Brian Agnew :

Thank you, Tawanda, and good afternoon to everyone on the call. Welcome to our conference call to discuss our second quarter 2024 earnings. This afternoon, we issued a press release announcing our financial results for the period ended June 30, 2024. A copy of the press release is available in the Investor Relations section of our website at investor.caesars.com. As usual, joining me on the call today are Tom Reeg, our Chief Executive Officer; Anthony Carano, our President and Chief Operating Officer; Bret Yunker, our Chief Financial Officer; Eric Hession, President Caesars Sports and Online Gaming, and Charise Crumbley in Investor Relations. 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 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. With that out of the way, I will turn the call over to Anthony.

Eric Hession :

Thanks, Anthony Caesars Digital delivered second quarter net revenues of $276 million up 28% year-over-year and set a quarterly adjusted EBITDA record of $40 million versus $11 million in the year ago period. Including this quarter, we have now generated trailing 12 months EBITDA of $76 million. Our net revenue flow through EBITDA in the quarter remained within our 50% range. Net revenues in our sports betting segment increased 19% year-over-year, driven by flat handle and hold of 7.2% which improved 80 basis points versus last year. Our product on the sports side continues to improve and our customers are reacting positively to our increasing mix of parlay and in-game offerings. We continue to drive growth in our parlay wagers with the percentage of that type of wager growing 380 basis points year-over-year, consistent with the trends we've observed throughout the year. In July, we closed on the acquisition of ZeroFlucs a leading sports betting technology company based in Australia. ZeroFlucs team has already started contributing to the product innovation and driving hold improvements and customer engagement. In our eye gaming segment net revenues grew 50% for the second consecutive quarter driven by a 33% increase in volume and a 30 basis point year-over-year improvement in hold. Caesars Palace Online continues to grow as a percentage of our total iCasino revenues. We're actively enhancing the product offerings by adding new and exciting game content including exclusively designed Caesars Themed Games. We successfully completed the acquisition of WynnBet's operations in Michigan in June which sets the stage for the introduction of our new iGaming app, which will be branded the Horseshoe in early Q3. As we head to the back half of the year, we continue to be optimistic about the progress we're making in both sports and iCasino and I believe we are well set up for a strong finish to the year. We now offer sports betting in 32 North American jurisdictions 26 of which offer mobile wagering. I'll now pass the call back to Bret for some comments on the balance sheet.

Tom Reeg:

Thanks. To dig a little more deeply into numbers starting in regional. April was a terrible month for us when we last talked to you. We were obviously in April, you had the Easter calendar shift, it wasn't clear how the month would shake out. But if you look at the decline in regional year-over-year April was more than a 100% of that May and June both were up year-over-year. If you look at Caesars-specific items in the quarter New Orleans were at peak Construction disruption in the center of the casino right now, that's going to continue for the next month or so, so that hits us in this quarter as well. Reno those of you have followed us a long time know that, one of the biggest groups in Reno are the bowlers. This year's bowling group is about 20% of the size of last year. So we're missing well over 40,000 direct room nights from them and likely more as they book through other channels. The combination of those two Items in the quarter cost us over $25 million of EBITDA and those will continue into the third quarter, given the bowlers left end of July last year, New Orleans construction will complete Labor Day. In addition, Churchill's Terre Haute property impacted Indianapolis in the quarter. And we anniversaried the temporary opening in Virginia for about half of the quarter. So as I look forward, I'd expect third quarter looks something like this. Fourth quarter, we get the benefit of a full quarter of New Orleans rolling out its new product. Recall that we've got about $80 million there of incremental gaming revenue, that the way taxes work in New Orleans would be without casino tax to us, and then expect Virginia to open before the end of the year. So I would expect we'd be a grower in the fourth quarter, third quarter probably looks similar to this. And then we feel good about 25 in regional. In Vegas, very pleased with the quarter. Keep in mind we had about $20 million of headwinds between union contract raises plus employees in venues that weren't open last year, so restaurants that were under construction and opened subsequent to second quarter last year. So to fade that 20 and grow, I'm particularly heartened that hold was a non-event in the quarter. We were in our range and the difference quarter-over-quarter was less than the increase in EBITDA. Obviously, we held margins well. Anthony mentioned the two hotel remodels that we did, Coliseum performing quite well. Versailles has knocked the cover off the ball for us. That's Versailles rooms are up $65 in ADR year-over-year, that's almost 60% lift. And that's before the rooms with the balconies came online. Just recently and the connector should open in this quarter that should have further tailwinds on that tower, that's been our most successful hotel renovation in possibly the history of Caesars, certainly since we've been involved. So excited about that. Rest of the year looks strong. Expect Vegas to post growth. I know that that's not what's been reflected in estimates, but we feel very good about the rest of the year into ‘25. Eric talked about digital. Another quarter of nearly 30% net revenue growth, 50% flow through, which is what we've told you that we expect to deliver. July's off to a fantastic start. Growth is in excess of that target. So we feel good about third quarter and then we'll get into, by the end of this quarter, we'll be into football. So feel very good about where digital's headed. Expect that the Horseshoe brand, the second brand in iCasino can help us build on the gains that we've had since we rolled out Caesars Palace online. So momentum in digital is quite strong for us and all of the targets that we've laid out in the past still seem well within our grasp. So feel very good about that. And then as Bret and Anthony both hit on, we will roll out, we'll finish our CapEx cycle that we entered into when we closed the merger in 2020 with the opening of Virginia by the end of the year. That'll bring that CapEx down a couple hundred million gross CapEx, over $500 million. And coupled with what's going on in digital and the brick and mortar portfolio, we're going to see a significant lift in free cash flow. As we stated, you should expect us to be looking for what we'll do with that free cash flow. We continue to plan to reduce debt, to reduce leverage at current levels in the stock. I wouldn't be surprised, you shouldn't be surprised if you see us become a buyer of stock as we get to that inflection point. And with that, I will turn it back for questions.

Joe Greff:

Good afternoon, everybody. I want to start with a question on Las Vegas. Obviously the results were nicely ahead of what we in the industry were forecasting and margins of knocking on 47%, nothing to sneeze at there. Going through some of the various Vegas KPIs that you put in the queue. If I make certain assumptions for slot wins, it looks like the contra gaming revenue, or at least the relationship between casino revenue and gross gaming revenue was very favorable. I mean, the best it's been in four or five, six quarters here. Can you talk about maybe what's driving that and maybe the sustainability of that? And obviously that would lead to a continuation of pretty good margins.

Joe Greff:

Great. Then my second question is for you, Tom, or for Eric in digital. Clearly, you're doing a good job on the iCasino side of things. And I'm presuming that has a much higher margin than the OFB revenues. And I know you have a target out there of $500 million in EBITDAR and if you look at the next couple of years and in consensus numbers, no one's sort of forecasting that. But it looks like this year you could be patient to do or knock on a couple of hundred million of EBITDAR in this segment. Is that close to how you're thinking about it internally? Obviously, taking into account what you're forecasting within a couple of quarters.

Joe Greff:

Great. Appreciate the comments. Thanks, Tom.

Carlo Santarelli:

Hey, Tom, everybody, Anthony, Bret. I just had two questions, both of which more or less relate to kind of the back half of the year in Las Vegas. The first one, and I just want to make sure I understand this properly. Tom, you talked a little bit about the $20 million of incremental costs, some of which are -- the bulk of which related to the culinary union contract. That contract, if I'm not mistaken, and this is where I'm looking for clarity, will see its next escalator in October, which means that in the 3Q, presumably the only increase you should see from that would relate to whatever you might have under-accrued in the 3Q last year, so relatively minimal. Is my understanding of that correct?

Carlo Santarelli:

Okay. Thank you. And then the second one, obviously, World Series of Poker is happening right now. You guys kind of have obviously had that in the properties and has historically been a pretty good cash generator for you, not just for the tournament itself, but gaming play in general. Could you comment a little bit about kind of the holistic impact that brand is having across the assets at present?

Eric Hession :

Yeah, Carlo, it shows up in our P&L on that other line. It's basically the World Series of Poker plus the skin revenues that we receive from renting our skins in other states. As Tom mentioned, we had a record World Series of Poker here at the venue in Las Vegas. From an economic perspective, it's actually very consistent. The online poker does okay, but doesn't make a huge amount of money, and then the royalty streams and the land-based casinos where the economics are, it makes between $20 million and $25 million for the year as a whole. That's an EBITDA number, and then the balance is going to be the skins that you see there in that other line.

Anthony Carano:

Yeah, Carlo, I think we'll see about mid-single digits above this year and going up into the mid-teens of mix for the market, so a tick up there as well. The team's been doing a great job in future bookings and has really, as I said, come in very strong in the last couple of months for ‘25.

Operator:

Thank you. Please stand by for our next question. Our next question comes from the line of Brandt Montour with Barclays. Your line is open.

Tom Reeg:

Yeah, Brandt, we've not seen a lot of elasticity when it comes to pricing in Vegas, so we have continued to take price kind of across the board, not just rooms, restaurants, ATM fees, pool cabanas. There's just a massive amount of demand for Vegas, and that has continued. And if you look at where we're driving, we're driving a lot of it through non-gaming, and gaming is holding up well. And so that leads to more EBITDA overall, which is great.

Eric Hession :

Yeah, it's a good question, and it's been a couple quarters that we've had, basically flat volume and increased hold, and thus increased revenues on the sports betting side. We've taken some actions from a reinvestment perspective, and then also from a wagering perspective that have impacted the volumes. And one way to think about it is, as I mentioned on the previous quarter, we had just recently been able to launch our new marketing system that allows us to provide segmented marketing, trigger-based marketing, and a much more customized approach. Prior to that, we were investing with a much more peanut butter spread approach, and it caused us to be over-investing in some of the lower end of the database. So, we've reduced that, and as you'd expect, the volumes have dropped off, but the profitability has gone up. And so, the business that we are getting isn't really business that you'd be too concerned about losing because it was unprofitable. I think that what you'll start to see is revenue growth start this quarter, and it'll accelerate as we start to lap some of the actions that we took. So, I do think you'll see solid volume growth starting, and the hold will continue to grow. And so that should compound as we head into the back half of the year.

Operator:

Thank you. Please stand by for our next question. Our next question comes from the line of Dan Politzer with Wells Fargo. Your line is open.

Tom Reeg:

Dan, we've known each other a long time. I only talk about EBITDA. So, whatever's going on in gross gaming revenue, I'm not paying attention to. We have not changed our promotional profile in any piece of our business. We were off, what, 30 something for the quarter, and 25 plus of that was New Orleans and Reno, as I described. So, the regional business as a whole continues to bump along. Obviously, as we've seen, you've got months that are not as strong and others that are stronger. April, for us is as I said was more than a 100% of the decline. Both May and June grew in EBITDA, but there's nothing we're doing in promotions nor are there anything we see others doing that we need to respond to in that segment.

Tom Reeg:

I'd say we're just reading the same headlines you are. We're not even tangentially involved in whatever's happening at Penn [ph] which I know that's where your questions going. In terms of what we'll do and we I've said before that we are mindful that we've generated a lot of shareholder value through M&A through external opportunities. The M&A that we've driven value through in the greatest form have used stock as a significant portion of our payment for those assets. I'm not an issuer of stock at $36 wherever it was today. We're going to be a significant even more significant free cash flow producer as these as the project spend runs down. So that will open up a leg of shareholder returns so you should expect us to start buying in some of our stock. If the stock moves to a different neighborhood that can change. I think all things equal will drive more value if we continue to execute external opportunities but I'm not going to give our stock away so that's where we sit today.

Tom Reeg:

Yeah we have the same. We're dealing with all three that impacted us in the second quarter in the third quarter. So New Orleans peak disruption till Labor Day, Terre Haute obviously we're going through I guess the second quarter -- second full quarter since opening. And then the Reno group impact extended into July last year. So all three will be headwinds this quarter. I think you start to flip toward the end of the quarter as New Orleans opens and then as you get to fourth quarter and Virginia opens, I'd expect we're growing in that segment again. Recall that the win per position in the temporary in Virginia is the highest in the entire enterprise and will be about doubling gaming capacity when we move to the permanent. So that should be a strong driver. And I've already hit on the way the New Orleans casino revenue will flow through in the initial stages.

Operator:

Thank you. Please stand by for our next question. Our next question comes from one of Steven Wieczynski with Stifel. Your line is open.

Tom Reeg:

You did not. I'd expect Vegas to grow in the second half of the year both third and fourth quarter. We would as -- I said on last quarter's call we would need a swing in hold that offsets our hold impact from first quarter to be a grower for the year.

Tom Reeg:

I would say there's always variability in a portfolio of our size. You feel it more in unrated and rated, where unrated is worse off than, call it, the average regional property. It's due to a competitive opening in the same geography. So if you think about how does Terre Haute affect us, we had people that were coming from a couple of hours away from Indianapolis to the West. And now you've got -- you've lost some of them for good because Terre Haute much more convenient and then you're going to have a battle around somewhere in between you like you have at other properties. And if I'm looking at unrated versus rated, it's like -- it's more unrated and the decline in unrated in that property would be more than our typical regional because of that competition.

Brian Agnew :

In the interest of time for the remaining participants asking questions, can we please limit it to one question and then we'll try to take some follow-ups. So we've got a bunch of people in the queue that we want to get to.

Shaun Kelley :

Hi, good afternoon, everyone. Thanks for taking my question. Just in the spirit of time, Eric, I wanted to go back to sort of the CAC or promotional environment a little bit and just in terms of what you're seeing in digital. Obviously, 50% flow-through in the quarter is great. Have you seen any environment -- environmental change and especially as you're thinking about ramping or seeing ramping volumes on the OSB side? Because I think there's some increasing trepidation about flow-through rates as we start to look into the third and fourth quarter. And obviously, I think there's a lot of expected competition in new products expected to be rolled out, particularly around the NFL season opener. Thanks.

Shaun Kelley :

Thank you very much.

Brian Agnew :

Hello?

Unidentified Analyst :

I couldn't hear that was my name, if it [Indiscernible] for a second. Can you hear me?

Unidentified Analyst :

Yeah. So one other on digital, given the strong flow through and as you open up Horseshoe Casino, should we anticipate any kind of investment behind that, that could reverse some of the operating leverage we've seen? And is there any thoughts that you can provide on how quickly you think that brand launch could build from here?

Eric Hession :

Yeah. We're launching it slightly differently than we did with Caesars Palace, where we're going to do effectively one state at a time. So pending regulatory approvals, we're going to launch in Michigan in September time frame. And then we'll roll out into the other states throughout the year, ending in Ontario in Q1. So from that standpoint, it will be a little bit different. I also would tamper the expectations just Horseshoe is a great brand, and it really -- we feel like it's going to resonate with a lot of customers. But Caesars is even a better brand. And quite frankly, that's going to be the flagship app that we have, and it's got a year's lead over the Horseshoe. So I would expect the Horseshoe to perform very strongly, but I don't think it will command the market share that Caesars as well.

Operator:

Thank you. Please standby for our next question. The next question comes from the line of Barry Jonas with Truist Securities. Your line is open.

Tom Reeg:

Yeah. Because of the graduated tax, I think we're not in favor of tax increases at all but the graduated tax is certainly favorable, I think, to a flat tax, the impact to us is under $5 million a year. We're not planning to change our behavior based on that change. If some of the others that are impacted more changed their reinvestment levels or their odds or some other type of action that they take in the state. It's potentially beneficial to us. But at this point, I haven't really seen anything that would indicate that that's happening.

Operator:

Thank you. Please standby for our next question. Our next question comes from the line of John DeCree with CBRE. Your line is open.

Tom Reeg:

Yeah, John, how do you like Agnew laying down the hammer? But John, on sales, you shouldn't expect that we're going to sell any operating casino assets. As I said previously, there are non-core, non-operating casino assets in the portfolio that I think could trade at a significantly accretive multiple for us, and you should expect us to try to take advantage of those opportunities. So no change there.

Operator:

Thank you. Please standby for our next question. Our next question comes from the line of David Katz with Jefferies. Your line is open.

Eric Hession :

Sure. I think that the growth rates -- the relative growth rates of the two sports betting and iCasino are going to continue. As we mentioned, the Caesars Palace online app continues to grow as a percentage of our iCasino business. So it's accelerating at a faster than 50% pace obviously, it's just over a year old. And then I think that the Horseshoe app will be incremental to that. And so you'll see the iCasino app continue to grow at a significantly faster pace than the sports betting side. From the sports betting side, we do feel like there's still going to be solid growth there, but it's probably going to be more like you're seeing now where it's in the 20% range. And so over time, the relative revenues from those two will converge. And as Tom mentioned, we do have a slightly higher blended tax rate on the casino side. So the flow through is a little bit lower on that incremental revenue. But eventually, I think that the iCasino will be more profitable than the sports betting in total dollars.

Operator:

Thank you. Please standby for our next question. Our next question comes from the line of Chad Beynon with Macquarie. Your line is open.

Tom Reeg:

Yeah, Chad. So I've seen the rhetoric around maybe the non-luxury properties are underperforming luxury. That's not what we're finding in our portfolio, all of our properties are performing in a similar fashion. Obviously, Caesars Palace has the bulk of our highest end business. So it's the most volatile from a table games perspective, but in terms of visitation, pricing power growth, they all look pretty similar for us.

Tom Reeg:

And then I'm sorry, on closing the Mirage, I think that's a mixed bag for us. I think it's helpful in terms of -- there's less rooms in the market, we'll get our share of those rooms. But given its proximity to our existing properties, we think that it served as a feeder theaters to our other assets that you state at Mirage and if you went walking, you probably ended up at one of our properties. So I really don't think that's going to be a material driver in either direction. I think we'll benefit from a little more occupancy be able to yield a little bit better, but we lose that 3,000-plus rooms in the neighborhood that would have you feed each other.

Operator:

Thank you. Please standby for our next question. Our next question comes from the line of Jonathon Novaretti [ph] with TD Cowen.

Tom Reeg:

Yes. Thanks for the question. VICI you'd have to ask them that is their option in terms of calling the real estate under the Indianapolis assets by the end of the year. We have a put option that we will not exercise. We've been pretty clear on that since we have this option became into existence. The proceeds are formulaic, so 1.3 times coverage, 13 times EBITDA. The last I check that gets to like $2.2 billion, something like that. If we were to get those proceeds that -- the bulk of those, you should expect would pay down debt. But yeah, you should also expect that there would be some return of capital element as well.

Operator:

Thank you. Please standby for our next question. Our next question comes from the line of Jordan Bender with Citizens JMP. Your line is open.

Tom Reeg:

Yeah. So those sports sponsorship deals were all signed as we launched the Caesars Sports app in 2021, they had varying terms. So some have rolled off already ESPN being the big one that rolled off as they launched ESPN. But we have still significant pieces that roll off or mature in a bulk of them in early '26 and we expect to see significant savings there that will flow directly to bottom line.

Jordan Bender :

Okay, got it. Thank you.

Daniel Guglielmo :

Hi, everyone. Thank you for taking my question. For each segment, it looks like you all found expense efficiencies this quarter versus last quarter. Is there anything specific across the company that you all can point to there? And can we expect those margin levels remain -- to hold through the second half, understanding there's some seasonality there?

Daniel Guglielmo :

Thank you.

David Katz :

Sorry about that. I just wanted to follow up on the comment, Tom, about regionals. I think what you're referencing for 3Q is a similar decline of down 8%, not a similar number of 469 of EBITDA, correct?

David Katz :

Yeah, got. Thank you. Appreciate it.

Tom Reeg:

All right. Thanks everybody. Enjoy the rest of the summer.

Brian Agnew:

Thank you, Jonathan, and good afternoon to everyone on the call. Welcome to our conference call to discuss our first quarter 2024 earnings. This afternoon, we issued a press release announcing our financial results for the period ended March 31, 2024. A copy of the press release is available in 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 COO; Bret Yunker, our CFO; Eric Hession, President, Caesars Sports & Online Gaming; and my colleague, Charise Crumbley, Investor Relations.

Anthony Carano:

Thank you, Brian, and good afternoon to everyone on the call. During the first quarter, consolidated net revenues of $2.7 billion declined 1% and total adjusted [ EBITDA ] of $853 million declined 10% year-over-year. We faced several transitory issues during the quarter, including low table hold in our Las Vegas segment and inclement winter weather in our regional segment, plus a loss on the launch of Sports Betting in North Carolina. Despite these transitory issues, there were several bright spots during the quarter, including record Q1 occupancy in Las Vegas, driven by strong visitation, 23% OSB net gaming revenue growth and 54% iCasino net gaming revenue growth in our Digital segment and sequential improvement in operating results in our Regional segment each month during Q1.

Thomas Reeg:

Thanks, Bret. We're not in the habit of delivering quarters that look like this. So I want to go through detail on how we got there and want to talk about whether anything fundamental has changed in the business. This is the kind of -- kind of answer the questions I would have if I was in your seat. If you look at the biggest buckets that this was kind of a kitchen sink type quarter for us, everything that could go wrong did for us. The biggest pieces are hold in Las Vegas, weather across the country that was well understood and you've seen with others and then losses around the launch of North Carolina in Digital. There's others that I'll touch on that are more minor, but there's well over $75 million of what's clearly onetime negatives for us in the quarter. So if I look at kind of the -- where we came out of the quarter and the way the business was operating fundamentally during the quarter, it looks more in my estimation, like a flattish quarter, notwithstanding the EBITDA that we posted.

Carlo Santarelli:

Tom, thank you for your remarks. I'm not going to get into the whole stuff. There was some stuff in there that I didn't entirely follow, but we can review it off-line. What I wanted to ask about though was kind of the -- what I see is kind of the widening gap between an implied Las Vegas GGR, and net casino revenue. And I want to understand maybe a little bit, is that a change in promotions? Does it have to do with the occupancies going up, maybe more comped rooms? And then as you mentioned, cash rates were up nicely on the coming months. But what percentage of the mix to the extent you could share? Should we think about as being cash rates going forward?

Carlo Santarelli:

Yes.

Carlo Santarelli:

Okay. And then on the other point, just in terms of reinvestment, et cetera, acknowledging -- look, we don't have your slot hold, but if I were to just make assumptions that it's somewhat static, that gap seems to widen a little bit. And I was just wondering, is that some influence from the whole dynamics on the table side? Or is there -- has there been a little bit of a change in promotional strategy?

Carlo Santarelli:

Okay. Some of it perhaps -- Rio coming out. I imagine probably has some modest influence as well?

Operator:

And our next question comes from the line of Joe Greff from JPM.

Thomas Reeg:

Slot handle was down 2%, Joe, net of the Rio and table drop was down 7%. So net revenue was down 4.5%. The bulk of everything that flowed through the quarter was table hold related. And recall, last year's first quarter was ginormous.

Thomas Reeg:

Yes. Sure, Joe. We have a number of assets that produce very little or no cash flow that are noncore to the business, non-operating casinos that could potentially be monetized at attractive rates where you wouldn't have to change your model much. And without getting too forward-looking, you shouldn't be surprised if some of those types of things start to happen in 2024 that our leverage reduction is not limited to only free cash flow.

Brandt Montour:

Maybe over on Regionals looking at the margin performance that you guys reported in the 1Q. When I look at OpEx and imply it back on OpEx, it looks like OpEx actually was pretty similar to -- of 1Q '23 despite opening in two properties. I'm curious if there were onetime savings in there from the January weather or anything else that we can kind of think about to try and think about your operating OpEx per day going forward?

Brandt Montour:

Sure. So your OpEx was flat in regionals year-over-year, right? Ex gaming taxes.

Brandt Montour:

And so we were just trying to figure out how you're able to keep costs so low given you opened 2 properties since last year? And if maybe there were some savings in January from the poor weather or if there was anything else onetime?

Brandt Montour:

Okay. Great. That's helpful. And then just as a follow-up on Digital. You gave -- Tom, you gave Digital ex North Carolina. I was just curious if you could give us or Eric, if you could give us the theoretical hold with the new -- with the Bumped up Parlay mix ex sport outcomes in March, so we can kind of think about the new normal here going forward?

Operator:

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

Thomas Reeg:

Yes. I told you the big ones. The three big ones. Hold Weather and North Carolina launch were more than $75 million. I mentioned other things like Adele moving that are smaller stuff that gets us to, if I'm looking at true non-onetime performance. I'm getting back to pretty close to even versus last year, which would include an increase in Digital if you're losing the $20 million North Carolina loss, an increase in Regional. But Vegas is probably still a little short to the record first quarter last year.

Thomas Reeg:

I think the most attractive opportunity I have for free cash flow, if I'm living in the current neighborhood is my own stock.

Daniel Politzer:

I wanted to touch on Las Vegas a little bit on the non-gaming side. I know you mentioned that occupancy was up a couple of hundred basis points year-over-year. But if we look at even the nongaming revenues, even adjusting for Rio, it seems like it's lagging the market I mean, can you maybe zoom in a little bit there and give us color? Is it low end versus high end? I know there was disruptions during the quarter, but is there anything else, I guess, under the surface that we should just kind of be aware of?

Daniel Politzer:

That's ex Rio, I assume?

Daniel Politzer:

Okay. And then I guess for my follow-up, on the noncash flow producing assets you mentioned, I mean you've kind of pivoted to more of a floating rate structure on your capital in terms of your balance sheet. How do you think about where interest rates are and some of those assets? I mean, is Centaur coming back into the mix as a potential option? Or when you talk about those noncash flow producing assets, is it completely -- is that in Regional, strip real estate? Any incremental detail or clues would be helpful.

Operator:

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

Thomas Reeg:

Yes. Look, I've tried to make clear all of our volume indicators were healthy in the quarter. Vegas number -- obviously, we lost CON/AGG, we picked up Super Bowl. So you had a big group that didn't show up in a big group that wasn't part of last year. But you can see it in our hotel occupancy, our hotel revenue, our food and beverage, all of those numbers remain healthy. The fact that regional ex January would have grown year-over-year should tell you that the consumer on -- that we see on balance continues to remain healthy and spending is robust.

Thomas Reeg:

I mean you guys are closer to accretion dilution math for them. I suspect that's what ultimately makes the decision. We are operating under the assumption that they intend to exercise, which is what they've told us in the past, but they've also said they won't do a dilutive deal. And as I understand, it's pretty close as it sits here today.

David Katz:

Appreciate all the detail. I just wanted to drill down a little further on the Digital discussion. If I sort of start off with notionally $50 million and I worked through the math, as I think you've laid it out, what it appears to imply is that the business grows to something just under $400 million of EBITDA? And is the inference that those deals that are rolling off are that significant that there are that they're in the 9-figure neighborhood in terms of the cost that goes away? Or is -- if you can sort of help me sort of dial in my mistake if I've made one?

David Katz:

Understood. So there may be just a little bit more growth in the market in there and the timing of how that rolls in and the partnerships, et cetera. But the partnerships are pretty material?

David Katz:

Understood. $100 million is -- when a $100 million is chunky, that's pretty good.

Stephen Grambling:

You mentioned a few times that looking across, whether it's the regions or Vegas, your expectations ex one-timers are effectively consistent. But what KPIs are you watching to assess whether it makes sense to perhaps start playing defense as it relates to costs? And as a related follow-up, what are the biggest levers if things were to erode and how should investors generally think about operating leverage as it seems like the market is back to worrying a little bit about the consumer here, and you've been able to be nimble in the past?

Stephen Grambling:

Got it. And maybe just not put words in your mouth, but to make sure this is clear. I guess, if things were to erode, you're already taking action so you would help mitigate any kind of operating deleverage? But on the flip side, if things reaccelerate, we could actually anticipate greater flow-through?

Operator:

And our next question comes from the line of Shaun Kelley from Bank of America.

Thomas Reeg:

So you've got North Carolina is a piece of it. But yes, Retail Sports was negative from a hold perspective in the quarter. And that hit revenue and flows through, that's where you're most acute flow-through of both Super Bowl and March Madness hints.

Thomas Reeg:

No, it was down materially from last year's first quarter.

Thomas Reeg:

Yes, Look, I'm looking at EBITDA. I'm not looking at GGR share. That's what you move with promo. Our international business was as high as it's been since going back to '19 in the quarter, our high -- our VVIP volumes were quite strong, we didn't hold. If you look at -- is it March has been reported already? Somebody is going to tell you they held because it wasn't us. And Baccarat held in the quarter or in the month. So we're really not seeing much in the way of share shifts that we need to respond to. If you look at the quarter, I would say January didn't feel great on a year-over-year basis. February and March did feel great, and the net result was volumes ended up about the same for the quarter against the biggest first quarter we've ever had. So I suspect when you hear others you might hear January didn't start that great, but that was very short-lived and February and March up much better.

John DeCree:

Maybe two. The first one back on Las Vegas. I'm not sure if I missed in the prepared remarks, if we already touched on it, I apologize. But I know Tom -- gave some color on 2Q, but curious if you guys have any stats in front of you about the balance of the year beyond that, perhaps where you have some visibility in Vegas like group bookings or mix group pacing or rate pacing? Just give us a sense of what the back half might look like?

John DeCree:

Great. Thanks Brian. And Tom, maybe one for you on external use of capital. I think your response to a prior question is pretty clear about where you see the stock. But given the kind of explosive growth we've seen in costs across the industry in the U.S. and your team's track record of operating efficiency, does domestic M&A as a way of perhaps finding more EBITDA growth than your peers? Or is there opportunities in the domestic market that might look interesting given your kind of abilities and your team's abilities relative to the cost growth that we've seen?

Operator:

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

Thomas Reeg:

Well, ultimately, you're limited by how many skins that you have. So you saw the transaction that we did with Wynn in Michigan that allows us hopefully, before too long to have another skin in that state. So we have two available in each iCasino jurisdiction and that should allow us to launch a second brand, and then we'll -- obviously, we'll see what happens after that and where we can get to from a skin perspective, it's different by state, but we have enough at this point to launch in every iCasino state.

Thomas Reeg:

Yes, I'd say yes to slightly lower, but I'd use 5% as a target.

Daniel Guglielmo:

The Harrah's in Pompano has continued to perform well after the expansion and rebrand outside of the current pipeline. Do you all have any similar near-term projects for properties that may be dealing with some of the competitive pressures that were mentioned in the opening remarks?

Daniel Guglielmo:

Okay. Appreciate that. And then just around expenses. So the negotiations and the expense accruals have been pushed through and the contracts give some predictability for the next few years? But are there any surprises or dynamics you all are thinking through on the expense side this year into 2025?

Operator:

And due to time constraints, this does conclude the question-and-answer session of today's program. I'd like to hand the program back to Tom Reeg for any further remarks.

Operator:

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

Brian Agnew:

Thank you, Josh, and good afternoon to everyone on the call. Welcome to our conference call to discuss our fourth quarter and full year 2023 earnings. This afternoon, we issued a press release announcing our financial results for the period ended December 31, 2023. A copy of those results are 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; Eric Hession, President, Caesars Sports and Online Gaming; and Charise Crumbley from Investor Relations. 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 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 at 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.

Eric Hession:

Thanks, Anthony. On our Q4 call last year, I talked about how the benefits of scaling net revenues in our digital segment would drive improved profitability given the high flow-through nature of the business. This transpired as strong revenue growth in Q4 and for the full year of 2023 led to several notable records within our digital business. Net revenues for Q4 grew 28% to a new quarterly record of $304 million and the segment generated $29 million of adjusted EBITDA, also a record. On a hold adjusted basis, we estimate that the segment would have delivered close to $60 million of adjusted EBITDA during Q4. Sports betting volumes during the quarter grew over 12% with a hold rate of 6.4%, up year-over-year but negatively impacted by November hold coming in below our expected range. iGaming growth accelerated throughout the quarter and delivered over 50% growth in volume led by Caesars Palace Online, which contributed to our first quarter of $100 million in GGR for the segment. For the full year of 2023, our Digital segment achieved 78% net revenue growth to $973 million, a new annual record and $38 million of full year adjusted EBITDA, also an annual record. On the sports betting side, during 2023, we continued to focus our product and technology improvements on the overall experience for our customers. They responded favorably to improved same-game parlays product enhancements, in-game wagering improvements and streaming technology. The percentage of customers making parlay wagers continues to improve and the average legs per wager also continues to steadily increase, giving us confidence in our ability to improve hold throughout 2024. On the iCasino side, we introduced our new Caesars Palace online app in August of 2023. Results to date are very encouraging as we've seen active customer counts and volume growth grow sequentially each month. The core iCasino slot customer has responded positively to our significantly improved offering, and we're pleased that the new product and brand resonate much better with our Caesars Rewards database than our casino associated with the Sportsbook. iGaming remains a critical component of our digital growth strategy for 2024 and beyond. In support of that strategy, after the market closed, we announced an agreement with the Sault Ste. Marie Tribe of Chippewa Indians and Wynn Resorts to enable a second iGaming brand in Michigan, which we plan to launch before the end of the year pending regulatory approvals. The existing Wynn operations have been averaging approximately $3 million of GDR per month, and we will work with their team to transition the customer base to our newly branded product when we launch. Following regulatory approvals, we will have secured market access for a second brand in every jurisdiction where we currently offer the Caesars Palace Online iCasino, which allows our new brand to benefit fully from the scale. We now offer sports betting in 31 North American jurisdictions, 25 of which offer mobile wagering. I'm very pleased with the progress we made in 2023. If you recall, our objective was to drive a solid return on investment for our shareholders as our business grew and matured over time. Our thesis was grounded on a reasonable TAM, an early effort to build brand awareness and harvesting the benefits of a very scalable business with a high portion of fixed costs. Our performance in 2023 sets the stage for continued profitable growth in the years ahead and keeps us on our path towards achieving $500 million of adjusted EBITDA. I'll now pass the call over to Bret for additional comments on Q4 in the full year.

Tom Reeg:

Thanks, Bret. To touch briefly on the fourth quarter results, I know we pre-released about a month ago, so they've been out there. If you look at the Caesars specific items that were going on in the quarter to get toward – where do we come run rating out of the quarter, we had in Vegas, recall that we were accruing for the new union contract that was signed in the fourth quarter. The accruals that we had put in place since June 1 were not quite at the level where the contract ultimately landed. So there is a catch up payment in there. The Versailles Tower that we were transforming at Horseshoe into the Versailles Tower at Paris, those rooms were entirely offline in the quarter, so we had 65,000 fewer room nights at over a $200 ADR. And sports has been well documented away from us, November hold was historically in players’ favor. We quantified that to about $20 million in our pre release in EBITDA. And we had construction disruption, as Anthony says, in Indiana and New Orleans in the quarter. If you put all that into the blender and figure out where we came out, I have us set $975 million to a $1 billion of run rate EBITDA in the fourth quarter. We had stronger hold last year in Vegas than we did this year, both within our normal range, we were more middle of the range this year, high end of the range last year. That's not in those numbers that I gave you. But if you look at Vegas on any volume indicator, room revenue was up despite the fewer room nights, food and beverage revenue was up double digits. Slot handle was up, table drop was flat for us. As you'll recall in prior quarters, we talked about F1 as a big stimulator of demand for us. We had been talking about a 5% lift in EBITDA in the quarter from F1. Our actual experience was about a 4% lift. So pretty close to what we were expecting. It was a huge lift for the high-end properties in the market, as you've seen, including Caesars Palace and Paris for us, it was less so for mass market properties. But generally speaking, it was a phenomenal event for the market. It needs to get – obviously, that was the first year of the Grand Prix in Las Vegas. It was a gargantuan effort to pull-off a race at all as with anything of that scale where you launch, you learn, what would I do differently as we move forward. We know as Caesars that this will be a better event when more of the city is energized, not just the four or five buildings that garnered the brunt of the benefit. So we're working with our partners in the city and with F1 to make sure that it is a more broadly successful event next year than even the success that it was this year. Thinking about this year, as we look forward now, January was a debacle from a weather standpoint. I think that's well understood across the market, you had about three of the four weeks that were significantly weather impacted. So we and everybody else starts in a January hole. What's good about that is January is a seasonally slower month to begin with. I expect even with what went on in January, we'd expect growth from each of our three segments. I expect growth in Vegas and EBITDA, in regionals and EBITDA and in digital, with digital being the most dramatic in my expectation. If you look at what's going on in digital, we're particularly excited with what's happening in iCasino. I know we've talked about iCasino for a very long time. We're seeing the fruits of our labor there. Eric and Matt Sunderland and their team have done a fantastic job. You saw fourth quarter handle and revenue was up 50% plus. We continue to grow on a month-over-month basis from there. So we're accelerating from there. Caesars Palace Online, as Eric said, launched second half of the third quarter. It's already to the point where it's about the same level of revenue as the business that preceded it in Caesars and it has created the shift that we anticipated to more slot play, more skewed towards female, in line with our Caesars Reward database, that's a higher hold business as well. So our iCasino numbers are ramping very, very quickly and continuing to accelerate. Keep in mind that in the digital business, iCasino is a higher margin business than OSB. So that bodes well for us this year. And in terms of capital, free cash flow, recall that when we finished – when we completed the merger with Caesars, we had a number of big ticket items that were either committed to as part of the merger like this $400 million of spend in Atlantic City or had been committed to by either the Caesars side or El dorado side. Prior, we were rebuilding the Lake Charles property. We had – we extended the lease in New Orleans, and we're pursuing an expansion there that was tied to that lease extension. And we had been awarded the license in Danville, which has been a home run out-of-the-box. But chunky capital projects with really not much discretion involved with them. I'm pleased to say that we're reaching the other side of that in 2024, Atlantic City is in the rearview mirror, as is Lake Charles, the – I'm sorry, the Caesars New Orleans project, should open late third quarter, and the Danville project should open by the end of the year. So as we look to – by the time that Danville project opens, we have a significant reduction in CapEx as we move forward. Free cash flow should be continuing to improve, both from growth in EBITDA, reduction in CapEx, and as Bret said, our financing that we executed in January, if you think about this is the second consecutive January. Bret and his team have executed a $4.5 billion financing for us. Nobody really would have set up a balance sheet with $9 billion in 2025 maturities. But that’s what the market allowed us to do when we came to finance Caesars in the middle of the pandemic. So that’s what we dealt with. Last year, when rates were going up, we did $4.5 billion and shifted our fixed to floating interest ratio to 75% fixed, 25% floating as rates rose. This year, we reversed that, did the $4.5 billion now we’re 50% floating, 50% fixed. So as we pay down debt and the Fed moves into the rate cutting regime that they are telegraphing free cash flow further improves for us. So we’re very pleased with 2023. I’d add my thank you and congratulations to our team members who delivered an unbelievable year for us, just shy of $4 billion of EBITDA lift of over$700 million from 2022. And we’re excited for what 2024 holds for us. And with that, I’ll open for questions.

Joe Greff:

Hi there, thanks for taking my questions. Tom, going back to your comments on F1, can F1 be a successful non-high end event? Can it be a pretty good growth driver at the mid price point properties? How do you position market price the rooms at these properties differently in 2024 and beyond to drive growth?

Joe Greff:

Great. And then just to get a sense of in Las Vegas, what type of operating expense growth you’re anticipating, and maybe we can kind of think about it this way in level setting, say revenues growing at a flat pace in 2024 versus 2023. And I heard your comments about growth in the market, and I’m sure in the 1Q with the Super Bowl and events, overall revenue growth is in positive territory year-over-year. But if we assume for full year 2024 that revenues are flat, how would you expect OpEx growth to perform?

Joe Greff:

Great. Thank you so much.

Carlo Santarelli:

Hey, thank you, everyone. Eric, I was hoping I could ask, obviously you did a nice job, pretty fairly comprehensive job highlighting kind of the digital business to date. But if we’re looking at simply on the iCasino side, you guys have seen acceleration in handle, acceleration in GGR in each quarter over 2023. Obviously, you’ve rolled out some new things. How should we think about kind of framing the growth in handle GGR, however you want to think about it in 2024? And what are some of the incremental add-ons that, that you guys will have for 2024 to kind of continue to drive the story there?

Carlo Santarelli:

Great. Thank you for that. And then, Tom, if I could just kind of follow-up on something Joseph asked. As you think about Las Vegas in 2024, and clearly, from a margin perspective last year, moving parts – there are certainly moving parts in the comparisons this year, you'll have five months of kind of the incremental labor expense the Super Bowl, obviously, in the first quarter last year, kind of lapping CON/AGG, et cetera. How do you think about kind of the ability to keep margins flat? Or do you just simply believe that's almost entirely reliant on revenue?

Carlo Santarelli:

Understood. Thank you both.

Steve Wieczynski:

Yes. Hey, guys. Good afternoon. So Tom, look, I fully understand you guys don't give guidance for the full year, but given everything you've kind of talked about in your prepared remarks and kind of the first two questions here in the Q&A. I guess, the question is, is it possible to grow EBITDA this year in Vegas and the regionals segments?

Steve Wieczynski:

Okay. That's very clear. Thank you for that. And then – so then second question, Tom, obviously, you guys continue to generate a good bit of free cash flow here. So just wondering if we can get your updated thoughts on deploying that free cash flow, given just now where the debt markets are versus where your current stock price is.

Steve Wieczynski:

Okay. Very clear. Thank you very much, Tom.

Dan Politzer:

Hey, good afternoon, everyone. I wanted to touch a bit more on regionals. It looked like over the course of the fourth quarter, trends kind of start to evolve and get a little bit better. And I recognize January, you touched on weather was certainly a headwind, but maybe kind of coming out of January, February today trends, can you give us a little bit more detail there. And maybe how that kind of jives with your expectation for EBITDA to be up year-over-year with regionals?

Dan Politzer:

Got it. Thanks. And then just switching to the free cash flow, you’ve done this big refi, maybe maintenance CapEx and cash taxes have shifted around. But could you just kind of remind us of that bridge as you think about 2025 from EBITDA down to free cash flow?

Dan Politzer:

Any assumptions for cash taxes in there just along with that? And that’s it for me.

Dan Politzer:

Understood. Thanks so much.

Brandt Montour:

Hey, good evening, everybody. Thanks for taking my question. So, in Las Vegas, you gave the convention group mix, I think for either the fourth quarter or the full year. Where do you see that mix going this year? And maybe you could give us an update on sort of how attrition is going and how you’re able – if you’re getting any incremental benefits on your revenue management yield side from the increase in mix and convention.

Brandt Montour:

Okay. That’s super helpful. And then maybe a question to follow-up, maybe with Eric on the agreement with WynnBET. Could you just talk about the sort of pros and cons of coming out with a second brand? Obviously, it’s additive to a certain extent. I’m just curious how you weigh that against the scale of having a marketing budget, right, that can get maybe more bang for their buck if it’s going toward one brand. But I guess maybe you’re thinking about having two brands going for a different customer. So maybe you could just flesh that out for us.

Brandt Montour:

Very clear. Thanks all.

David Katz:

Hi. Afternoon. To use your adjective, Tom, chunky, any temptation or any thoughts about revisiting the notion of a Strip asset and lightning the portfolio to that end and put some takes there?

David Katz:

Understood. And with respect to digital, if I can just follow-up on the sports betting side, since you are doing so nicely on iGaming, sports betting is a lot of talk about product advancement, same-game parlays, et cetera, and in play as a vehicle for growth. Could you just update us on your strategies there to sort of keep up with the leaders?

David Katz:

That'll work. Thank you very much.

Barry Jonas:

Hey, guys, can you talk a little bit more about New Orleans, maybe timing there and your ROI expectations? Also curious to hear about what you think the ramp is going to be with and without next year's Super Bowl. Thanks.

Barry Jonas:

Great. And then just…

Barry Jonas:

Awesome. And just as a follow-up, obviously, New York's still ongoing, but I believe there are a number of regional land-based opportunities that have either come up more recently or being debated. Curious, if there's any new expansion opportunities that interest you at the moment?

Barry Jonas:

Great. Thanks, Tom.

Stephen Grambling:

Hi. Thanks. When you think about the path to $500 million in EBITDA in Digital, which I realize you’ve basically reiterated that I think each call this year. What has surprised you to the upside and or to the downside, as we think about market size, share, structural hold, marketing, et cetera from when you first put out that target?

Stephen Grambling:

And where do you think structural hold should be in the online sports betting business as we think about longer term?

Stephen Grambling:

So just to be clear though, the 7.5% to 8% would be you have to get there through increased parlay mix from here that wouldn’t be additive?

Stephen Grambling:

Great, thanks. I’ll jump back in the queue.

Shaun Kelley:

Hi, everyone. It’s Shaun Kelley on for Julie. Just two questions, if I could. First on the regional side, Tom, you’ve been calling out for a while just some extra competition in a handful of markets. And as we screen the data that seems to be in markets that are particularly overlap with Caesars properties. So just kind of curious, has that settled down at all? Is that something that you kind of lap and expect to not deteriorate further? Just how do you underwrite that? Because it is a little different than the stability we’ve seen, I think, more broadly across regional landscape. But again, we do see it in the numbers.

Shaun Kelley:

Great. Thank you very much. And then as my follow-up for you or for Eric, just how should we think about, let's call it EBITDA flow through as we think about sort of the change in revenue to the change in EBITDA moving forward in digital? I think traditionally when we talk to some of the other operators, we think anywhere in the range of 40% to 60% depending on the state, depending upon whether or not it's hold related or not. But there's still a decent amount of variable cost. The question is can that – is that the right formula for Caesars? Can it be any better than that as some of those marketing agreements roll-off and as – and as the flows are any different, especially in the iCasino side.

Shaun Kelley:

Thank you very much.

John Decree:

Good afternoon, everyone. Thanks for taking my questions. Maybe to go back to the regional markets, Tom, I apologize if I missed, and I think you may have answered it with your growth commentary about the 1Q. But absent the weather or after the weather in January, what you've seen in February was a typical resume to normal. Is that fair?

John Decree:

Thanks. And then I guess one other kind of housekeeping item and Vegas, the room disruptions that you cited in the 4Q, are they both complete and are there any kind of notable disruptions that we should think about in 2024 particularly in Las Vegas? I think you talked about some of the bigger ones in the regional market, so really just Las Vegas?

John Decree:

Right. Okay, that's it for me, just those housekeeping ones. Thanks, Tom.

Chad Beynon:

Good afternoon. Thanks for taking my question. With respect to the North Carolina launch, this one seems kind of as fair as it gets. You have a database with the Cherokee property and it sounds like Eric, all the features are pretty much almost there. So how should we think know what an expectation should be for you guys, whether it's market share or profitability or customer acquisition, should this look different in terms of share versus other states? Thanks.

Chad Beynon:

Thank you, Tom. And then a follow-up to the last question, just in terms of the Vegas portfolio. So following the Versailles Tower and some of these F&B refreshers that you're doing, I know there's nothing else near-term, but how are you thinking about other, maybe transformative or kind of larger projects in Vegas? And how does the outcome of the Oakland A's [ph] situation change, what you're thinking from a timing standpoint? Thanks.

Chad Beynon:

Thank you. Appreciate it.

Daniel Guglielmo:

Hello, everyone. Thank you for taking my questions. Just around labor at the properties. You guys have a good advantage of kind of the U.S. with the portfolio makeup has turnover. From a labor perspective, has it been similar this year to last year? Is there anything you're seeing within the different regions that would be helpful?

Daniel Guglielmo:

Okay, great. Thank you. And then we've talked a lot about the capital flexibility in 2025 and just thinking about the VICI option for the Centaur [ph] properties outside of the share repurchases. And then I think you had said debt focus. Is there anything else you're kind of gearing up forward looking at when thinking out two years?

Daniel Guglielmo:

Thank you.

Jordan Bender:

Great. Thanks for taking my question. With the new app, you mentioned a shift into more slot play and not that hold shouldn’t move much for iGaming. But is there any upside to iGaming hold as you shift away from some of the lower margin table play?

Jordan Bender:

Okay, and then just to follow-up, I assume you pick up the Wynn database in the state as well. How should we just think about that customer mix versus what you currently have in that state? Thank you.

Jordan Bender:

Great. Thank you very much.

Tom Reeg:

Thanks, everybody for your time, and we'll see you next quarter.

Brian 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 third quarter financial results. With the disclaimer out of the way, I will now turn the call over to Anthony.

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. Caesars 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 six jurisdictions. I'll now pass the call back to Bret for additional comments.

Tom Reeg:

Thanks, Bret. 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 -- 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 margin -- the slight margin reaction you see is related to labor costs, as Rio comes offline 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 a contract, it's going to be the largest increase that our employees have seen in the four 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 like Charles, Virginia, Horseshoe Indianapolis 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 disruptive now and for the next quarter or two, basically one-third of the floor, the casino floor is tore up on any given day as we run -- 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 4 times or below lease-adjusted area. 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.

Carlo Santarelli:

Hey, guys. Thank you. Anthony, I believe you were talking about some of the event calendar for 2024 as it pertain 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 -- in the year, for the year experienced this year relative to what you could perhaps see 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?

Carlo Santarelli:

Great. Thank you.

Carlo Santarelli:

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

Joe Greff:

Good afternoon, guys. 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.

Joe 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 year-over-year. Table game drop, 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?

Joe 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?

Joe Greff:

Thank you, guys. Have a good day.

Dan Politzer:

Hey, good afternoon. 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 regional, 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? Thanks.

Dan 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?

Dan Politzer:

Got it. Thanks so much for the detail.

Steven Wieczynski:

Yes. Hey, guys, good afternoon. 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?

Steven Wieczynski:

Okay. Got you. And then, Tom, in the past, 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.

Steven Wieczynski:

Okay, great. Thanks, Tom. Appreciate it.

Shaun Kelley:

Hi, good afternoon, everyone. Thanks for taking my question. Tom, I feel like one of the themes from the kind of quarter 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?

Shaun 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?

Shaun Kelley:

Great. Thank you very much.

Brandt Montour:

Hey, good evening, everybody and thanks for taking my question. 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?

Brandt Montour:

That's super helpful. Thanks for that. 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 advertising perspective. And then if you could separate by related, if you could just update us on your overall confidence levels of hitting that digital EBITDA target in '25? That would be great.

Brandt Montour:

Great. Thanks all.

Barry Jonas:

Hey, guys. 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.

Barry 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?

Barry Jonas:

Okay, thank you so much.

Stephen Grambling:

Hey, thanks. 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. Is that increase the likelihood of any popping up? Or do you say, look, at this point, buying back your own stock makes the most sense?

Stephen 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 -- is 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?

Stephen Grambling:

Helpful. Thanks so much. Best of luck.

Operator:

Thank you. [Operator Instructions] Our next question comes from John DeCree with CBRE. You may proceed.

Tom Reeg:

Yes. You're seeing all 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.

Tom 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:

Thank you. [Operator Instructions] Our next question comes from David Katz with Jefferies. You may proceed.

Tom 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, 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.

Eric Hession:

Yes. I think it's a great question. I think you're right. Product is quite important. It's -- 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 two 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:

Thank you. [Operator Instructions] Our next question comes from Chad Beynon with Macquarie. You may proceed.

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 the -- 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 coming, 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.

Tom 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:

Thank you. [Operator Instructions] Our next question comes from Daniel Guglielmo with Capital One Securities. You may proceed.

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.

Tom 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, at...

Tom Reeg:

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

Operator:

Thank you. [Operator Instructions] Our next question comes from Joe Stauff with SIG. You may proceed.

Tom 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 a -- 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 the -- 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.

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 that people 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:

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

Operator:

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

Brian Agnew:

Thank you, Josh, and good afternoon to everyone on the call. Welcome to our conference call to discuss our second quarter 2023 earnings. This afternoon, we issued a press release announcing our financial results for the period ended June 30, 2023. A copy of the press release is available in the Investor Relations section of our website at investor.caesars.com. Joining me on the call today are Tom Reeg, our Chief Executive Officer; Anthony Carano, our President and Chief Operating Officer; Bret Yunker, our Chief Financial Officer; and Eric Hession, President, Caesars Sports & Online Gaming. Before I turn the call over to Anthony, I would like to remind you that during today's conference call, we may make certain forward-looking statements about the company's performance. Such forward-looking statements are not guarantees of future performance and therefore, one should not place undue reliance on them. Forward-looking statements are also subject to the inherent risks and uncertainties that could cause actual results to differ materially from those expressed. For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements. You should refer to the cautionary statements contained in our press release, as well as the risk factors contained in the company's filings with the Securities and Exchange Commission. Caesars Entertainment undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after today's call. Also during today's call, the company may discuss certain non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company's website at investor.caesars.com. by selecting the press release regarding today’s 2023 second quarter financial results. I will now turn the call over to Anthony Carano.

Eric Hession :

Thanks Anthony. During the second quarter of 2023, we delivered another significant improvement in the performance of our digital segment versus last year. Our business reported $11 million of adjusted EBITDA and $216 million of net revenue versus a $69 million EBITDA loss last year. Results this quarter represent our first full quarter of EBITDA profitability since rebranding to Caesars Sportsbook in Q3 2021. During the quarter, sports betting hold improved 180 basis points versus last year, and iCasino volume increased 27% year-over-year. Our performance this quarter continues to demonstrate the effectiveness of our targeted promotional investment and overall lower level of marketing within our existing customer base as well as customers located in the new states. We have recently introduced four significant pieces of new and exciting technology improvements that we expect will be well received by our customers. First, our new iCasino product Caesars Palace online is now live in multiple states and pending regulatory approval in the others. The new iCasino product offers a significantly improved product and enhanced marketing capabilities, all combined with the compelling benefits of Caesars rewards. Secondly, we recently transitioned our Caesars app in Nevada to our flagship Liberty product, which delivers a significantly improved product for our customers. Pending regulatory approval, we anticipate converting our William Hill product and our retail sportsbooks to delivery platform at some point later this year. Third, we've started out rolling our net native iOS Sportsbook app and anticipate reaching 100% adoption in August. The new native app is receiving consistently higher performance feedback and will result in faster loading speeds, improve stability, and enhance development speed. And fourth, we're on track to introduce our in house player account management system starting state by state later this year, which will ultimately lead to a shared wallet that we anticipate rolling out in 2024. These four products have consumed significant amounts of technical resources over the past year, and we're very excited to introduce them to our customers. We now offer sports betting in 30 North American jurisdictions, 22 of which offer mobile wagering. We also operate iCasino products in six jurisdictions. I'll now pass the call to Bret for additional comments.

Tom Reeg :

Thanks, Bret. Thanks, everybody, for joining us today. Very happy with the quarter, strong quarter again for us. Starting in Las Vegas, keep in mind we were up against the strongest quarter that we've ever had in Las Vegas, we were missing a large group that comes once every three years to Caesars properties that was in last year's numbers. Not in this year's numbers. We telegraphed that last quarter. So that was known what you saw last week in the Nevada numbers was June hold in [inaudible] was not as strong as it was in the prior year. We participated in that and I don't particularly like to talk about hold, but it's notable enough that I should in this quarter. We're in the gambling business, what we're looking for is the volumes to come through the property. And they came through we just didn't hold in June, like we did in the past June both the miss in that -- of the group from last year and the hold impact in June, are diluted to margins. Obviously, the group business for us is accretive to our overall Vegas margin. And then clearly revenue that would flow with normal hold is accretive as well. So as you're looking at margins on a year-over-year basis, keep that in consideration as we look at forward in Vegas continues to look very strong. We had a strong July; we feel very good about the remainder of third quarter. And then fourth quarter, you've got Formula One first quarter of ’24, you've got Super Bowl. I've said in the past, I think Formula One is a 5% list. Not including whatever happens at the tables really just from increased hotel revenue that still -- hotel and food beverage revenue that still seems to be the right zip code for us. Demand for F1 particularly at the high end has been very, very strong for us. We feel very good of it as to how we are positioned ahead of the event and we're anxious like everybody else to see how this event plays in Las Vegas as we look to future years. Superbowl ‘24 is exceedingly strong from a demand standpoint, where we sit today in terms of booked capacity versus a typical Super Bowl. We are dramatically ahead of and at higher rates than ever it typically at this time ahead of the Super Bowl. And if you just anecdotally look at who's going to be getting our tickets, the average customer that will come to the game with us is substantially more valuable than prior Super Bowl. So Vegas remains very, very strong for us. Feels very good, really no discernible impact in terms of any recessionary concerns, any concerns about the consumer. As we look out, the only thing to call out Anthony talked about the Jubilee Tower at Valley being converted to Versailles at Paris, we'd expect those rooms to be back online, before the end of the year, we don't expect the entire project to be done until first half of next year. But there will be some disruption in that tower at Horseshoe now that we're underway. If you look at the regional portfolio, and really the whole quarter is a testament to diversification we had what I what I'm talking about in terms of the group mess -- the missing group in Vegas and the hold impact in June. In the regional business, we've got a number of properties that are under competitive pressure, due to competitive openings. I'd call out Tunica is facing a property that open about an hour closer to Memphis that is pressured Tunica. We've got Council Bluffs has been a bit pressured by casino capacity we added in Nebraska. And then we have Chicago properties, both in Illinois and Indiana, that are impacted by the expanded casino offerings in Illinois that have come online and continue to come online. On the other side of that what we've got is the fruits of our capital investment cycle that whereas Bret said, we're reaching, we're crossing and reaching the end of. You've got new property in Danville; you've got projects in both Indianapolis tracks. You got Lake Charles now open; you've got the Atlantic City spend. And as a result, our regional EBITDA despite a super strong comp, were just about flat year-over-year, which I think is going to compare well with others that you'll see over the next couple of weeks. Again, as you look to third quarter off to a strong start, we're comping against an extremely strong third quarter of last year in regional and looks like we'll be able to beat that this year through July. That's particularly encouraging for us. Now flipping to digital, digital was a loss last year. And we've talked a lot about inflecting the positive and driving real EBITDA through that vertical and it's spectacular to see our first full quarter of positive EBITDA as Eric detailed. I laid up pretty specific targets in terms of where we can be in digital looking out to ‘25 on our last call, and that I went to some conferences where a lot of you told me there's no way we'll get there. I would tell you, every number that I laid out, 90 days ago or so, I'm 100% confident that we're going to hit them. Every metric that I look at going forward is at or above where we were 90 days ago when I laid out those targets. So I tell you, I'm reiterating those targets as we look forward. Big, on the tech side, those are big moves for us. It's very -- you've put them in a list and I don't really know that the impact is emphasized enough. When we took over William Hill, William Hill had one employee working on iGaming. We were on old technology that was limited in a whole number of wins. We soft launch, Caesars Palace casino about two weeks ago, we're waiting on approval in a couple of jurisdictions that I expect any day now, and then you'll see a full launch of the product. But I'd encourage you to go take a look, it's a casino first entry into our digital business. And in terms of capabilities bonusing, segmentation, proprietary games live dealer it is lightyears beyond what we've been operating under that, as Eric said, grew iGaming revenue to 27% in the quarter. We are fully aware that we have seen significant competition in the iCasino space, we don't expect that we're just going to come in and run everybody over. But we feel like we've got the product to start to build market share, and wrapping that into Caesars rewards has been and will continue to be powerful for that business. So you'll look at the quarter, second quarter of last year, was the best second quarter that we ever had, the second best quarter that we had ever had, and we topped it in EBITDA this year. So return in digital, and regional holding its own to offset the loss of that group in Vegas. So this is exactly how we built this business. And it's great to see it come together. And one more point on digital. Moving to Liberty in Nevada is an enormous lift. We were operating on the equivalent of a Commodore 64 computer in the old technology. And now we have the state of the art Liberty app that we operate in all of our jurisdictions. This is a dramatic leap for us in Nevada, if you think about the Super Bowl happening, and all of the visitors that will come to the state and our market position in the state. And now we have the app too, that's competitive with what they've got at home, whether it's with us or somebody else, that's going to be a giant customer acquisition opportunity for us. So we're particularly excited about that, I would expect that 95% of our handle in Nevada will be on Liberty by the middle of this month. And virtually all of it by kickoff of football season. So we feel really, really this is our third NFL kickoff, since we launched our digital business, in terms of how I feel heading into the season, I think we are very, very well positioned as we head in. So Bret talked about, we continue to pay down debt. Conventional leverage now is around four times and going lower, would expect that to go lower. Given where we are in the capital cycle, where we are with the performance of the business, we're starting to look at what do you do with the free cash flow that will be generated in ’24 and ‘25? And is there a return of capital piece? Or is there an external opportunity that could be interesting to us, I tell you, as you're sitting here today, three years after the Caesars transaction close, it was 30-60 days beyond the first time where I'm feeling where we can be offensive from an external opportunity standpoint. So it has been a long road to get through. Everything that happened with COVID, the merger, we really, really feel like we're on strong footing as we head forward. And the cash flow machine here is going to continue to accelerate as results continue to improve, digital continues to deliver improving cash flow, interest expense goes down. We really feel strongly about where we sit today. And with that, I'll open it up for questions from the audience.

Joe Greff:

Good afternoon, everybody. Tom, given what you said today tonight, about Las Vegas trends, how aggressive of a scenario is it for you to experience year-over-year net revenue growth in the 3Q? I would imagine the answer for that, with respect to the 4Q is not aggressive, given that one booking, and then I have a follow up on digital.

Joe Greff:

Great. On digital, maybe this is a question for Eric, but whoever wants to answer it. How do you think about the conversion of OSD and gross gaming revenue, instant net revenue into next year? And then specifically on iGaming gross revenue? We noticed that include increased sequentially $80 million in 2Q versus $75 million in 1Q. How do you think about the segment's growth going forward? Is iGaming presently EBITDA positive? And did the count for all in more than 100% of the 2Q EBITDA results? Thanks.

Operator:

Our next question comes from Carlo Santarelli with Deutsche Bank.

Tom Reeg :

Yes, so we're, key is we're getting toward the end of a capital circle, right, as New Orleans runs off. We don't have the, any of the chunky projects that we've had going, really, since the merger on our plane, there's some meaningful projects in particular markets, but you're not looking at the $300 million, $400 million or $500 million capital outlays. So from a balance sheet and cash flow perspective, you get to a point where you're going to be generating a lot of free cash flow and look at what do I do with it. We, as a team have delivered a lot of value over the last decade, to stakeholders through external opportunities. So, of course, we're going to look for, that for potential future opportunities now that we're in a position to tackle those but don't read that as a lack of confidence in the growth potential of the existing portfolio. As I said, last quarter, we're on a run rate of about a little over $4 billion of trailing EBITDA, we think there's $0.5 billion plus available to us in the digital business. And something similar to that in the brick and mortar business as we get returns, from the projects that have recently come online and are still to come online. And that should push us toward a $5 billion company. But as you look at where do what do I do with cash flow when paying down leverage might be generating, diminishing returns in terms of shareholder value, then you start to think of am I distributing that cash flow in some form or fashion, or am I putting it to work elsewhere? And we've got a great track record of putting it to work elsewhere. So we'll explore that as we move forward.

Tom Reeg :

See, I think that's a reasonable expectation Carlo. And touching on the labor agreements, labor agreements expired by contract at the end of May. We're operating under -- everybody on the surface operating under extensions. As we speak, there is work being done in terms of a new contract, I think it's, you're talking about complex stuff that takes a little while. But I'd expect that we'll have new agreements by the fall. And I'm not expecting a whole lot of drama around.

Dan Politzer:

Hey, good. Good afternoon, everyone. And thanks for taking my questions. I wanted to touch on digital first. Because the whole I think you call that was 6.4% it was up 108 bps year-over-year. How do you think about sports betting hold and growing it over time? And what do you kind of see is kind of the guideposts as you kind of maybe get to that 2025 level where you would see that high EBITDA flow through?

Dan Politzer:

Got it and then just pivoting Horseshoe, Baltimore, I know you acquired the remaining stake in that. I think VICI has a row for option on that as well as one for Caesars Virginia. So can, as you think about that deleveraging path and things are obviously moving in the right direction? Can you maybe talk about other ancillary options as it relates to the original portfolio and the possibility that there's maybe an avenue with VICI, where you can get a bunch of cash in the door.

Operator:

Our next question come from Steven Wieczynski with Stifel.

Tom Reeg :

Short answer is no. I won't give you exact, maybe I'll, maybe I'll buy Stifel, Steve, --

Tom Reeg :

You know who's out there. What's possible, you know that there are at our size, it's not as easy to find targets that, a, move the needle and b, are actionable from an antitrust perspective. But there's not zero targets available out there. And as we get to the free cash flow levels that we get to given what we have generated in the past in terms of returns, it shouldn't be surprising to anybody that we're going to look for opportunity to do that again.

Tom Reeg :

Yes, but it has been very strong from a volume standpoint, our volumes at the high end, both domestic and international continued to build. We've put in quite a bit of effort. Caesars had a very strong international business when we arrived, unfortunately, those players weren't traveling, it's great to see that come back. In the interim, we've continued to build on the domestic business. So to give you anecdotal and anecdotal ideas, Steve, I get a hit sheet every day. And in 2021, if I looked at it on a Saturday or Sunday morning, there was -- there might be one player there, that was a significant swing in our results. Now, on a typical Saturday, Sunday, I've got 5 to 10 players that are at a minimum, several $100,000 line of credit. So you've got a much more balanced book, you've got a lot more volume. So it's really continued to build. Obviously, events in the second half or in the fourth quarter with F1. And the first quarter was Super Bowl are fantastic, high end events. And as I said, in my remarks, demand for both of them at the high end is extremely encouraging several months out.

Stephen Grambling:

Hey, thanks, two follow ups. First, on the digital side. I think I heard you say this unplanned investment into the Caesars Palace app, does that mean that we should be anticipating to step up in marketing and increase promo spend on iGaming in the near term?

Stephen Grambling:

That's helpful. And my follow up just taking one more crack at it on the going on offense comments. Is that comment more directed at domestic or international? And do you generally view that more on the digital or physical casino side? Thanks.

Operator:

Our next question comes from Brandt Montour with Barclays.

Tom Reeg :

Yes, Brandt, we're not really seeing anything, I can speak to that material in terms of softness, at any level of property, the only property that as you're looking at the next quarter, I'd expect to be soft, is the Rio. And that because we're transitioning out of the property, and a lot of the rate of business has already come out of there. But that's obviously unique to that particular property. It feels really strong out here, we're out here. Today, volumes are, as they have been for a year and a half now continue to be very strong. As I told you, I'm looking at forward occupancies depending on properties 96% to 98%. So it's really hard to tell you anything that would give you a bearish stance on Vegas.

Tom Reeg :

Yes, we're kind of -- we are disruption free really since right before 4th of July, we are finishing up the entrance to Caesars Palace. I was out there for the opening of THE HOOK and Superfrico. And it really pleased with the way the renovation work is turned out all that's left is the Nobu Hotel Tower at Caesars, which should be done by the end of the year. Yes, I would say in terms of expectations, Atlantic City, not as strong as I would have hoped it would be but it's fine. And yes, obviously it's within that regional business that was flat in 2Q and I'd expect to grow a little bit in 3Q.

Shaun Kelley:

Hi. Thank you for taking my questions. Maybe first for just, Eric. Just wanted to ask about on the digital side, maybe at a very high level, could you help us think about as you start as your expense base is increasingly normalized and you continue to get your product roadmap where you want it to be? How do you kind of think about flow throughs in the digital business of sort of percent changes in revenue to EBITDA? What sort of either kind of a directional amount that makes sense, or could you help us think about some of the key levers or line items that you could drive improvement from just as we get out into kind of ’23-‘24 and beyond?

Shaun Kelley:

So 50% on variable and possibly greater than that when we factor in some of those fixed expenses, if I'm kind of summarizing that right. Does that make sense?

Shaun Kelley:

Great. I mean, it makes a ton of sense. Thank you for that. And then one sort of bigger picture, one for Tom. But Tom, you kind of mentioned in the prepared remarks a little bit about your longer term goals from 90 days ago, and standing by those and I just sort of wanted to kind of specifically, was there like something specific you had in mind? And maybe I'm just not in on either the comment or the joke, but just was there a specific area that was that really directed at free cash flow? Was that directed at the 50% return on digital investments, sort of all the above? Was there just something you were specifically trying to kind of get across relative to where we sat 90 days ago?

Operator:

Our next question comes from Barry Jonas with Truist Securities.

Tom Reeg :

I feel fine. And I know those types of partnerships are useful from a loyalty branding perspective for the databases at the scale of the company that we've got, where there's nothing out there that we're missing that I expect would materially move the needle for us.

Tom Reeg :

Yes, so you're remembering correctly, August, September, last year, in particular, we had some unhedged utility costs, primarily in Nevada that bid us were in a much, much better position over the next 60 days, the same 60 days is last year. So I'd expect those costs to be lower. In terms of weather, there's, I can certainly probably come up with weather that impacted us in various places during the quarter. Obviously, it's very hot everywhere recently, but there's nothing to point to as a reason for particular weakness or strength in our markets based on the weather recently.

David Katz:

Hi, evening, everyone. I'd like to just go back to the digital, if I may, and just looking at the Q and reflecting back on some of the discussions we had about some of the media partnerships, et cetera. There are still some meaningful commitments, capital wise in terms of those costs, if you could shed a little light on how much of that starting to roll off, is important for hitting these targets these profitability targets, versus how much of it is just execution on getting the new apps rolled out and doing the business?

David Katz:

And those are relatively equal in size.

David Katz:

Got it. Okay. And if I may, as my follow up, just focusing on the regional business and trying to think through what it's becoming where we look at CapEx and we're always a little sensitive to CapEx that may give the appearance of being defensive as competition ramps up pretty much across the regions. I suppose what I'm asking is this, what it is, where it's not going to be a lot of growth. There'll be some capital redoes that are necessary at some point. But for the most part, right, or what we're looking at today, kind of is what it is, to repeat myself a little bit.

David Katz:

Okay, thank you for the fond memories of MTR, appreciate it.

Chad Beynon:

Afternoon, thanks for taking my question. You've gotten a lot of digital, but I wanted to pile on that. So we get a lot of questions around live dealer, given how big the demand is in Europe and the market cap of the leading player over there. So Eric, maybe for you as it relates to your optimism around iGaming in general, is this expected to be a major piece of the business going forward? And given I guess, the branding, the marketing some of the IP that you have, would you consider doing this in house or use third party exclusive vendors to have the Caesars experience? Thanks.

Chad Beynon:

Okay, thanks. Appreciate it. And then just in terms of legislation that we should be keeping an eye on, I believe North Carolina is out there potentially talking about some expansion of land based gaming, and then on the iGaming front that'll probably roll into Q1 of ’24. anything else that we should be watching or you're keeping an eye on in the legislative session? Thanks.

Operator:

Our next question comes from John DeCree with CBRE.

Bret Yunker:

Yes, on the minority interest always we are opportunistic around holding an asset at the right valuation. So we took that in for a little under $70 million. You'll see that in the Q. And once we collapsed and owned 100% of it, you look at that cost of debt. The term loan was pre-payable at par and was midnight on the interest rate with our nearest maturity so it might land that's called a no brainer in terms of what to repay next with our free cash flow.

Eric Hession :

Yes, you're absolutely right. It was an all-time record World Series of Poker both from a prize money perspective, participants perspective, but also from the ability to really provide contribution to the properties that hosted it. We moved it to the Horseshoe last year. So it's kind of the first year those branded as a Horseshoe, and it really drives a lot of activity to the property, a lot of food and beverage, a lot of hotel revenues. So it's really great for us from a portfolio perspective, in addition to the direct revenues that are drives to the, from the actual tournament itself. From an online perspective, we really don't see much movement in terms of new states legalizing, so it's kind of a business that is kind of flat at this point. It vacillates between going up and down based on how customers go. But from a brand perspective, we think it's definitely accretive to the company, and does provide these incentives for customers to come to the brick and mortar locations for the tournaments.

Tom Reeg :

Thanks, everybody for your time, attention and support. And we will talk to you in November if we don't see at conference sooner.

Brian Agnew:

Thank you, Josh, and good afternoon to everyone on the call. Welcome to our conference call to discuss our first quarter 2023 earnings. This afternoon, we issued a press release announcing our financial results for the period ended March 31, 2023. A copy of the press release is available in the Investor Relations section of our website at investor.caesars.com. Joining me on the call today are Tom Reeg, our Chief Executive Officer; Anthony Carano, our President and Chief Operating Officer; Bret Yunker, our Chief Financial Officer; and Eric Hession, President, Caesars Sports & Online Gaming. Before I turn the call over to Anthony, I would like to remind you that during today's conference call, we may make certain forward-looking statements about the company's performance. Such forward-looking statements are not guarantees of future performance and therefore, one should not place undue reliance on them. Forward-looking statements are also subject to the inherent risks and uncertainties that could cause actual results to differ materially from those expressed. For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements. You should refer to the cautionary statements contained in our press release, as well as the risk factors contained in the company's filings with the Securities and Exchange Commission. Cesar's 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 financial measures as defined by SEC Regulation G. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company's website at investor.caesars.com. by selecting the press release regarding the company's 2023 first quarter financial results. I will now turn the call over to Anthony Carano.

Eric Hession:

Thanks, Anthony. During the first quarter of 2023, we delivered a dramatic improvement in the performance of our Digital segment versus the prior year. Our business nearly broke-even during the quarter on $238 million of net revenues versus a $554 million EBITDA loss in last year, which was impacted by significant brand-related spending and state launches in New York and Louisiana. Our performance this quarter clearly demonstrates the effectiveness of our targeted promotional investment within our existing customer base as well as customers located in the new states that we launched this quarter, Ohio and Massachusetts. I'm pleased with the progress we have delivered over the last 12 months. Our net revenues continue to increase significantly as we launch new states, grow and retain our existing customer base and continue to deliver exciting product improvements. On that front, we will be executing three significant tech enhancements to our platform during the remainder of the year. First starting early in the third quarter, we will be launching a new standalone iCasino app this exciting addition to our product offering will allow us to drive better customer engagement through a dedicated application with a focus on increased game content, which will include new proprietary offerings and improved marketing capabilities. Second, we expect to begin testing our in-house player account management system later this year, which will ultimately lead to a shared wallet that we anticipate rolling out in 2024. And finally, we expect to migrate all of our operations in Nevada to our Liberty tech stack ahead of the 2023 football season. From an EBITDA perspective, our net revenues are now at a scale where we are able to roughly breakeven and cover the costs of our proprietary technology. We expect that our year-over-year net revenues will continue to grow each quarter. And given the effectiveness of our expense management plan will drive extremely high flow-through on each incremental dollar. From an expansion standpoint, after our most recent launches in Q1, we now offer sports betting in 30 North American jurisdictions, 22 of which we offer mobile wagering. And in addition, we offer iCasino in five jurisdictions. I'll now pass the call over to Bret for some additional comments.

Tom Reeg:

Thanks, Bret. Thanks, everybody for joining today. To go a little deeper into the numbers, Vegas, was very near a quarterly -- all-time quarterly record, it was a Q1 EBITDA and margin record and it was a record for mix in the group business 21%. Recall that Caesars' pre-merger was running at about 14%. And so what we're seeing -- what you're seeing through Vegas is not only just extraordinary demand that continues as you look through each month. You're seeing the average customer in our property continuing to be -- continuing to raise. We're getting group business that is higher dollar comes with banquet business attached and replaces our least profitable players. So it's a virtuous cycle in Vegas, as we sit here today. Obviously, second quarter generally is our most difficult comp of the year, since that was our all-time record. Second quarter last year we did almost $1.50 billion of brick-and-mortar EBITDA, but we feel very good about business in April and through the rest of this quarter in Vegas. And as you look forward with the Group business that's on the books going forward, we did announced $100 million project to change the Bally's Jubilee Tower to the Versailles Tower in Paris. It will be connected by a physical bridge into the property. Paris has really exploded as we've improved the casino floor and added a number of high-end food and beverage options, including Nobu, the Bedford and Vanderpump. And room rates at -- both room rate and spend -- non-gaming spend per room at Paris are significantly ahead of where they are at Horseshoe. So we think this will be a high ROI and more importantly, high-conviction in that ROI project that is in design stages now and should begin shortly. Regional, if I touch on regional for a moment. The Tahoe area, Northern Nevada about 720 inches of snow, so 60 feet of snow in the quarter. Unfortunately for us, a lot of those storms hit Thursday, Friday, Saturday. So even with that amount of snow, you can get lucky as to when it hits, we did not. So weather in Northern Nevada cost about $20 million of EBITDA in the quarter. So if you normalize for weather in the quarter, regional EBITDA and margin both would have been up slightly. We've got a number of exciting projects there that I'll touch on as they get a little deeper, I'll circle back to that. In Digital, we were about a $3.5 million loss that was with the launches of Massachusetts and Ohio. And the Super Bowl that didn't hold very well for us, frankly, given the amount of scoring that happened in it. Really if any of those three legs were not a part of the quarter, we were positive. As we sit here today, we are positive on a year-to-date basis. In Digital, I told you last quarter we anticipate that we will generate positive EBITDA for the year 2023. I can tell you today, we're already there on a year-to-day basis and the amount of EBITDA that I was expecting, when we announced that we'd be positive for the year about 90-days ago versus where we are today, we think we'll do considerably better than where we thought we were even 90 days ago. And something that comes up in Digital and conversations with investors is I suppose from our peers, the GE. It's just Nevada. I want to be clear that non-Nevada as a piece of Digital and I'm not going to get super specific. But more than 80% of our Digital business is non-Nevada. And we will be EBITDA-positive this year, we remain on track to generate the 50% return on the $1.1 billion of cumulative losses that we generated, as we launched the business. I still expect that to be a 2025 event, with the hope that we're run rating that level by the fourth quarter of '24. So I want to get out of -- I know these calls tend to focus on right now next 90-days. I want to -- I want you guys to know how do I think of the business from a longer-term perspective and I want to couch this with this as not guidance, as most of you know, I'm pretty transparent. So this is what I see today. When we took over Caesars, the assets that we own today the brick-and-mortar assets, we're doing $2.9 billion of trailing EBITDA. As we look post first quarter, the Vegas business LTM EBITDA Vegas alone is a little over $2.1 billion. Regional is a little less than $2 billion. When you run through managed and corporate, we're right at about $4 billion of EBITDA from the same assets that we're doing $2.9 billion prior to the merger. We've got about $2.4 billion of operating cost, cash outflows between rent, cash interest expense, maintenance CapEx, so about $250 million shares outstanding that's about $750 of free cash flow per share as we sit here today. The Digital business for now seven months is about breakeven. So obviously inflecting to positive. We've told you what we expect that to do through ‘25. In that same timeframe, I think we've got a similar amount of incremental EBITDA that will come through the brick-and-mortar business. So, piece of that is -- piece of that are the projects that Anthony touched upon, you've got the Lake Charles expansion that opened in December. So we're still in the first-half of the first year post that reopening. We've got the Pompano project where the racetrack came out of the business. We expanded the Casino, we will start to see the JV development begin in earnest, it's already in earnest around the property, but you'll start to see pieces come online. We've got the Atlantic City spend, which is largely in the rearview mirror. This summer is the first prime period where we will not be significantly disrupted on our floors from those projects. So we're optimistic there. We've got the Hoosier Park expansion in Indianapolis, which is again a high probability, high ROI project mirrors what we did, of course, Indianapolis where we have seen returns in excess of 30% on that capital would expect a similar outcome in that Hoosier Park. And then you've got New Orleans, which is over $400 million. That will come online before the Super Bowl of ‘25. So towards the end of ’24, that's going to transform that property into a Caesars, a number of high-end restaurants. You've got a Caesars Tower that will be dropped right in the middle of the Casino. You've got a number of high-end food and beverage offerings, you've got third-party development across the street of Four Seasons Hotel open across the street within the last 12 months. So we're excited about what's possible there. So I think what we're looking at if you look out to ‘25, in my view, is a company that could be pushing toward $5 billion of EBITDA. As Bret said, we paid down $400 million mortgage note on the Forum Convention Center yesterday. That puts us on-track to pay-down over $1 billion of debt for the third consecutive year. I would expect ‘24 and ‘25 to look the same. So again, as we sit here today, you're at $22 billion-ish of lease-adjusted debt. That $4 billion of EBITDA with Digital flat. So you got about 5.5 times leverage. Just from what we do organically in the business, as I described that debt balance should get down to $18 billion and $19 billion against the $5 billion. So you're looking at -- in that scenario, you're paying down effectively 7% debt, $1 billion a year for three years. You're going to have some increase in the lease payment stream, but you're talking about $150 million less in cash outflows, $1 billion more in cash inflows. So you're looking more like $12.50 or more a share in cash flow. None of those assumptions in my mind seem particularly aggressive. I think we can generate an incremental $0.5 billion out of the brick-and-mortar given the momentum that we have in the business and I think we're going to do better than that. In Digital, and if you think of where that comes in Digital, I think you've got three legs of the stool and a third of it and they'll roughly be a third, a third, a third. You've got the existing sports-betting business continues to get more profitable, volumes continue to increase and you should expect that continues to drive positive EBITDA, that's the bulk of what's happening as you see us inflect the positive. Eric talked about the iGaming app that we will launch early in the third quarter. We're particularly excited about that, that's going to improve in particular our slot business in iGaming, because our existing portal is through a sports-betting app, our existing iCasino business leans toward tables more than our peers and iGaming forward app is going to change that for us. If we get our iGaming share to equal our sports-betting share that's going to be that third of the boost in EBITDA. And then as we've talked about numerous times, we've got partnership and talent agreements that come up in the next, let's call it, 12 months to 24 months that we expect will be the third leg of that stool that gets us to $500 million plus. Every time I speak to you, I'm more confident in those numbers. And every time I speak to you, we've outperformed where I thought we would have been 90-days ago. So that's obvious, thanks for indulging me to think longer-term, because I know we're going to get right back into what's the consumer doing right now and two weeks from now. And what I'll tell you is we continue to see significant strength across all of our assets with extraordinary strength in Las Vegas. So, we are exceedingly optimistic about the road ahead. We're particularly proud of the quarter that we just posted, so the idea that -- if you add back the 20 in Northern Nevada that we were nearly $1 billion in EBITDA in the first quarter, which is not typically a seasonal strong point. I'm really pleased and proud of what our team and our employees have delivered and look forward to the rest of the year. And with that, we'll open it up for questions.

Carlo Santarelli:

Hey, Tom. Everybody, thank you for the remarks. Tom, when you talked about kind of being positive year-to-date in digital and positive for the year, kind of, an odd-sounding question, but from where we are today, do you expect to remain positive through the year? Will we see a 3Q that likely embeds some spending ahead of the NFL season and then obviously harvesting that in the fourth quarter?

Carlo Santarelli:

Great, thank you. And then as it pertains to Las Vegas, obviously, second quarter is a tougher comparison with some larger groups that were meaningful in the 2Q last year out. As you think about the second-half of this year, as well as into next year, do you get the sense from kind of your mix shift and your group pace, coupled with kind of what you're seeing on the casino floor that you're able to kind of just shrug off what might be a little bit of a challenging comparison in 2Q and resume growth in the back half of the year?

Carlo Santarelli:

Great. Thank you, and then if I may, just one follow-up along those same lines. As you guys look out on the horizon in terms of bookings, and I'm talking more so towards leisure transient, et cetera., are you seeing anything across the market from a promotional perspective that has changed at all?

Carlo Santarelli:

Thank you very much.

Joe Greff:

Good afternoon, guys. Just starting with Las Vegas, Tom. Obviously, the 21% of occupied rooms in the first quarter relating to the group segment, that's a fairly significant jump and good to see. Can you talk about how group looks for the balance of this year? Is group pace, group room nights up in the aggregate 2Q through 4Q?

Joe Greff:

Great, thank you. And then on Digital, Tom, you had spoken earlier that your outlook is favorable just over the last 90-days. And I know you talked about some of the things that you're doing there. How much of that is a rationalized cost structure and the scale benefits in OSB? How much of that is related to iCasino and some of the things that you have done and will be doing this year?

Joe Greff:

Great. Thank you, guys.

Steven Wieczynski:

Yes. Hey, guys. Good afternoon. So, Tom, if I can I put you back on your soapbox for a minute? I want to get your opinion on a question we get a lot from investors. They always seem to want to know, they would want to ask and they just want to get the feel for -- is this going to be the best that Vegas ever is, especially as we kind of move through 2023 strong event calendar. So just maybe if you could opine on that as to maybe why that's not the case.

Steven Wieczynski:

And then, Tom, I know you said -- thanks for that by the way, that was very helpful. And I know you said you aren't giving guidance, but look, unfortunately, our investors are going to take your $5 billion math essentially as guidance for 2025. So I guess what I want to ask here is I assume your $5 billion math, just meaning the consumer stays pretty much where they are right now. But if you think about all those buckets, you laid out to get to that $5 billion. What would be the one bucket that you would say is maybe the most, I don't konw if it's the word most concerned about or the biggest stretch to kind of get there and hopefully, that makes sense.

Steven Wieczynski:

Okay, great. Thanks, Tom. I appreciate it.

Dan Politzer:

Hey, good afternoon and thanks for taking my questions. I wanted to touch on regionals, Tom. Could you talk about maybe the cadence over the course of the quarter and what you've seen into April? I know there's been some noise in terms of comparisons, both on a year-over-year and versus 2019 basis. But it sounds like the consumer is doing fine. So if you can maybe just provide some clarity or any additional color on that?

Dan Politzer:

Got it. And then Pompano, you mentioned this quickly in your prepared remarks. I mean this was a big JV project with a long-term time horizon that was supposed to be built out over time. You've had the casino expansion now come online. How should we think about maybe some JV equity cash flow distributions coming from this and the returns over time? And maybe even in the near-term, are you seeing any disruption as this bigger term -- bigger project gets built out?

Dan Politzer:

Got it, thanks so much.

Brandt Montour:

Hey, good evening, everybody. Thanks for taking my questions. So just a couple of more big-picture questions. Tom back to your last discussion. When you guys go through your longer-term scenario planning or stress testing or whatever you call it, wondering if you'd be willing to sort of update or refresh a bear case to that $5 billion longer-term planning.

Brandt Montour:

That's super helpful. Thanks for that. And then over at the three-legged stool for digital. If you could -- is it any way you could force rank those three legs, sort of from least challenging to maybe what you consider most challenging of the three? And then which of those three legs do you think we could be sitting here in a couple of years and you just sort of knocked the cover off the ball?

Brandt Montour:

Great, thanks for all the color.

Barry Jonas:

Hey, Tom. I really appreciate all the commentary on the three-year potentially where EBITDA and deleverage could get and some of the sensitivities. I'm just curious, where do things like New York, Dubai or sale-leasebacks fit in there? Is that cushion? Or is that even a potential upside?

Barry Jonas:

Great. And then just as a follow-up, I think MGM just announced an acquisition of an online game developer. Curious what your thoughts are for more investment on the content side, vertical integration or just digital M&A in general?

Barry Jonas:

Perfect, thanks so much.

Shaun Kelley:

Hi, good afternoon, everyone. Thanks for taking my question. Tom, just kind of wanted to run a high-level corporate finance question by you to get your take on it. But if we kind of think out a little further as we know you're doing internally as you think about these numbers, if we take this $12.50 of free cash flow, I mean, scratch math is that's about a 28% free cash flow yield. You're paying down 8% debt at the moment, moving probably closer to 7% debt in terms of what's going to be coming available at some point and just where your long-term cost of debt is? So at some point, when you can start to maybe turn the corner to '24, somewhere in here, probably when is that place where it makes sense to start expressing your view as it relates to that 28%? I.e., a different way of saying it, when you flip from paying down debt to buying back stock because one would think that yield is just -- it's just going to be too incredibly attractive to ignore?

Shaun Kelley:

Very helpful. Thanks. And then maybe just with my follow-up, just a quick update on kind of the union renegotiation, any impacts of that on the cost front. Assume that's obviously all factored into in general, the growth that you're expecting to still achieve in Las Vegas, but just how do you see that playing through appreciating that those types of things are specific negotiations are hard to comment on a public conference call?

Shaun Kelley:

Thank you very much.

Chad Beynon:

Afternoon, and thanks for taking my question. Tom, it appears that interest rate hiking acceleration has potentially slowed here, which would potentially spark some more M&A activity broadly in the space. So when you're thinking about these '24, '25 goals, not that you're running anything to be sold, but has anything changed just in terms of the number of assets in the regional markets, in Vegas that makes sense for kind of the future portfolio of Caesars? Thanks.

Chad Beynon:

Okay. Thanks, Tom. And then nobody has asked about potential impact, just overall benefits with DAs potentially moving to Las Vegas. Obviously, it should be a positive. As we've seen with other sports teams and just overall programming, but any additional thoughts in terms of what this would mean to Las Vegas, to your properties, to future growth? Thanks.

Chad Beynon:

Thanks, Tom. Appreciate it.

John DeCree:

Hi, everyone. Thanks for taking my question. Maybe just one or perhaps a two-parter. Tom or Eric, you talked about executing on iGaming with some key product enhancements on the horizon like that single app for iCasino. And I think you mentioned some additional marketing capabilities that, that would bring. But it might be helpful for investors to kind of understand what some of these product enhancements get you and what you'll be able to do specifically to generate some incremental revenue or start to execute in iGaming. If you could maybe elaborate a little bit more on that, that would be helpful.

John DeCree:

That's helpful, Eric. Maybe a follow-up question in terms of what you see. One of your big advantages is your customer database and without that single app, and you look at your penetration of that database for digital. Relative to your peers or expectations, is there a chunk of the database that you haven't really been able to get on board without that single app? Just kind of see if you have some visibility into what the opportunity is?

John DeCree:

That makes sense, Eric. I appreciate that additional color. Thank you.

Operator:

Thank you. Our next question comes from David Katz with Jefferies. You may proceed.

Tom Reeg:

I mean, this is a pretty unique project. We've got a tower that can be absorbed into a property that has higher room rate -- considerably higher room rate, considerably higher spend out of those rooms. And it has rooms that are existing that face the fountains across the street at Bellagio that have no windows. So what we can do here is a simple upgrade in terms of the rate that those rooms will get and then create on that side facing the strip, probably some of our most attractive non-villa product in the market. And it's very easy to run the numbers and see the returns there are quite strong. I'll tell you, there has yet to be a capital project with the returns of this one that took more than 30 seconds for us to approve. You're going to see us upgrade Flamingo in terms of its food and beverage, particularly its strip frontage. Food and beverage, but you're not talking about even the quantum of spend that you're talking about at Paris and Bally's. So I think there's a few one-off opportunities that are high ROI, but the great thing about our portfolio on the strip is it's all right at mid-field, right, at the 50-yard line. And the demand for that location is exceedingly strong and has been better than a generation. So we feel very good, and there's not a ton of capital necessary to maintain that beyond what we've done historically, but there are some interesting projects that can be additive.

Operator:

Thank you. Our next question comes from Stephen Grambling with Morgan Stanley. You may proceed.

Tom Reeg:

So on the brand, Stephen, let me tell you to wait for about 60-days and to have a further answer on that. But I like the way that you think. And then on Caesars Rewards, we've talked about play that was generated new to the enterprise through digital, into brick-and-mortar or reactivated customers. The last time we told you that number, it was about $200 million on an annual basis. Without getting into a specific number, I'd tell you, it's more than 50% larger than that today.

Tom Reeg:

No. I mean there is a contributing factor in what happens in the brick-and-mortar, the digital part of both, directly and indirectly, but there's nothing needs to happen that isn't already happening or on the horizon in terms of the projects.

Tom Reeg:

All right. Thank you, Stephen. With that, I'm going to let everybody go. Thanks for your time and attention. We'll talk to you next quarter.

Brian Agnew:

Thanks, Josh, and good afternoon to everyone on the call. Welcome to our conference call to discuss our fourth quarter and full year 2022 earnings. This afternoon, we issued a press release announcing our financial results for the period ended December 31, 2022. A copy of that press release is available on the Investor Relations section of our website at investor.caesars.com. As usual, joining me on the call today are Tom Reeg, our Chief Executive Officer; Anthony Carano, our President and Chief Operating Officer; Bret Yunker, our CFO; and Eric Hession, our President of Caesars Sports & Online Gaming. Before I turn the call over to Anthony, I would like to remind you that during today's conference call, we may make certain forward-looking statements about the company's performance. Such forward-looking statements are not guarantees of future performance, and therefore, one should not place undue reliance on them. Forward-looking statements are also subject to the inherent risks and uncertainties that could cause actual results to differ materially from those expressed. For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements, you should refer to the cautionary statements contained in our press releases as well as the risk factors contained in the company's filings with the Securities and Exchange Commission. Caesars Entertainment undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after our call today. Also, during today's call, the company may discuss certain non-GAAP financial measures as defined by SEC Regulation G. the GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company's website at investor.caesars.com by clicking on the press release regarding today's fourth quarter financial results. I'd like to turn the call over to Anthony.

Eric Hession:

Thanks, Anthony. I'm very pleased with the progress that we made in our Digital business during 2022. If you recall, our objective is to drive a solid return on investment for our shareholders as our business grows and matures over time. Our thesis was grounded on a reasonable TAM and early estimate and effort to build our brand awareness and harvesting the benefits of a very scalable business with a high portion of fixed costs. The key to taking advantage of scale in a mostly fixed cost business is to drive improvements in net revenue. Net revenues for sports and online are primarily determined by a combination of volume, hold and offset by the cost of promotions. I'm pleased that in Q4 year-over-year, our volume was up 7%, hold up 100 basis points and promotional expense down 43%. The combination of these three metrics resulted in us reporting the highest quarterly net revenue results to date growing by over 100% year-over-year and the smallest adjusted EBITDA loss since rebranding to Caesars Sportsbook in August of 2001. On the sports betting side, we continued to focus our product and technology improvements on the overall experience for our customers. They responded very favorably to the improved in-game parlay product enhancements, the in-game wagering improvements, streaming technology and the introduction of live scores. During the quarter, we also started to see the results of our segmented marketing campaigns that allow us to reward customers more directly for their loyalty and play. As referenced earlier, these efforts were direct contributors towards our net revenue growth as they allowed us to improve our promotional spending efficiency. We anticipate continued enhancements in this critical area over the course of 2023. On the Isle Casino side, work is well underway toward creating a significantly improved product experience for our customers that will be rolled out in the second half of 2023. The new product experience will also include enhanced marketing capabilities, such as segmented and life cycle triggered offers, which we currently do not have for iGaming. In the meantime, we continue to add new content, which has been well received. iGaming remains a critical component of our digital growth strategy for 2023 and beyond. From an expansion standpoint, in Q4, we opened retail locations in Puerto Rico and Kansas and launched online sports betting in Maryland. In addition, on January 1, we launched sports betting online in Ohio and retail. We now offer sports betting in 29 North American jurisdictions, 21 of which offer mobile wagering. We plan to launch our mobile sports app in Massachusetts later this week to accept registrations and deposits. And pending final regulatory approvals, we anticipate accepting wagers starting in mid-March. I'll now pass the call to Bret for some additional comments on Q4 and the full year.

Tom Reeg :

Thanks, Bret. And on the financing piece, I know these calls end up skewing to the equity markets, I want to thank our banks and our credit investors. We've been at this for about nine years now as a public entity and have gone through a series of acquisitions, a series of financings. And every time we ask the debt markets to step up for us, you step up and strengthen numbers well beyond expectations; in this case, allowed us to upsize by $1 billion and start dealing with '25 maturities. In advance of when we expected, know that, that's not taken for granted that we really do appreciate you believing in us each time we come to market. You should expect that we'll be back to deal with the remaining '25 maturities at some point after the call steps -- the calls step down in the middle of this year. In terms of operating results for the quarter since we already pre-released, I'll make a few comments on last quarter, but I'll focus on what's going -- what's going on in January and February so far. In Digital, as you saw in our results, we were nearly breakeven. Our well-publicized MLB exposure around the World Series was about a $30 million swing. So on a hold-adjusted basis, we are well into the positive in the fourth quarter. First quarter, we launched Ohio. Given the launch cost there, you should expect a modest loss in the first quarter. But we're anticipating that Digital on a full year basis will be an EBITDA contributor for us this year. And when I say that, I'm talking about overall and both verticals, I expect sports betting and iGaming to be EBITDA positive this year for us. When we started this Digital launch about a little over 1.5 years ago, we told you that cumulative EBITDA losses would be something north of $1 billion. Looks like they're going to finish at somewhere a little over $1.1 billion. We expect at maturity that we’ll generate in excess of 50% of that in annual EBITDA out of the Digital business. That has not changed at all from when we launch remains in our sites. We'd expect to be generating that level of EBITDA full year of '25. We're hopeful we'll be run rating at least a quarter or two in '24 at those levels. So the switch to getting out of brand building, getting out of advertising in terms of big expense of commercial, as you noticed you didn't see us at the Super Bowl, but more importantly, the granular changes in individual marketing have slowed dramatically. This is the quarter when we launched New York and Louisiana last year. So you're going to see over $0.5 billion of trailing EBITDA losses in Digital disappear this quarter. January alone, on a consolidated basis EBITDA improved over $450 million for the month. So obviously, there's going to be a significant change in trailing credit statistics that we're excited for. In the brick-and-mortar arena, the business remains exceedingly strong. Consumers continues to spend. Regionals continue to do well. The only thing I can point to really in terms of weakness is weather related in the fourth quarter. I peg about $20 million of lost EBITDA in December, primarily in the Midwest, but kind of throughout the Regional business. First quarter, you've got Northern Nevada has been inundated with snow. It's the worse winter in about 70 years. So the -- you've got a little bit of impact there. But despite that, our Regional business grew in the fourth quarter. It continues to grow in the first quarter. And as Anthony said, we have pieces that are coming online that will add to that. I was at the Lake Charles opening in December. Really pleased with the way that product turned out. If you look at how it's been doing since opening, I'd expect that our incremental EBITDA on the spend is going to be in excess of 25% on a gross basis. But recall that we had insurance proceeds there from the disruption of the original property. So on a net basis, our ROI there should be approaching 50%. So extraordinarily strong in Lake Charles. We're excited that we've got temporary casinos coming in Danville, Nebraska. We've got the Indiana project coming online in the back half of the year. The Atlantic City spend largely done, should be done by the time we hit prime season. So really excited for the way '23 sets up for us from a regional basis. Vegas, it's hard to express how strong Vegas is right now. Occupancy in January for us was up over 1,700 basis points versus Omicron impacted '22. We're off to on a consolidated basis and in Vegas, in particular, an exceedingly strong start to the first quarter. But recall that in the first quarter, the back half of the quarter tends to be more important than the front half. But as we look at forward bookings in Vegas, they're strong and getting stronger. March sets up to be one of the best months that we've ever had in Las Vegas. Forward bookings are strong, group attrition is declining so that we are now seeing group business in excess of 2019 numbers for the first time it looks that way going forward and all of our forward indicators for booking look very strong. So as we sit here today, it feels -- the business feels fantastic. And with that, I'll open it up to questions.

Joe Greff :

Tom, just wanted to dig a little deeper into your Las Vegas Strip group and convention commentary. Based on pace and/or what is booked presently, can you talk about room nights by quarter for this year and how it compares to each of the quarters in 2022, really kind of focusing more on the second quarter and the second half of this year, so I could understand the first quarter strength?

Joe Greff :

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

Operator:

Our next question comes from Carlo Santarelli with Deutsche Bank.

Bret Yunker :

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

Tom Reeg :

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

Tom Reeg :

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

Barry Jonas :

Tom, are you surprised at how resilient the consumer has been? Anything you think could explain it? And then just as a follow-up, as you think about digital versus land-based players, where do you expect to see more recession or macro resistance?

Barry Jonas :

That's great. And then just a follow-up was I'm curious to get your thoughts on the digital versus the land-based player. Obviously, there's some overlap. But as you think about a recession or some macro hits which player do you think would be more resistant?

Operator:

Our next question comes from Steven Wieczynski with Stifel.

Toms Reeg :

Yes. Your last question, there is -- no. In terms of unrated, you saw -- we saw a material step down in unrated as we anniversaried stimulus, but that's behind us now. And you've seen the results, including the fourth quarter and into the first quarter. So unrated kind of peaked when stimulus checks were going out. rated continues to behave strongly and on rate still is holding in after that initial stepped up.

Tom Reeg :

That's over and done with. That's a technology issue. We're running Nevada on old technology, not Liberty. Liberty needs approval. It's actually the PAM provider that needs approval. We expect that relatively soon, and so we expect Nevada to be on Liberty for next football season. So that's certainly not something that we were -- that we enjoyed while it was going on, but it's in the rearview mirror at this point.

David Bain :

Great. First, I was hoping we can get a little bit more granular on the potential iCasino ramp in the back half. Just trying to get an idea of major tech improvements like sufficient slot content for churn when that kicks in, how important that is? Maybe any other major catalysts that move the needle in terms of share there because certainly doesn't look like with the EBITDA guidance -- and thank you for that by the way, it doesn't seem like that includes a lot of big cash promotional push.

David Bain :

Okay. Awesome. And then just kind of -- I think this will bleed into Eric, your comments just now, but Tom, in the past, you've given us data points on land-based contributions from online, I believe, sometime last year around this time, it was $150 million of high-margin revenue. Could we get an update on how that's trending now? And in terms of the omnichannel marketing approach, are there some specific plans you can share to sort of ramp that for more valuable customer acquisition and loyalty?

Operator:

Our next question comes from Daniel Politzer with Wells Fargo.

Tom Reeg:

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

Tom Reeg :

Sure. Yes, it's all of the above. So it's continued momentum from what we're doing here. You've got a business that's growing organically and has added a bunch of states, some more recently than others. We're -- there doesn't appear to be a huge new state pipeline coming on. Obviously, we've got a significant ramp expected in iGaming as we get into back half of '23. And then you do have all of that, the original partnerships that were stuck in that should be rolling off starting in '24, '25 on and some of the chunkier ones that flow directly to EBITDA as they run off.

Shaun Kelley :

I just want to follow up on that last question around online. Could you help us just give us any thoughts on kind of the underlying margin structure there? A number of people who have given some formal targets that talked about a 30% overall style contribution margin, what would be underlying the targets that you kind of laid out as you start to get out into '24 and '25? Would it be to that? Can you do even better given some of your own in-house capabilities? Just kind of how would you think about the puts and takes relative to some of the margin goals that have been put out there by others?

Shaun Kelley :

Got it. And then sort of just wanted to pivot on the land-based side, too, maybe just the cost environment a little bit. We're starting to hear a number of operators on the hotel side, talk a little bit more about sort of cumulative inflation over the last three and four years. A little bit of a different animal in Vegas. I know Caesars has a decent amount of union contract as well, which probably provides some visibility. But can you just discuss about the overall labor and hiring environment and then specifically maybe drill in on any upcoming union contracts and how that might -- how any negotiation there might impact the operating expense?

Operator:

Our next question comes from Brandt Montour with Barclays.

Tom Reeg :

Yes. So Brandt, we've seen a significant lift in demand as we measure it in terms of forward bookings in the last few weeks. As I said, March is setting up for one of the strongest months we've had certainly from a rate and occupancy standpoint. As you get toward the back half of the year, you're comping against quarters where we were full, so you're going to see more of a rate lift. It's really the first half of the year that has benefited in filling in occupancy that wasn't there in '22, primarily midweek.

Tom Reeg :

I think it will be a mix of both that will tap into our own network, but that also there will be some market share gain as well. You've seen even in this environment where we've not been aggressive at all from a promotional perspective. I'd go back and look at what's happened in Illinois market share for us. You see us continuing to class share. We're certainly still nothing to write home about. But when you give the customers a better product, we've got a lot of customers that are that lean towards doing business with us if we've got the right product. And we think that we're going to be there shortly, and we'd expect similar experience.

Chad Beynon :

Eric, you mentioned hold was up, I believe, 100 basis points in the fourth quarter. And I'm guessing that was a combination of game outcomes, but probably more importantly, game mix with single game parlays and the like. Can you kind of help us think about structurally what's happening with withhold, kind of where your single game parlay and maybe in-play product is against where you want to be and maybe your peers, and if you think this will have a positive outcome for 2023, particularly as we get deeper into the year?

Chad Beynon :

And then separately, can you just update us on in terms of the size and scope, I guess, the spend in New York for a land-based casino and maybe the timing for that opportunity when we'll find out the next steps?

Operator:

Our next question comes from John DeCree with CBRE Securities.

Tom Reeg:

Yes. I would say you should expect a more normal year of seasonality in Vegas this year where early in the year, your soft ramp up in the kind of right about now in the first quarter, and that goes until it gets really hot here. Third quarter is the seasonal slowest point. Fourth quarter, you've got November is typically your slowest month of the year, but that's when F1 will hit this year. So I think you get that bump that we talked about earlier in Joe's question.

Tom Reeg :

Yes. I'd expect with full-on group business with FORUM operating, I think you should expect us to continue to creep higher into the high teens in terms of percentage of overall room next year.

David Katz :

I wanted to go back to the subject of prospective asset sales and where you think the credit markets are in terms of support for that, both within and perhaps outside any pre-existing put calls or ROFRs, et cetera?

David Katz :

Understood. So if we can just sort of focus on the potential opportunities that are contractual obligations. Are those factored into your thinking for this year and next? I know Bret talked about getting to a leverage level by the end of next year that I think was sub 4 was suggested, if I heard correctly?

Operator:

Our next question comes from Stephen Grambling with Morgan Stanley.

Bret Yunker :

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

Bret Yunker :

I said, 300 and 500.

Stephen Grambling :

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

Tom Reeg :

All right. Thanks, everyone. We'll talk to you at the end of the quarter.

Brian Agnew:

Thank you, Elizabeth, and good afternoon to everyone on the call. Welcome to our conference call to discuss our third quarter 2022 earnings. This afternoon, we issued a press release announcing our financial results for the period ended September 30, 2022. A copy of the press release is available on the Investor Relations section of our website at investor.caesars.com. Joining me on the call today are Tom Reeg, our Chief Executive Officer; Anthony Carano, our President and Chief Operating Officer; Bret Yunker, our Chief Financial Officer; and Eric Hession, President, Caesars Sports & Online Gaming. Before I turn the call over to Anthony, I would like to remind you that during today's conference call, we may make certain forward-looking statements about the Company's performance. Such forward-looking statements are not guarantees of future performance and therefore, one should not place undue reliance on them. Forward-looking statements are also subject to the inherent risks and uncertainties that could cause actual results to differ materially from those expressed. For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements, you should refer to the cautionary statements contained in our press release as well as the risk factors contained in the Company's filings with the Securities and Exchange Commission. Caesars Entertainment undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after today's call. Also, during today's call, the Company may discuss certain non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the Company's website at investor.caesars.com by selecting the press release regarding the Company's 2022 third quarter financial results. I will now turn the call over to Anthony.

Eric Hession:

Thanks, Anthony. Our digital business reported revenue growth of over 120% and a smaller-than-expected EBITDA loss in the quarter. On the sports betting side, we recently started to realize the benefits from the efforts that we've made over the summer to improve the overall experience for our customers, specifically improvements in cash out speeds, customer service response times and our in-play parlay and alternative line offerings are all being well received by our customers. We've also created several analytical tools that provide real-time assistance and insights for our trading team allowing them to expand the number of markets we offer to our customers and to be more responsive during in-play trading sessions. As a result, our hold volatility has declined and our overall expected hold levels have increased. During the quarter, we also began to see the results of our initial segmented marketing campaigns that allow us to reward our customers more directly for their loyalty and play with us. These efforts contributed towards our net revenue growth as they allowed us to improve our promotional spending efficiency. We anticipate continued enhancements in this important area over the course of 2023. On the iCasino side, we hired a new leader for the vertical who started on October 1st. In conjunction with our tech team, we have an aggressive product improvement road map identified with numerous enhancements for our customers that will be rolled out as completed with a full product targeted for the start of the second half of 2023. iGaming remains a critical component of our digital growth strategy. From an expansion standpoint, during the quarter, we launched our online sports betting product in Kansas and upgraded our tech package in Illinois, Pennsylvania and Washington, D.C. to our most current version. We now offer sports betting in 27 North American jurisdictions, 19 of which offer mobile wager. In Q4, pending regulatory approval, we anticipate launching online sports betting in Maryland and on January 1st in Ohio. In addition, we plan on adding two new third-party retail locations during the quarter. With that, I'll turn it over to Bret for some additional comments.

Tom Reeg:

Thanks, Brett. I'm going to touch a little further on the quarter, and I want to talk about October as well. In Las Vegas, very strong results in the quarter. Normal seasonality returned to Las Vegas in the third quarter. We also had a couple of headwinds that I would call out. And utility expenses for the quarter were extraordinarily high, particularly August, and we had the finish of the construction of the entrance, which caused some construction disruption. If you look at the impact of the two of those and add it back, you would end up a little bit ahead of last year on an EBITDA basis and similar from a margin standpoint. As you look into October, October was the strongest month in the history of Las Vegas for Caesars. We did over $200 million of EBITDA in October, which is up double digits versus last year on a consolidated basis. October EBITDA for bricks and mortar is pacing double-digit percentage above last year's October despite having one fewer weekend day in the 2022 period. Regional is obviously quite strong as well. It had a little bit of a margin improvement there. Strongest third quarter that we've ever had in regionals. And then we've got -- as Anthony touched on, we've got Lake Charles coming. We've got temporary casinos in Columbus, Nebraska, Danville, Virginia that will hit next year. We've got the completion of the Atlantic City spend as well and the Harrah's Hoosier Park in Indianapolis -- outside Indianapolis should finish by the middle of next year. So, a number of tailwinds, cash that you allowed us to invest as shareholders that you're going to see the fruits of going into the rest of '22 and into '23. I'd also like to touch on the strip asset sale and say that we intend to keep all of our strip assets as we move forward. We ran into a market where the cash flow of the asset continued to increase the ability of buyers to raise financing, made it a very easy decision for us to keep. I know that despite us talking about how this is and was a discretionary process for us, it created an unnecessary overhang in the stock. And I apologize to all of our shareholders for that. That was a self-inflicted error and that was me. So, we will be keeping our Vegas Strip assets as we move forward. In Digital -- October Digital inflected to positive EBITDA for us. So, we are extremely pleased that's 12 months ahead of the schedule that we anticipated. I think most of you are aware, we've got a fairly high profile liability out there with the Astros. So that will have -- that will be a swing factor in whether fourth quarter is positive as a whole, but we'd expect that we have inflected, and Digital will be a contributor as we move forward. So that's extremely exciting news for us. Great work by Eric and his team in Digital, and thank you to all of our shareholders for the capital to invest in that in Digital and the patience as we work through it. We continue to believe that on our $1.1 billion of cumulative EBITDA losses that maturity, we'll be doing in excess of 50% of that in annual EBITDA out of Digital. That business continues to outperform our expectations and really, really inflected over the last 60 to 90 days. So, we are quite pleased with that. With that, I'll flip back to the operator for questions.

Carlo Santarelli:

Hey guys. Good afternoon. Tom, I appreciate the commentary on Digital. Could you talk a little bit about how you foresaw or foresee going forward, the promotional environment, perhaps based a little bit on your experience in the 3Q as well as what you saw in October as we're now in the kind of the meat of football season. And then further, let's set aside the World Series liability, could I take your comments to kind of infer that perhaps next year, you're looking at a positive EBITDA contribution from Digital?

Carlo Santarelli:

Yes. I have noticed the latter personally. Thanks Tom. I appreciate that. And then just one follow-up. From the regional perspective, obviously, results were good against a difficult comparison. It looks like you guys were able to more or less keep OpEx kind of ex gaming taxes to the best of our estimation, flattish. Are you kind of where you need to be? Are there any pressures that are kind of creeping there that we need to be aware of outside of traditional labor inflation, things like that, or is this a pretty good run rate in terms of OpEx?

Operator:

Our next question comes from the line of Joe Greff with JP Morgan.

Tom Reeg:

Sure, Joe. As you look at current business, you've got for us, what is a sports-dominated business at this point inflecting to profitability. Obviously, we have significant opportunity in front of us in iCasino. We think we now have the right leadership in place to attack that. So, we think that will grow from what's a fairly small contributor today, into a much more meaningful contributor. But, what I think you're referring to is as we launch, and this is not unique to us, this is throughout the entire digital space. There were a number of partnership deals signed up with media partners, with teams, with leagues that all kind of run 3 to 5 years. In our case, from let's say, the middle of last year. So you'll have some running off in a year, you'll have more running off over the next three years. And you'll look at -- there were assumptions made in terms of what you were willing to pay for those sponsorship opportunities -- those partnership opportunities that were based on customer generation, new customers to your platform. Obviously, we've got much more data today than we had before, and you're not going to be in virtually all of these cases in a launch situation anymore. So for us, that's something that runs in north of $200 million of annual expense. And you should expect as though -- and for now, that's a fixed expense for us. As long as those contracts are in place, you should expect some of them will live in a form that may not be as expensive as it is today. A fair amount of those will go away entirely, and that should flow straight to EBITDA for us if you're looking out in that ‘24, ‘25 timeframe that you laid out.

Tom Reeg:

Bret will take corporate expense. I'll take Vegas.

Tom Reeg:

And for Vegas, Joe, if you normalize utilities, which was primarily rate in August alone, that's virtually the entire gap between Q3 of '22 or Q3 of '21. And then you have the construction disruption as well. To give you an idea, October on a preliminary basis, Vegas EBITDA margin was about 52% for us.

Steven Wieczynski:

So Tom, you just mentioned that Vegas did, I think you said $200 million in EBITDA in October. And I guess, the most simplistic way I can ask this question is, should the quarter end up being $600 million in EBITDA? And I guess what I mean by that is, obviously, with -- there's some holidays coming up and what not, I just want to make sure that expectations for the fourth quarter are rightfully set at this point. And hopefully, that makes sense.

Steven Wieczynski:

Okay. Perfect. And then second question, Tom, on the Digital side of the business, and clearly, there's been some significant progress made here in terms of getting that segment profitable. And I guess my question is -- or maybe give us your updated kind of thoughts about, down the road, do you see any kind of scenario where you would want to potentially spin this business off at some point? And I understand there's probably a lot of value here with the business being tied so closely to the brick-and-mortar side. But just wondering if that would possibly make sense at some point down the road to help the leverage side of the equation.

Operator:

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

Tom Reeg:

Yes. Sorry, what I'd say we're doing differently is we've had most of our market torn up during the peak season. So, we've had rooms out of service, both at Caesars and at Harrah's. And obviously, the intention as we began the project was that would be finished prior to peak season of '22 and for -- there's obviously a well-known story of what's happened to -- what happened to supply chain, and we missed the peak season. So really, the results you're seeing in Atlantic City are a function of the construction disruption that we've had going on in that market, that's not a -- we're making a conscious decision to run off revenue and focus on margins. So, Atlantic City on a relative basis to the Regionals was an underperformer. In terms of overperformers, New Orleans has come back quite nicely from both the hurricane and the severe COVID restrictions that were in place in the city, and then Northern Nevada continues to be extraordinarily strong, the levels of business that we're doing in Reno and Tahoe are, frankly, beyond what we ever dreamed when we were putting this thing together a few years ago.