Ladies and gentlemen, thank you for standing by and welcome to the Caesars Entertainment Inc 2021 First Quarter Earnings Conference Call. At this time all participants’ lines are in the listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I would now like to hand the conference over to Brian Agnew, Senior Vice President of Corporate Finance, Treasurer and Investor Relations. Thank you. Please go ahead.

Thank you, Erica, and good afternoon to everyone on the call. Welcome to our conference call to discuss our first quarter 2021 earnings. This afternoon we issued a press release announcing our first quarter financial results for the period ended March 31, 2021. 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; and Bret Yunker, our Chief Financial Officer. 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 in 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 2021 first quarter financial results. I will now turn the call over to Anthony.

Thank you, Brian, and good afternoon to everyone on the call. We are very pleased with our quarter. Thirteen of our properties had EBITDA records in Q1, and we had EBITDA margin records in Q1 with 20 properties achieving all-time EBITDA records in March, including four of our biggest properties. Turning to Las Vegas, we generated $161 million of adjusted EBITDA in the quarter and $172 million of property-level EBITDA, excluding rent payments. EBITDA improved significantly on a quarterly sequential basis. March was our strongest month, where we generated approximately $90 million of EBITDA excluding real rent payments and achieved an all-time EBITDA margin record of 43%. Total occupancy for Q1 was 63% with weekends at 85% and mid-week at 52%. March total occupancy was 77% and April was 84%. Weekends in Las Vegas are sold out for the foreseeable future. Finally, casino mix as a percentage of our occupancy was approximately 40% during the quarter. Looking ahead, we remain encouraged by booking trends for the second half of the year. Group and convention room nights on the books for the second half of 2021 versus 2019 are currently pacing up approximately 20%, and we're observing good rate growth as well. Group revenue for 2022 on the books is pacing up approximately 15%. Caesars Forum has booked over 165 events, 1.6 million room nights, and $633 million of revenues, with 80% of this business being new to Caesars. We're very optimistic regarding the remaining three quarters of the year in Las Vegas and the return of the group and convention business, as well as entertainment offerings that will drive incremental demand to the market. Now turning to our regional markets, operating results improved significantly compared to Q4 of 2020 trends. Year-over-year, regional revenues were flat, and adjusted EBITDA was up 69%. Looking back to Q1 of 2019, revenues declined 14% while EBITDA was down 4%, resulting in EBITDAR margin gains of approximately 600 basis points. In March of 2021, revenues for the consolidated regional portfolio declined 10% versus 2019, but adjusted EBITDA was up 5%. In our regional non-destination properties in Q1 2021 compared to Q1 of 2019, excluding Lake Charles, which is closed, revenues were down 8%. However, adjusted EBITDA was up 16%, and adjusted EBITDA margins improved by approximately 800 basis points. Our regional destination properties are also showing encouraging trends. Adjusted EBITDA for this group of properties improved by 110% on a quarterly sequential basis, and margins improved by 980 basis points. We expect to see continued improvement for these properties over the last three quarters of the year. I am extremely proud of our operating teams and their execution during the first quarter, and I believe our operating philosophy will continue to lead to sustainable improvements in adjusted EBITDA margins going forward. We are excited about the remainder of the year and look forward to sharing our progress with you on future quarterly earnings calls. With that, I'll now turn the call over to Tom.

Thanks, Anthony. Since we last spoke, we closed the William Hill transaction. It took a little longer than expected in the court hearing, but we achieved the outcome that we wanted, and now we control our own destiny in what I believe is an extraordinarily exciting opportunity for the company. I want to recognize Joe Asher, who built the William Hill business and we got to know each other well in the original partnership. As many of you know, I have done a number of deals during my time as a public company executive and even put together that original partnership without meeting Joe until the licensing hearing where it was approved. Joe built a phenomenal business from very little in the U.S., and we're excited to build on the foundation that he and his team have laid as we move forward. In the quarter, the combined business achieved approximately $150 million of revenue with positive EBITDA, despite the limitations of the transaction due to UK rules. That limited our ability to invest aggressively in certain markets. William Hill had some underperforming brands in several markets that we didn’t feel justified investing heavily in. With the UK parent and investor mindset being more cautious towards leverage, they were not as aggressive as we expect to be in this sector. Hence, acquiring William Hill was essential for us to take control of our destiny and access the necessary capital to invest effectively in the business. We expect to roll out the Liberty platform in jurisdictions where it has not yet been implemented by football season. We plan to rebrand our sportsbooks with Caesars and integrate our app into our Caesars rewards database. Upon analyzing the market, we are optimistic about our potential given that we believe there's a correlation between spending and market share. We have observed that our competitors have successfully transitioned from a position similar to William Hill's to dominance in their markets. We realize that significant investments in technology and customer acquisition will be needed, and you can expect a marked shift from us as we close this transaction and move ahead. Though we report our quarterly numbers like any other quarter, they don't fully convey the story this time. We had anticipated demand growth which is happening as we aided recovery. March EBITDA saw an uptick, setting the stage for April. While there was initial concern that post-pandemic demand for casinos might dwindle as other options became available, we predicted that segments of customers who were initially resistant would return and drive an increase in business. The preliminary results for April show we generated over $300 million in consolidated EBITDA, which exceeded the previous year's numbers by more than 25%. Our consolidated margin was over 37%, which represents a 1,000 basis points increase compared to 2019. In April, Vegas's table-hall percentage was 9%, which historically is considered low. Despite the low table hold, Vegas has set another record in EBITDA margin for the market at 43.5%. Adjusted for hold in the quarter, Vegas's EBITDA margin was nearly 47%. Our regional run-rate EBITDA is currently over $2.5 billion. The destination markets, as Anthony mentioned, are rebounding notably. For example, Reno experienced its third-best month ever in April. I should mention, though, that Easter fell in April this year, which isn't typically a strong month for the casino business. We expect occupancy in Vegas to rise beyond April's 84% as we proceed into May and June. Looking at individual property performance in April, we had 36 properties in our portfolio that exceeded a 40% EBITDA margin, with 14 properties crossing the 50% EBITDA margin mark and one exceeding 60%. As a result, at our current run rate, we are generating over $100 million in free cash flow monthly. Now, I'll pass it on to Bret for an overview of our liquidity and capital.

Thanks, Tom. Given everything that Tom and Anthony just covered, it should come as no surprise that we will begin to aggressively pay down debt. Over the next 12 months, we intend to repay at least $2 billion in debt, and this will ramp up as we move further into 2020 and look to divest a strip asset. This initial $2 billion debt repayment assumes a conservative sale price for William Hill's non-U.S. assets, with that transaction closing in the next 12 months. Importantly, this strategy will not hinder our ability to invest in our physical properties or our online business. With the integration of William Hill U.S. now official, our capital expenditure for the 2021 calendar year will be between $400 million and $450 million, excluding expenditures in Atlantic City and Lake Charles, which are covered by escrow and insurance proceeds. With that, I'll turn it back to Tom.

Thanks, Bret. Not providing guidance, but I expect a quarter with at least $1 billion of EBITDA in 2021. I anticipate that by 2022, we will be at worst below 5 times gross lease adjusted leverage with a reasonable possibility of being below 4 times. On the sports side, I won’t make any daring predictions about where we’re headed. We will focus on executing effectively at present. Our operational expertise is second to none in this industry. We feel exceptionally positive about our prospects. I'll now turn it back over to the operator for questions.

Your first question is from Carlo Santarelli with Deutsche Bank.

Hey, guys. Thanks, everybody for the comments. Tom, just kind of picking up on some of the commentary you made there toward the end. As you think about the demand that you're seeing obviously right now in Las Vegas and in your regional assets and acknowledging the view that you believe there's still more to come with some of the older demographics coming back, and even if some of that younger demographic were to go away, that that gets offset. And you look at kind of the $1 billion a quarter this year that you do expect to print; I'm assuming that's a consolidated after a corporate number. If you want to clarify that, is there any reason why the organization can't be beyond kind of – or give away a $4 billion number as soon as 2022?

So yes, that's a consolidated EBITDA number after corporate, and I would be disappointed if 2022 was less than $4 billion of EBITDA.

Okay, great. And then just as a follow-up right, you talked a little bit about the contemplation of the $2 billion of debt pay down and the expectation that I think you'd classify as a conservative multiple, but assuming that the transaction does get done. As you think about the timeline to get that sold and how long it will take to close and stuff. When do you think you realistically have to have a deal in place to kind of get William Hill international buttoned up within the next 12 months?

Yes. We expect to launch the sale process by the end of this quarter, announcing a buyer in late Q3 or early Q4, and have that closed within 12 months of today.

Your next question is from Joe Greff with JPMorgan.

Hey guys. Tom, you sort of talked about this in general tone. But when you were thinking about the U.S. sports betting market, how specifically do you plan on it on attacking? And when you think about your competition and maybe the guys down the street from you MGM is sort of more likely like you in sports betting or the sports betting opportunity, they are not like you. I mean, are you looking at sort of a similar type of shared objectives as they've talked about, or how do you see this play out for you? I know it's you sort of had been previously constricted in terms of talking with specificity with the integrating William Hill? Thank you.

Yes. Joe, I like the assets that guys like us and MGM have to play. We have the largest loyalty database in the business. We have a fully immersive experience, and in our case, a fully vertically integrated tech stack, which makes us effectively the low-cost producer. We should be able to acquire customers at a competitive cost or one of the lowest in the business. Additionally, we are generating over $100 million a month in free cash flow to invest aggressively in this business moving forward. Therefore, you shouldn't expect us to be just spending money to buy market share. Instead, you should anticipate a thoughtful buildup of this business now that we have everything aligned.

Great. And you touched on this a little bit about asset divestitures and the one non-U.S. asset. Can you update us on your thinking in terms of divesting a strip asset relative to previous commentary given that you're right in that market?

We remain convinced that it does not make sense for us to market an asset until we can market it based on its cash flow, rather than a projection of what we think it can achieve. That indicates a 2022 event for marketing and sale endeavors. I want to clarify, I have encountered several rumors this quarter; however, there are no active discussions on any Las Vegas assets as I sit here today.

So when you were doing $1 billion of consolidated quarterly EBITDA at some point in 2021, is that – is that sort of the timing of when you would commence?

Yes. I would view it this way, Joe: what we have observed since the pandemic ended is a surge in business as the economy reopened. In 2021, we've seen an influx of revenue in regional markets which have been performing exceptionally well, showing increases of 10%, 15%, or even 20% more in revenue and a doubling of EBITDA compared to 2019. What we have not yet witnessed is if the wave of demand really rebounds and when that will occur, as that will determine when we optimize what we can generate.

Your next question is from Shaun Kelley with Bank of America.

Hi, good afternoon, everybody. Sorry, can you hear me okay?

Yes.

Good afternoon, everybody. Tom or Bret, I just wanted to ask about the sequential flow through that we saw in this quarter. If we're looking at our model correctly, it does look like in both Vegas and regionals, your operating expenses were down while your revenues were up. It's a significant reaction that you get, and I appreciate you've already addressed this. But are you seeing sequential opportunities and is it due to contracts rolling off, or did you execute strategies that you couldn't apply last year which drove some of that efficiency? I'm just curious.

Shaun, I would say, I know that we were the most optimistic about what we could do once we closed Caesars Entertainment. What we have found since getting into this is beyond our wildest expectations. Part of that is undeniably pandemic-related which forced us to move faster than we would have liked, resulting in accelerated savings we would have otherwise captured. We have had tremendous buy-in from the existing Caesars management team, and the execution from our team has been seamless. This has been, without question, the best transaction we have ever undertaken.

Great. Maybe just to switch gears if you could. Can you provide a sense of your investment in customer acquisition moving forward and your digital opportunity? Some of your competitors are making huge investments, do you feel you can operate in a different way? What sort of guideposts should we consider?

The former William Hill struggled particularly in last football season as they were constrained by the timing of signing and closing the transaction. Given our discipline in deploying capital and understanding we need to invest sizably, we believe we can do so more efficiently because of the strengths we bring to the table. We have faith in our abilities and our experience within the industry, so you should expect us to remain cautious but aggressive in our strategy moving forward.

Hi. Good afternoon, guys. Tom, you provided us with a lot of data to digest, but I want to clarify a couple of things. You've always aimed for a 40% margin over time, but does that target now seem conservative? And regarding the $100 million a month in free cash flow, where do you see that potentially going? I'm trying to reconcile this with your previous target of $10 a share in free cash flow, and the leveraged targets you mentioned are not connected to asset sales, correct?

The forecast for margins is independent of anything that isn’t yet announced in terms of asset sales. Regarding margins, given we are already bumping up against 40% without the group business in Vegas or without thoroughly booked full hotels midweek, which we expect to rebound, you should expect that each of Vegas, regional, and consolidated should exceed 40%. Our perspective is that the business will continue evolving in a way that exceeds historical performance. Regarding $10 a share of free cash flow, maintaining this without debt repayments suggests we need to generate around $4 billion in EBITDA, and I’m confident that we can achieve even more than that.

Thank you. In your earlier comment, you mentioned not wanting to set a market share target for sports betting or online gaming. Can you help us understand the time frame you're looking at for building that business and when we should judge progress?

I expect us to have a competitive business and brand in the upcoming football season. While certain features like the single wallet may not be ready until after that, we anticipate being a player in the market by this fall.

Appreciate it. I wanted to inquire about room rates across the broader business, including weekdays. Can you discuss current trends and pricing power?

Room rates are still below 2019 levels during both weekdays and weekends. If we could fully recover, just from occupancy and room rates in April, it would translate to over $20 million in EBITDA. We currently see weekdays hovering around 80%, and weekends filled as far ahead as we can project. We're still yielding approximately $20 below on ADR on a typical weekend, and the return of group business could significantly aid our margins. It could fill the gaps during midweek and allow us to yield better on weekends as well.

Hi, everyone. Thank you for taking my questions. Tom, I wanted to discuss the group business in April. There was little to no group business, right? Is that accurate?

Yes, I'm aware there was one small group during the quarter.

Historically, how significant was the international business for your Las Vegas operations? That segment's recovery may take longer. What are your views regarding its potential impact on your run rates?

Compared to our competitors, we have lesser exposure to the international business, but it could still have an impact when it returns.

Thanks. Two follow-ups on the digital side. First, regarding investing in tech, where do you see the most significant gaps in your current tech stack? Also, how do you plan on building or purchasing solutions?

We feel confident in our tech stack, focusing on the rollout of the Liberty platform. The aim is to ensure a competitive offering while continually enhancing user experience. Expect a steady investment pipeline into our technology in the long term.

And the other follow-up on sports betting, where do content and additional media partnerships fit into your strategy?

Our expanded partnership with the NFL is significant. Football is the pivotal segment in this market. We aim to be a key player in this space. Given our recent acquisition of William Hill, we can control the operational side comprehensively. Expect us to be proactive in creating value in this arena.

Good afternoon. Thanks for taking my question. Regarding the regional markets, your comments around trends in March and April were positive on revenue, but how do you see the outlook over the next six months as more entertainment options become available?

I believe this is a long-term situation. Historic events like wartime mobilization can serve as a parallel for understanding how quickly consumer demand can rebound post-crisis. After being confined for a year, consumer spending will likely surge as reopening takes place. We have a solid preparation for when that demand is fully realized.

Thanks, Tom. I concur. Regarding the William Hill non-U.S. digital business, considering your strong cash flow and de-leveraging path for local business, did you consider keeping it?

One of my main frustrations as an investor was companies unaware of their core strengths. I'm fully aware that we aren't adept at running a non-U.S. digital entity. There are entities better suited for it and I can redeploy capital into ventures I know will produce higher shareholder returns. We've not wavered in our decision to divest the non-U.S. business.

Hi, guys. Thanks for taking my question. Tom, you mentioned lease adjusted leverage with a four handle in 2022. When do you start thinking about allocating capital for buybacks or dividends?

That is down our list of priorities. We're focused on driving our company to an investment-grade balance sheet, investing in our physical properties, and ensuring adequate funding for our sports and online initiatives. These are fundamentally better uses of our capital compared to share buybacks or dividends for the foreseeable future.

Hi, afternoon everyone. Thanks for taking my question. Considering the digital gaming segment, how are you thinking about building out this offering and creating diverse content?

We are currently evaluating our content strategies and determining how deeply we want to invest in that area. We recognize the importance and potential of this segment, and we are closely analyzing what approach will yield the best outcomes. We aim to position ourselves strategically in this competitive landscape.

Hi, Tom. Thanks for taking my question. Can you share your thoughts on hiring issues and wage inflation moving forward? How do you plan on managing these challenges?

Hiring has certainly been a challenge. The expiration of the supplemental unemployment benefit should help our cause. Expect labor costs to rise somewhat to ensure we have sufficient staff for demand. However, that cost increase will be more than offset by the robust demand we’re experiencing.

Thank you for all the insights. I'm interested in how your discussions with larger groups have evolved considering the recovery in Vegas. How do you see the timeline for booking shifting?

We are monitoring the attrition rates for groups on the books closely. We're optimistic based on our conservative modeling, as early indications show that groups are indeed eager to return to Vegas. The second half of the year is looking extremely strong, with forward dates indicating robust demand—which should support our group business well into mid to late 2022.

There are no further questions in queue at this time.

All right. Thanks everybody. We'll talk to you in 90 days.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.