samir Morris Ghafir

This is Sam on for Chad. First one is for Eric. Wanted to ask about the watch and bet streaming feature that you launched for NFL this season. And have you seen any changes in customer engagement or betting behavior from implementing this feature so far? And any thoughts around adding this feature for other sports.

Eric Hession

Yes. We're very excited to be one of the few operators to basically trial this for the NFL and our partners. We do see uptick in terms of customers watching it on our app. We we're able to measure how many people are viewing it and so forth. The next big step is going to be able to overlay wagering opportunities while customers are watching it. That we don't have yet. It's under development, and that's why we still consider this to kind of be a trial. So in terms of customer behavior change, at this point, we're still waiting for more data to be able to determine that. But a lot of the benefit that we feel we're getting out of this is on the tech side, being able to integrate it, working with the data feed providers and then being able to measure how the, customers are using it. Those will be the real benefits kind of going forward. In terms of doing it for other sports, we're definitely interested in doing that. It really depends on what the leagues' policies are and how they plan to utilize that service.

Samir Morris Ghafir

Okay. And then perhaps for Tom, recent market data showed that Las Vegas RevPAR growth has trended well into the double digits in October. Just wanted to get your view. Given what you're seeing today in terms of bookings, consumer behavior, the return of conferences and the overall events calendar in '24, where do you think The Strip RevPAR growth can get to in '24 or at least in the first half of '24?

Thomas Robert Reeg

We're optimistic about The Strip, generally, the group calendar ahead of us. I would -- we don't really have much room and occupancy anymore. We've just reported almost 97% occupancy for the quarter. So it will come in late. You'll see that as we shift mix more into group and feel very good about '24 from that perspective.

Operator

Our next question comes from Daniel Guglielmo with Capital One Securities.

Daniel Edward Guglielmo

So the first one, just in the Q, you gave a guide for maintenance project spend. It looks like the midpoint of that spend went up around $40 million versus last quarter. Is that just construction and labor coming in higher than expected? Or have there been changes to the plans to close out the year?

Bret Yunker

Yes. We just caught up on some deferred spend from last year into this year. So slightly accelerated above pace within the calendar year spend on maintenance.

Daniel Edward Guglielmo

Okay. And then just going back to the table game drop for the brick-and-mortar portfolio. I know we talked about Vegas earlier, but it's also slowed year-to-date on the regional side, and it seems like table game traffic volumes have diverged from slots in both segments. Is there anything there around certain demographics or a piece of the database not showing up or playing differently? And do table game players tend to be younger than slot players in a brick-and-mortar?

Thomas Robert Reeg

So the answer to the last question is no. The players across a regional casino don't have particularly differences, differences in ages. In terms of tables across the enterprise, I can't point to any specific changes in behavior that's -- what number we're looking at?

Brian Matthew Agnew

Table games dropped in Vegas and regionally, it went down versus slot volumes up.

Thomas Robert Reeg

Yes. I don't really have anything intelligent to say about that. Most of our regional properties, table game's a fairly small piece of the business. Regional business is driven by slot revenue much more so than Vegas.

Operator

Our next question comes from Joe Stauff with SIG.

Joseph Robert Stauff

I just had two, maybe on digital. We can see some references of your reduction in OSB spend. And just wondering, is it fair to assume, is that a permanent reduction as you think about sort of your OSB product? Or is it likely that you'll just reallocate that spend? And I'm talking about say, customer acquisition retention to your new iCasino first product. I know it's still ramping, so it's probably not 1:1, but just wondering how to think about that strategy going forward? And then maybe to see how Nevada did in the third quarter, you had just launched a new app, your new app, in Nevada. Just wondering if, year-over-year that was up.

Thomas Robert Reeg

Yes. So Joe, in terms of Nevada, yes, as we moved from CBS to Liberty and the functionality of our app that you see everywhere else, what we saw was an increase in hold, increase in volume, increase in average bets per user, what you would expect to see in terms of, call it, this generation product versus a prior generation product. In terms of what we're doing in promo, you should expect that there's going to be some spend that we've talked about in terms of launching iCasino. But given the way iCasino works in the amount of states, there's nothing in terms of the intensity that you see in OSB states. So you'll see some launch spend there, but you should expect OSB will be pretty stable for us. As Eric said, we've been kind of 1.25% of handles for quite a while now over a year, and we'd expect that to remain the case. Permanent is a long time. So I can't tell you it will never change, but we feel good about where we're at.

Joseph Robert Stauff

And maybe just one follow-up. For iCasino, are you largely just mining your large loyalty database for, let's say, cross-promotional type of customer? What are you seeing thus far in that?

Eric Hession

Yes. I would say, broadly speaking, our database is more responsive to the new app as you would hope and as you'd expect. When we built it, it was designed to be much more similar to a traditional casino experience. That said, we continue to get the majority of the customers that are trialing the app from other sources. So it comes from paid search, paid social affiliates and then just from brand recognition and advertising to people who trial the app. So it's a good mix right now. I think over time, our real differentiator, though, is the ability to cross-sell between online and bricks-and-mortar. And so we're eagerly looking forward to working with the soft providers to provide games and promos and jackpots that span both brick-and-mortar and digital.

Operator

I'd now like to turn the call back over to Tom Reeg for any closing remarks.

Thomas Robert Reeg

All right. Thanks, everybody. We will see you, I'm sure, at some conferences between now and then. But happy holidays, we'll see after first quarter.

Operator

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