Thank you for joining us for the Caesars Entertainment, Inc. First Quarter 2024 Earnings Call. Today's session is being recorded. I’d like to introduce your host, Brian Agnew, Senior Vice President of Corporate Finance, Treasury and Investor Relations. Please proceed.

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 of Caesars Sports & Online Gaming; and my colleague, Charise Crumbley, 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 under 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.

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, 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, as well as sequential improvement in operating results in our Regional segment each month during Q1. Despite the hold-related headwinds in Las Vegas during the quarter, our Las Vegas segment delivered $440 million of adjusted EBITDA, which is the second-best Q1 on record. Occupancy in Q1 reached 97.6%, a new Q1 record, which also drove a record for Q1 cash hotel and food and beverage revenues during the quarter. In our Regional segment in Q1, we delivered $433 million of adjusted EBITDA, down 3% versus last year, driven by unfavorable winter weather during the first 6 weeks of the quarter. Regional trends improved each month throughout the quarter with March delivering positive revenue and EBITDA growth. Similar to prior quarters, outside of the negative weather impacts, we continue to face new competition in a few markets and construction disruption in New Orleans, which was partially offset by our new temporary facilities in Danville, Virginia, and Columbus, Nebraska. Turning to CapEx, in 2024, we will finish several construction projects that we expect to generate strong returns and will complete an elevated CapEx cycle for the company. The permanent facility in Columbus, Nebraska will open on May 13. Construction in New Orleans should finish by Labor Day, and the permanent facility in Danville is expected to open by year-end. All three of these projects will deliver strong returns on capital to drive growth in the Regional segment. I want to thank all of our team members for their hard work so far in 2024. Our strong results are a reflection of their dedication to delivering exceptional guest service. With that, I will now turn the call over to Eric Hession for some insights on the first quarter performance in our Digital segment.

Thanks, Anthony. Caesars Digital delivered $282 million in net revenues, up 19% year-over-year, and generated $5 million of adjusted EBITDA during the quarter. Results in our Digital segment were driven by strong momentum in both online Sports Betting and iCasino during the quarter. As Anthony mentioned, Online Sports Betting net revenues grew 23%, and iCasino delivered 54% net revenue growth. The strong performance in these two verticals was offset slightly by declines in our Retail and Other segments. In our Online Sports Betting segment during the quarter, hold increased roughly 80 basis points year-over-year. However, despite the increase, it was at the lower end of our expected range due to less favorable results around the Super Bowl and March Madness. Despite the unfavorable large event outcomes, Parlay mix improved approximately 400 basis points year-over-year during the quarter, driven by our improved user interface and pricing uptime. Higher parlay mix gives us confidence in our ability to continue to improve holds throughout 2024 and beyond. iGaming set new quarterly records for active customers, volume, GGR, and net gaming revenue driven by the success of our New Caesars Palace Online App, which, despite only launching roughly 7 months ago, now makes up more than 50% of the net gaming revenues in this segment. Customers continue to respond favorably to the product interface, game content, and improved loyalty marketing. iCasino remains a critical component of our Digital growth strategy for 2024 and beyond. During the quarter, we also successfully launched Mobile Sports Wagering in North Carolina. We're encouraged by the early results and have signed up new customers at a faster pace than prior state launches, translating into a higher initial market share. We remain focused on several key priorities for the remainder of the year. On the Sports Betting side, work continues on our proprietary TAM, which will enable shared wallet across state lines. We expect to deliver this important functionality across all the jurisdictions in which we operate by the middle of 2025. We will also continue to improve our product in Sports Betting, enhancing our same-game parlay, live wagering, and internal pricing. On the iCasino side, we will continue to add additional game content and functionality and are on track to launch our new iCasino brand in the second half of 2024. We now offer Sports Betting in 31 North America jurisdictions, 26 of which offer mobile wagering. I'm very pleased with the progress we made this first quarter. Excluding the effects from new state launches, our net revenue flow-through to EBITDA was over 50%, consistent with our expectations and setting the stage for continued profitable growth in the years ahead. Now I'll turn it over to Bret.

Thanks, Eric. We had an active first quarter on the capital markets side, refinancing $4.4 billion of parent-level debt, eliminating the CRC credit entity, and extending debt maturities to 2031 and beyond. On April 26, we closed on a new $425 million bank financing at the joint venture level for our Danville property. This facility will be used to cover all remaining CapEx requirements for the permanent casino that is expected to open in December. 2024 CapEx, excluding our Danville joint venture, is expected to be $800 million. We look forward to using strong free cash flow generation to continue to repay debt and reduce leverage towards our stated goals. Over to Tom.

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 was somewhat of a kitchen sink type quarter for us; everything that could go wrong did. The biggest pieces were hold in Las Vegas, weather across the country that was well understood, and you've seen with others, plus losses around the launch of North Carolina in Digital. There are others that I'll touch on that are more minor, but there are well over $75 million of what are clearly one-time negatives for us in the quarter. If I look at kind of where we came out of the quarter and the way the business was operating fundamentally during the quarter, it looks more like a flattish quarter, notwithstanding the EBITDA that we posted. Starting in Vegas, our typical hold is a range of 20% to 23% at tables. We were at 15% for the quarter, so 500 to 800 basis points below normal range. The midpoint of that is 650, and that's on $850 million of drop. You can see that's a very large piece of the shortfall in the quarter. This is typical table hold; we were certainly in the second standard deviation to the negative. We are completely comfortable that this reverses over time. You'll have quarters that are the reverse. I'm sure you can think of some in recent history that were 2 standard deviations to the positive, unfortunately not for us, but our time will come. This was not an instance of a few players beating us; this was a repeated issue across the board. If you look at our volumes, slots were about flat. As Anthony said, Hotel and F&B hit first quarter records, overcoming increases in union costs to deliver greater profitability to us. So volumes were great. People are still present; we just didn't hold. Running these properties at over 97% occupancy means you're fully staffed, so there is no opportunity to make up hold. It's particularly negative on the operating leverage side when you don't hold. We have the additional impact of Adele at the Colosseum with shifted dates from March into the fourth quarter, impacting this quarter but largely a non-event aside from this quarter's numbers. Looking forward, our forecast for April, May, and June shows each month is expected at 98% occupancy in the market. Our cash rates are depending on the month, up 8% to 14%. So, Vegas remains very strong. I don't like to talk about hold, and I'm hoping this is the last time I have to address it this year, but presuming normal hold and what we see in front of us on a forward basis, I would expect Vegas to grow for each of the last three quarters of the year. We're in about a $70 million hold shortfall out of the first quarter. I don't know that we'll make up that entire amount, but I'd expect we'll be chipping away at that throughout each quarter the rest of the year. Moving to the Regionals, we were down 3%. As I said, weather significantly impacted us, but absent weather, Regionals would have been up year-over-year. We are particularly optimistic about the rest of the year, particularly the second half. We continue to believe that Regionals will grow on a full-year basis for us. Anthony mentioned New Orleans and Danville coming online, which will complement Columbus, Nebraska, starting cash flow in the next couple of weeks. The Danville property is operating in a temporary structure at the highest win per unit numbers in our entire system, reflecting unmet demand. We almost double our capacity when we open the permanent facility at the end of the year. The permanent facility will be dilutive to margins because the temporary facility operates at excessive margins, but it's accretive to overall EBITDA. Regarding New Orleans, recall that the gaming tax regime in the city has a flat tax until reaching a certain level of gaming revenue. As we sit today, we are about $75 million below where that property shifts to a variable rate versus a flat tax, meaning the first $75 million of incremental gaming revenue generated has no incremental gaming tax for us, resulting in extraordinarily high flow-through. In terms of the trajectory, Regional EBITDA in January was down more than 20%, in February it was down about 4%, and in March it was up about 10%. April's predictive effects are less clear since it's the least important month of the second quarter, but we have a positive outlook for the remainder of the year. The Digital sphere is an exciting story for us. North Carolina was a much more successful launch in terms of customer acquisition than we anticipated. Our first month market share reached almost 9%, which is about three times what we've seen in other states. This resulted in North Carolina being negative $11 million in net revenue in the quarter and negative $20 million EBITDA, but if you strip out that launch, we were $25 million of EBITDA. OSB revenue was up 33%, and iCasino, as Eric highlighted, was up 54%. We're seeing tremendous momentum in Digital. We are seeing strong improvements in hold despite poor sports outcomes. On the Caesars Palace online launch, we've now reached our 7th month post-launch, and the business is already exceeding 50% of our revenue. iCasino is performing as we anticipated, generating an iGaming customer base that mirrors our casino clientele. We're aiming to launch a second brand before year-end to maintain this momentum. Conversations about reaching $500 million in revenue have come up frequently. We did $1 billion of net revenue in Digital in 2023, with the industry growing at 30% this year. Given our iGaming is growing much faster than the market, the projected growth of our Digital segment supports the optimistic outlook we have for 2025 EBITDA crossing $500 million. We feel confident about the Digital growth strategy. In terms of capital, we're spending significantly this year. We've been through substantial CapEx since the Caesars merger. There's a positive expectation for reductions in CapEx and increases in free cash flow leading into offense strategies, possibly stock buybacks or external growth opportunities. As we sit here in April, you are about five months away from a step-down in CapEx in 2025, exceeding $500 million. You should expect robust cash flows and investments to ramp up, aligning targets toward growth metrics. The expectation is to revert back to historical operating performances starting next quarter. I wanted to provide a perspective on the business and expectations moving forward. I'm happy to take questions.

And our first question comes from Carlo Santarelli from Deutsche Bank.

Tom, thank you for your remarks. I'm not going to get into the whole stuff. There was some content there that I didn't entirely follow, but we can review it off-line. What I wanted to ask about though was the widening gap between an implied Las Vegas GGR and net casino revenue. I want to understand if there has been a change in promotions or if it has to do with occupancies going up, maybe more comped rooms? And you mentioned that cash rates were up nicely in the coming months. What percentage should we think of as being cash rates going forward?

Cash rates for us versus comp rates? Say it again.

Yes.

We're about 75% cash in Vegas, and that hasn't really changed.

Okay. Regarding reinvestment, I wanted to know if there are any influences from the hold dynamics on the table side or if there has been a change in promotional strategy.

We have made zero changes in promotional strategy.

Okay. Perhaps Rio reopening has some modest influence as well?

Correct.

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

Sticking with Las Vegas here, your table game drop was down 10% year-over-year. Slot handle was down about 7% year-over-year. Last year's numbers include the Rio. Can you share those numbers excluding the Rio? What's driving those declines excluding the Rio?

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. Last year's first quarter was exceptionally strong.

Okay, great. And you mentioned CapEx coming down. The operating perspective suggests attractive free cash flow generation over the last three quarters of this year and through next year. But aside from deploying excess free cash flow to pay down debt and moving EBITDA in the right direction to reduce net leverage ratios, can you talk about other potential avenues for you to reduce leverage?

Yes, sure, Joe. We have a number of assets that produce very little or no cash flow that are non-core 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, our leverage reduction is not limited to just free cash flow.

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

Maybe over on Regionals looking at the margin performance that you reported in the 1Q. It looks like OpEx was pretty similar to 1Q '23 despite opening two properties. I'm curious if there were one-time savings from January weather or anything else that we can consider for your operating OpEx per day going forward?

I'm sorry, can you repeat that, Brandt?

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

Correct.

I was trying to figure out how you kept costs so low, given you opened two properties since last year?

There were no positives coming out of the weather. You know we are always looking to improve our margins, and that's a testament to our team, who has been around a long time. We don't just absorb increased costs; we aim to improve efficiency and deliver growth.

Great, that's helpful. And then just as a follow-up on Digital. I was curious if you could give us, or Eric, the theoretical hold with the new Parlay mix ex-sports outcomes in March.

Yes. We haven't disclosed our current structural hold yet, but we've set the target at 8.5%, and we're well on the way there. Tom mentioned the increase in parlays, but we’ve also seen growth in customers making parlays and legs, with a compounding effect. We're pleased with our progress. Absent those two large event outcomes, we would have seen an even larger increase year-over-year than what we achieved.

And our next question comes from Steven Wieczynski from Stifel.

Tom, can you help me with some of the numbers you listed in your prepared remarks? I got somewhat confused. You mentioned $75 million in terms of weather-hold losses around North Carolina. But then I thought I heard you say Vegas was tied to a $70 million hold the rest of the year. Can you help reconcile that?

Yes. The three big negatives were the hold, weather, and North Carolina launch, which collectively exceeded $75 million. Smaller factors like Adele moving will bump that number. If I look at true non-one-time performance, we’re getting close to even versus last year, including an increase in Digital but not quite making up for the shortfall in Vegas compared to last year's record first quarter.

That makes sense. You indicated you will go on the offensive as your CapEx is reduced. What do you consider a growth opportunity today?

The most attractive opportunity for free cash flow, in my view, is self-buybacks.

And our next question comes from the line of Daniel Politzer from Wells Fargo.

I wanted to touch on Las Vegas a bit on the non-gaming side. You mentioned occupancy was up a couple of hundred basis points year-over-year. However, it seems like nongaming revenues are lagging the market. Can you provide insight there on any discrepancies?

I don't have numbers for the quarter from anyone else yet. Our hotel revenues are up, and our food and beverage revenue increased by about 14%. I'd be surprised if that was lagging the market.

That's excluding Rio, I assume?

Correct.

Regarding the non-cash flow producing assets, how do you view interest rates on those assets? Novation is not an option, or is it about the regional and strip real estate?

I'm not going to give you clues. Centaur would not be classified as a non-operating casino generating cash flow. There are many assets in this company that don't appear in your sum of the parts but hold real value, and you shouldn't be surprised if we start to market some of them in 2024.

And our next question comes from Barry Jonas from Truist Securities.

I want to dig a little more into what you're seeing with the consumer and the Regionals in Vegas. Can you touch on visitation as opposed to spending per visit trends?

Our volume indicators were healthy in the quarter. Despite losing CON/AGG, we gained Super Bowl business. We can see this in our hotel occupancy, revenue, and food and beverage, all remaining robust. The regionals grew in January and February due to weather. The consumer remains healthy and spending is strong.

Got it. What are your expectations today around VICI exercising its call option for Centaur?

You are probably closer to accretion dilution math. We are operating under the assumption that they intend to exercise based on their past indications but won't engage in a dilutive deal, which I understand is somewhat close as it stands.

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

I wanted to drill down on the Digital discussion. Starting with $50 million, it seems to imply the business grows towards $400 million of EBITDA. Are the partnerships rolling off significant enough to factor into those numbers?

Partnership roll-offs are significant and material. We're expecting to see growth at market rates. I mentioned the discussions around reaching $500 million; that target might be reached by 2025 or early 2026.

Understood. So, there may be more growth projected in the market, and the timing of partnerships will factor in as well.

Yes, the partnerships are significant and roll off over the '25 time frame. However, regardless of the timing, we continue to see growth beyond that.

And our next question comes from Stephen Grambling from Morgan Stanley.

You've indicated that your expectations ex-one-timers appear consistent. What KPIs are important to you in assessing the need to possibly begin playing defense on costs? If things were to erode, what would you focus on as your biggest levers?

We're always on defense concerning costs, and you should presume in a quarter like this that we would be going to our local managers and requesting ways to tighten up, either by generating more revenue or lowering costs to make it EBITDA additive. While I don't have an acronym for these types of programs, expect that we have initiatives aimed at hitting nine figures to flow through by year-end.

To clarify, if things were to erode, you would already be taking action to help tackle operating leverage, but if they improved, we would see greater flow-through?

Correct.

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

I wanted to dig back into Digital for a moment. Some numbers given in prepared remarks on OSB growth and iGaming are impressive, yet do not align with some disclosures in the 10-Q. Can you help clarify these discrepancies?

North Carolina was part of it. Retail Sports was down from a hold perspective this quarter, which affected revenue. Super Bowl and March Madness were also not kind in the quarter.

Was the Retail Sports Book hold negative for the entire quarter?

No, it was down significantly compared to last year's first quarter.

So, when looking back at those volumes, despite the numbers and adjusting for Rio, you retain a belief that underlying consumer behavior hasn't changed?

Yes. I'm focused on EBITDA, not GGR share. Our international business was as high as it’s been since '19 this quarter, and our VVIP volumes remain strong. The readings reflect a challenging quarter, but customer fundamentals remain favorable.

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

I'm curious to know about the visibility into Las Vegas for the balance of the year. Do you have any stats on group bookings or pacing that could give insight into the second half?

For the year, we would expect group and convention to be up in '24 versus '23. This segment set records in 2022 and 2023. First quarter was down slightly as a percentage of occupied room nights at 19% this year versus 21% last year due to CON/AGG. However, the pace for the remaining quarters looks favorable.

Great, thanks Brian. Tom, on external use of capital, given the industry’s cost growth, does domestic M&A appear as a potential avenue for EBITDA growth rather than merely cost-focused?

Short answer, John, is yes, though any significant growth would require equity in a transaction, and given the current situation, I'm not looking to sell my equity for any reason.

And our next question comes from Chad Beynon from Macquarie.

On the Digital side, what’s the impact of the casino brand launch? Can this be a step towards something larger? How many brands do you think will suit your consumer data?

You're limited by the number of skins you have. The transaction with Wynn in Michigan enables another skin there. We have two available in each iCasino jurisdiction, which permits us to launch a second brand and see how that unfolds, dependent on state regulations.

Previously, you mentioned growth in revenue should align with margin maintenance. Is this broadly applicable?

Yes, I’d say that's true for slightly lower growth but I'd use 5% as a target for revenue growth.

And our next question comes from Daniel Guglielmo from Capital One Securities.

Harrah's in Pompano has continued to perform well after its expansion. Any similar near-term projects in the pipeline for properties impacted by competitive pressures?

We only have a similar undeveloped real estate piece at Scioto Downs in Columbus, which might provide opportunities in the long term. Pompano’s development took over 5 years, and while slow, its revenue and EBITDA performance is rewarding.

Negotiations and expense accruals provide predictability. Are there any surprises or dynamics on the expense front looking into 2025?

Not really, aside from what I mentioned regarding opportunities around both revenues and expenses. We plan to address the numerous small items that contribute to larger targets throughout the year.

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.

Thanks, everybody. We'll talk to you next time.

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