Earnings Call Transcript - CZR Q1 2022

Operator, Operator

Good day. And thank you for standing by. Welcome to the Caesars Entertainment Inc. 2022 First Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that this call is being recorded. I would now like to hand the conference over to your host today, Brian Agnew, Senior Vice President of Corporate Finance, Treasury and Investor Relations. You may begin.

Brian Agnew, Senior Vice President of Corporate Finance, Treasury and Investor Relations

Thank you, Justin, and good afternoon to everyone on the call. Welcome to our conference call to discuss our first quarter 2022 earnings. This afternoon, we issued a press release announcing our financial results for the period ended March 31, 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; 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 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 first quarter financial results. With that, I will turn the call over to Anthony.

Anthony Carano, President and Chief Operating Officer

Thank you, Brian, and good afternoon to everyone on the call. We delivered another strong quarter to start the year in 2022. Adjusted EBITDA in the first quarter, excluding Caesars Digital, was $850 million, up over 60% versus the first quarter last year. Margins in our brick-and-mortar business were 36.2% despite the negative impacts of Omicron in January. Operating results reflect the new first quarter record for adjusted EBITDA in our Las Vegas segment despite multiple headwinds during the quarter. In total, 18 of our properties set a record for the highest first quarter EBITDA while 28 set a record for the highest Q1 EBITDA margin. Turning to Las Vegas, demand trends strengthened throughout the quarter, leading to an all-time first quarter record of $411 million in adjusted EBITDA excluding real rent payments. EBITDA improved 140% versus the first quarter of 2021 and margins improved 1000 basis points to 45%. Total occupancy for Q1 was 83% with weekend occupancy at 95% and midweek at 77%. As of April 1, 2022, we lifted all occupancy caps in Las Vegas, and we would expect to see a material improvement in occupancy for the second quarter of 2022. Group room nights during Q1 represented approximately 13% of occupied room nights in Las Vegas, up from 11% in the second half of 2021 despite January weakness due to Omicron. Elevated attrition rates continue to decline, and group revenue pace in Las Vegas is strong for the remainder of the year and into 2023 and 2024. With convention demand accelerating, we are excited to finally see the full potential of the new Caesars Forum Convention Center. The Forum currently has 150 future events booked, with over 1.3 million room nights and over $500 million in revenue. Over 70% of this contracted business is new to Caesars as a company. In our regional markets, operating results remain strong, and revenues and EBITDA improve sequentially each month of the quarter. Trends have further improved into April. EBITDA for the first quarter was $459 million, with margins of 33.6%. Highlighting a few specific properties, trends normalized in New Orleans in Q1 following the removal of masks and vaccine mandates in March, and Atlantic City had a great quarter despite it still having rooms offline for remodeling. We are encouraged by the early returns on the capital spend at the recently rebranded Horseshoe Indianapolis and look forward to starting construction on our Harrah's Hoosier Park expansion this year. Following the launch of sports betting and iCasino in Ontario on April 4, we now offer sports betting in a combination of 24 domestic states and North American jurisdictions, 17 of which are offered mobile wagering. In March, we converted Illinois to our Liberty platform and expect all of our remaining Caesars-branded apps and sportsbooks to be running Liberty by year-end 2022. We remain focused on growing our digital business during Q1 through customer acquisition, especially in new markets, including New York and Louisiana. While customer acquisition and handle exceeded our internal expectations, especially in New York and Louisiana, net revenues were negatively impacted by promotional investment to support the new market launches. Our capital program remains unchanged from our Q4 call. We're excited to have most of our room remodels completed in Atlantic City for the upcoming summer season and look forward to many new food and beverage and entertainment offerings this fall. Our new land-based facility in Lake Charles remains on track to open in Q4 of this year, and so does our casino expansion and new parking garage in Pompano. We anticipate breaking ground on our expansion plans for Harrah's Hoosier Park this quarter, and construction is slated to begin on our Columbus, Nebraska project later this year. These are exciting projects which will collectively generate a meaningful economic contribution for our company. As we look to the remainder of 2022, we remain optimistic about our business as consumer trends remain strong. We're also encouraged regarding improving group and convention trends in Las Vegas, as well as the potential for the full recovery of our older demographic consumer who has been the most impacted by COVID-19. In addition, our property rebrands are exceeding return expectations, which gives us confidence in future announced rebranding opportunities in St. Louis, Black Hawk, Las Vegas, and Florida. I want to thank all of our employees for their hard work in 2022 so far. I'm extremely proud of our operating teams, their execution, and their exceptional guest service. With that, I will now turn the call over to Tom for some additional insights on the quarter.

Tom Reeg, Chief Executive Officer

Thanks, Anthony. Good afternoon, everyone. Thanks for joining us. I echo Anthony's comments on the work that our employees have done to drive results for the organization. Personally, it now feels like what we thought we were buying when we originally bought Caesars Entertainment. We're almost two years in now. But with all the virus disruptions that went on over those two years, it's really the last eight weeks or so that we're starting to hit on all cylinders and really feel the potential of the organization. So we talked to you well into the first quarter. And what we described then was that Omicron was kind of a wet blanket around the entire business. For the bulk of January into February, it was really right before the Super Bowl that events changed with the virus and we saw a surge in visitation. This is—and you'll hear a common theme as I go through. I know that investors are extremely concerned with the health of the consumer and what's going on inflation-wise, and what impact is that having on the business. I can say unequivocally that the biggest correlation that we see in the business over the last two years is the state of the virus. When the virus recedes and when case counts are benign, there is a pent-up demand for travel and entertainment activity. We see a burst of demand in our business, and Omicron was no exception. As you got through Omicron, if you look at the regional market, as Anthony discussed, we ended up considerably year-over-year, margins in the 33-plus percent range. If you think about that in the quarter, and this is true throughout, when volumes are down, we experienced negative operating leverage, so regional margins in January were 29%. In March, they were above 37%. So we ramped up through the quarter as demand increased. That has continued into April and into the second quarter with margins in excess of 37% on a preliminary basis. In Las Vegas, if you look at occupancy, we had told you before that January was around 75% occupancy. February was about 80%, March came in about 81%. We thought March would come in in the mid-80s. It actually came in at 91% for the month. We were able to have a record first quarter even with a slow start where we lost the bulk of CES, which is one of the biggest groups on the calendar market-wide. If you think about margins in Las Vegas, we were a little over 40.5% in January, and in March we were a little over 47%. The strength has continued into April. April was the single largest month in the history of the Caesars organization for cash room revenue. Occupancy was just under 97%. Rates were up a little less than 40% over last year, and a little less than 20% over 2019. So Vegas is extraordinarily strong for us. As we sit here today, I expect us to break the record again in May for cash hotel revenue. The second quarter is going to be particularly strong in the group business. This is where a lot of the cancellations post-pandemic started to rebook into. So we expect a significant bump in group business. Recall that when we talk about group business, we did not have Caesars in 2019. We did not have the Forum Convention Center operating. So when we say group will be considerably stronger than 2019, that includes the Forum, which 2019 did not. We'd expect Vegas to continue a very strong trajectory; as I said, April was an all-time cash hotel revenue record, despite only 30 days and the Easter holiday in April, which is not a particularly good casino holiday. May has 31 days and should be even better. So we feel very good about where the brick-and-mortar business is heading. As you look at digital, I want to be clear. We started the process to sell a Las Vegas Strip asset early in 2022. There are public documents that show you how long the ROFR process and the process to reach a definitive agreement takes, which would put us somewhere in the middle of summer for consummation of a transaction. You shouldn't expect us to be giving you play-by-play in the interim. We will be back to you when that's resolved; know that it is in motion and governed by the documents that we have that govern our VICI agreement. As you go to digital, as I said on the fourth quarter call, first quarter is our peak EBITDA loss. Of the $553 million of EBITDA loss in the quarter, a little over $400 million is attributable to the launches in New York and Louisiana, with New York being the lion's share. As discussed, we got to our handle share goals far earlier than we anticipated, and we did cut back all of our mass media spend. So we cut about a little over a quarter of a billion dollars of expected spend from when we started cutting in February through the end of this year. We've seen no degradation in handle share other than our planned retrenchment in New York. Since we retrenched, that's the only material movement in share, even though we've cut over a quarter of a billion dollars from marketing. If you look at the quarter, we lost about $44 million in March. As we got out of that heavy launch period, our losses moderated considerably. If you think about the investment that we talked about making in terms of cumulative EBITDA losses, we said it would be north of a billion. In my mind when I made that statement when we launched in August, I was thinking a billion and a quarter to a billion and a half based on where we've gotten sharewise. I think a billion and a half is the right neighborhood. As you look at what we've done to date, about two-thirds of our cumulative EBITDA loss investment into digital, measured in that way, is now in the rearview mirror. Our losses should come down considerably as we move forward. We fully expect to inflect to EBITDA positive in digital as we move into the football season of 2023. If you think about numbers that we've talked about in the past, the cross-market play out of sourced in digital into brick-and-mortar we said was running at about $150 million of gaming revenue at the time of our last call; that has since increased to over $200 million. What are we focused on in the offseason, I should say, as there’s never an offseason? Football is clearly the driver of sports. So, before next football season, we're bolstering our customer service capability, our technology, and bolstering our payments capability so that we're ready for next football season. As I look back, we closed William Hill in April. We had almost exactly 100 days to expect, or to the start of football season when we closed William Hill and our re-launch. We were kind of sprinting to keep up throughout football season last year; this year is going to feel much more comfortable for us in terms of being well prepared for anything that can come our way. We are absolutely thrilled with the business that we've built to date, but we're excited about what we can do as we move forward. To give you some context, we've had 1.4 million in Caesars reward sign-ups since we re-launched digital, that came in through the digital channel. If you think about a typical Caesars property, we get about 50,000 on average per property, per year of new sign-ups—a little more in destination properties, a little less in regional properties. If you think about a million customers coming into the pipeline in really a span of five months, it's extraordinary. Now the work in front of us is to identify which are the most valuable customers there. As you look back at the way football season was last year, you were getting the same offer whether you were a $50 player or a $1,000 and above player; we didn't discriminate. That's kind of what we inherited when we bought all of these brick-and-mortar assets from various operators in the past, marketing to the masses with little discrimination. What you've seen us do repeatedly in the brick-and-mortar business is target that spend to our most valuable players and not waste money on the unprofitable players. That's the task in front of us in digital. So you're going to see us segmenting our marketing as we move forward, and that's going to be a dramatic improvement in profitability as we move forward. We are excited for that. As you think about where we are now that we've got two-thirds of the losses behind us, we should be a significant free cash flow producer as an enterprise going forward. We're expecting to close on the non-U.S. William Hill sale within this quarter; I talked about the Vegas Strip asset sale being in motion. We would expect to be making significant reductions in our leverage within this calendar year and into 2023 and beyond. And I'll pass to Bret for some specifics on liquidity and capital.

Bret Yunker, Chief Financial Officer

Thanks, Tom. 2022 is off to a nice start in terms of executing on our growth objectives alongside continued debt reduction. When the sale of William Hill's international business closes in June, we will apply all proceeds to reduce debt, taking aggregate debt reduction over the past 12 months to over $2 billion. We expect the cadence of debt reduction to accelerate over the next 12 months through strong free cash flow and further asset sale proceeds. Our 2022 calendar year CapEx spend remains unchanged from our Q4 call at $300 million of maintenance CapEx, $100 million of digital capital, and approximately $700 million related to project capital. These figures exclude CapEx spend in Atlantic City, which is escrowed and sits in restricted cash. We continue to model minimal cash taxes and approximately $800 million of cash interest expense for 2022, which we intend to reduce through debt repayment and opportunistic refinancing. I'll turn it back to Tom.

Tom Reeg, Chief Executive Officer

Thanks, Bret. So we've got some exciting projects coming online. As Anthony said, we've got a lot of our Atlantic City capital coming online before the summer season, and then some of the restaurant projects over the summer. We've got Lake Charles hitting in the fourth quarter this year. We just opened the expansion of Horseshoe Indianapolis. We've got a similar project going at Harrah's Hoosier Park in Indianapolis. So we've got capital projects that will start contributing that have been drains on us in the past. We think we can continue to execute on basic operations, both digital and brick-and-mortar, and significantly reduce our debt over the next several quarters. Back to the key point, I know there's a lot of concern about what's going on with the consumer and what's going to happen around the corner. I can't stress enough that this business, particularly in Vegas right now, is operating and generating as much cash as it ever has. So we feel very good about the balance of the year. And with that, I'll open it up to questions. Operator, ready to take any questions.

Operator, Operator

Thank you. And our first question is going to come from Carlo Santarelli from Deutsche Bank. Your line is now open.

Carlo Santarelli, Analyst

Hey, guys, thank you very much. Tom, just to kind of make sure I'm understanding how you articulated the digital investment. As you said, kind of a billion five is where you think it comes in. That would imply ballpark $475 million to $525 million of spend before turning profitable again. Is that how you're thinking about it in terms of between now and say, August, September of next year, you’d be looking at something in the ballpark of $500 million of losses?

Tom Reeg, Chief Executive Officer

Yes, and Carlo, obviously that'll do. We've got an Ohio launch in front of us; that would be the only launch that I can think of that would have significant costs surrounding it. And so how we come out of the box in Ohio will be a governing factor in terms of where we would be, but that's the right we’ve got.

Carlo Santarelli, Analyst

Okay. And then just on the iCasino side of the business. I know you guys were, you talked about it previously, putting more content on and making a bigger push there. Does the $500 million kind of contemplate some additional efforts on that side of digital business?

Tom Reeg, Chief Executive Officer

Yes, that's inclusive of everything that we have in front of us in digital.

Carlo Santarelli, Analyst

Okay, great. And then just lastly, kind of on Las Vegas, putting into context kind of all the room nights of the revenue that's booked for the convention center, as well as kind of the 11% mix of room nights in the fourth year moving the 13% in the first quarter. Where do you think that mix kind of sits out on a 2023 basis? And then where do you think it shakes out pro forma for the asset sale and the separation from Rio, so maybe on a 2024 basis, just in terms of group room night mix.

Tom Reeg, Chief Executive Officer

So I would say leaving aside the Rio, you should expect a group room night mix in a normal world would be north of 15% for us, somewhere between 15% and 20%. As you remove Rio from the equation, that will creep up slightly. The big group at Rio is the World Series of Poker, which is coming to the Strip this summer. So that’s already shifting as we speak.

Operator, Operator

Thank you. And our next question comes from Joe Greff from JPMorgan. Your line is now open.

Joe Greff, Analyst

Good afternoon, everybody. Tom, have you seen or experienced a noticeable difference from your competitors with regard to marketing promos? Just broadly, customer acquisition costs, meaning have your larger competitors pivoted away, providing for an incrementally more rational environment.

Tom Reeg, Chief Executive Officer

In terms of we're talking about digital?

Joe Greff, Analyst

On the digital side. Sorry, yes.

Tom Reeg, Chief Executive Officer

No, not that I can speak to. I think everybody else is spending fairly much in line with where they were before.

Operator, Operator

Great. And then Bret, you talked a little bit earlier in your prepared comments about opportunistic refinancing. Can you talk about the timing of this? And does that timing coincide with the closing of William Hill and later in the year of a strip asset sale?

Bret Yunker, Chief Financial Officer

Yes, I think those things line up pretty well for the summer. When you think about closing William Hill, where we get to on the Las Vegas asset sale alongside a lot of our debt becomes callable July 1. I would be looking at the third quarter as a likely window for us to be refinancing.

Operator, Operator

Great. Thanks, guys. And thank you. And our next question comes from Steve Wieczynski from Stifel. Your line is now open.

Steve Wieczynski, Analyst

Yes, hey, guys, good afternoon. Tom, so you talked about the strength in Vegas has continued into the second quarter. And obviously, so far April's had a lot of big events, concerts, it says the NFL Draft. And I'm just wondering, as we kind of think about comparisons moving forward, is the second quarter going to be a little bit of an anomaly? Or is the rest of the year going to be in a very similar position from not only a group standpoint but from an event standpoint? And then maybe as we think about the second quarter for next year, was the draft big enough to call out? Or was it just, kind of average, if that makes sense?

Tom Reeg, Chief Executive Officer

Yes. So Steve, in terms of group calendar going forward, the group calendar going forward is very strong. The second quarter and beyond, as we talked about, World Series of Poker comes to the Strip in that timeframe as well. In terms of the draft, I would say from a visitation standpoint for the market, it was very, very strong. Not a particularly great gambling crowd, though. So good for visitation, but casino numbers were kind of average. I certainly wouldn't expect it—there's a lack of that next year to be any kind of headwind.

Steve Wieczynski, Analyst

Okay, got you. And then, Tom, you talked about getting back to or getting to that breakeven point on the digital side of things in the football season of 2023. And you called out how you're kind of changing around some of your marketing strategies. And I'm guessing when you talk about that breakeven point in the fall of '23, does that include those marketing changes, or as you start to implement those marketing changes? Could that timeframe get accelerated?

Tom Reeg, Chief Executive Officer

I'd say yes, that's our best peg as we sit here today. Obviously, the couple of quarters before football season in '23 tend to be lower volume sports quarters, so lower loss anyway. So is it possible it sneaks a little bit earlier? I'd say that's possible. But I'd be banking on inflection in the fourth quarter as we sit here today.

Operator, Operator

And thank you. And our next question comes from Barry Jonas from Truist Securities. Your line is now open.

Barry Jonas, Analyst

Great, thanks, Tom. You've talked in the past about a potential 40% ROI on that $1.5 billion in digital losses. I'm curious what you think has to happen across the market in fees, specific to see those types of returns and what you think a reasonable timeline might be.

Tom Reeg, Chief Executive Officer

So I don't think there needs to be anything heroic that needs to change for the business to become profitable. I've actually been talking about 50% plus cash ROI. You can see where our handle is today. You can make assumptions on where our handle will go in the future and where your hold is going to shake out in sports and iCasino based on a lot of history. What happens functionally is your customer base becomes dominated by existing customers rather than by brand new customers that are taking advantage of a new customer promo offer. As you shift more out of business dominated by new customers, and like I said, we had a million four signups for Caesars rewards since we launched, and those that deposited and became active in digital almost certainly did so through a promo, those promos are different, as you become a season customer. What gets the headlines in terms of deposit matches, things like that, that's not what happens as customers become seasoned and your margin profile changes significantly. Another thing is going to change, I touched on in my remarks. In the in football season of '21, every customer, regardless of value, was getting a similar offer. What will happen as we move into '22 football season and beyond is we're going to segment our customer base based on worth. We're going to target our promotional spending at our profitable customers, which is going to be a much smaller subset of that larger group. This is going to have two significant impacts: you're going to build loyalty among that group that is targeted, and you're going to increase profitability as you increase share of wallet. You're still going to have activity from those not targeted to the same degree, but your profitability on those customers is going to change dramatically because they're not getting the marketing offers or the marketing offers that come out. We have significant history in Nevada, in particular, what does a stable state look like from a margin standpoint, customer activity standpoint, and promotional standpoint. All of our states are going to end up looking in some form or fashion like Nevada with different puts and takes based on tax rate and competitiveness in the environment. But it's going to look nothing like the environment that you're analyzing now where a state launches and nobody has any customers; it’s the Wild West. Those days are already in our rearview mirror in most states as we move forward. There are going to be some new states, but as a percentage of the business, it's going to be much more of an existing customer and existing state crowd. And the states are going to start to look more like the seasoned states in our portfolio.

Barry Jonas, Analyst

Got it, got it. And then just follow-up on the land business. Current trends and the outlook, Tom, seem really strong. But I'm just curious if there's any remaining negative impact you're seeing from COVID. I guess that would include any of the older demographic not back yet or anything else you wanted to highlight?

Tom Reeg, Chief Executive Officer

No, we have seen 55 plus return post-Omicron. They're still not as strong as the younger cohorts, but they're coming back. There's more coming back every week.

Operator, Operator

Thank you. And our next question comes from Thomas Allen from Morgan Stanley. Your line is now open.

Thomas Allen, Analyst

Thank you, sir. Just on the digital side, Tom, you highlight Ohio as like the only state where you really have to invest this year. Maryland may launch this year. Is your comment just on Ohio because you think Maryland will probably launch next year, or is there just a difference in where you see the opportunity between those two states?

Tom Reeg, Chief Executive Officer

Yes, Thomas. I'm skeptical Maryland launches mobile in 2022.

Thomas Allen, Analyst

Okay, so still a good Maryland's still a good opportunity for you, it’s just…

Tom Reeg, Chief Executive Officer

Oh yes, and if and when mobile launches, you should expect us to be competitive there as well.

Thomas Allen, Analyst

Perfect. And then any commentary around the Ontario market and what you've seen to date in terms of the competitiveness and potential, or both sides of it? Thank you.

Tom Reeg, Chief Executive Officer

Yes, I'd say Ontario is a unique animal given the grey market that existed there before and the restrictions on what you're able to do. We're building our capabilities in Ontario, but you shouldn't expect to see us throw a lot of money into Ontario. We expect to be a player. We expect the market to grow steadily, but that's not going to be a big needle mover one way or another for us.

Thomas Allen, Analyst

Okay. And then lastly, on the brick-and-mortar business, what are you seeing in terms of labor availability, your competitors, increasing marketing, or any other kind of cost changes, big cost ranges you're seeing that you wanted to call out?

Tom Reeg, Chief Executive Officer

Labor is still tight. It's gotten better. Obviously, we talked about how, as Anthony mentioned, we were able to remove our caps when we ended the first quarter. That was as a result of a lot of hiring effort and activity. We're feeling better. Labor costs are higher, but nothing that's a considerable drag on the organization's gaming taxes is our number one expense category. Thankfully, those don't inflate, and if they do, it's because you're getting more gaming revenue and getting an increase on a percentage of revenue basis. We feel while there are pressures, the strength in the underlying customer activity strength is swapping anything that we see on the cost side.

Operator, Operator

Thank you. And our next question comes from Shaun Kelley, Bank of America. Your line is now open.

Shaun Kelley, Analyst

Hi, good afternoon, everyone. I don't think this has been touched on. But Tom, I think in the prepared remarks, it was mentioned that, if I caught it correctly, April in the regional markets was trending well and better than March. And I think that's a little different than some of the patterns in some of the other companies that we've heard about. So could you talk about that a little bit more if I caught it correctly, and what might be driving that?

Tom Reeg, Chief Executive Officer

For us, we've gotten—your margins have continued to increase so that your rate of increase is not like January to March, but we're still improving. We've got properties like New Orleans that were under significant COVID restrictions that came off just before the Final Four in March. So we saw the benefits in April. Atlantic City has been particularly strong for us, even with construction disruption. So that's been a strong performer. Northern Nevada for us has just been incredible for going on, what, 18 months now. We've got some particular pockets that are strong and we're up against a very difficult comp in the second quarter, given this is when stimulus checks went out. But we feel good about compiling against those numbers.

Shaun Kelley, Analyst

That's great. And then you have two markets I wanted to touch on specifically one you kind of just did, which was, we've heard about a little bit of potential softness in Northern Nevada, and then also in the southeast, so maybe ex-New Orleans, which is a bit idiosyncratic to you. But any comments on just behavior in those particular markets? It sounds like I said, like Northern Nevada might be swimming along just fine, but just yeah, any thoughts there?

Tom Reeg, Chief Executive Officer

Yes, Reno and Tahoe for us have been stellar performers really since reopening. We could do better than a quarter of a billion dollars of EBITDA out of Northern Nevada in 2022, which was not in the realm of what we were thinking before we did the Caesars transaction. So the strength there is continuing, and setting for us the southeast outside of New Orleans. You're generally talking about smaller properties that whether they move up or down aren't going to swing our broader numbers much. So New Orleans is the key there.

Operator, Operator

Thank you. And our next question comes from Stephen Grambling from Goldman Sachs. Your line is now open.

Stephen Grambling, Analyst

Thanks. On the 1.4 million in new ads, the loyalty program through digital, how did the demographics of this group compare to what would normally sign up? And how is the frequency and spend per visit in the cross-sell that you referenced, or even mix of tables versus slots on property compared to the existing base of rewards customers?

Tom Reeg, Chief Executive Officer

I appreciate those questions, Stephen, but that's the level of granularity I'd rather not get into on our database.

Stephen Grambling, Analyst

Fair enough. And then should we interpret that the $200 million in cross-sell is purely incremental? So the like-for-like customer revenue as we look at Q1, we would back out that $200 million might pick that would be down. So it's really just the digital piece that's keeping trends strong stable in the industry as we attract a new customer.

Tom Reeg, Chief Executive Officer

Well, the $200 million is an annual number, so you're talking about $50 million of quarterly spend that gets up to that number; that's a pure addition through the digital channel. If you want to take it to the level of customers, would sign up and there would be some, if digital didn't exist, there would be in addition through Caesars Rewards. That's a derivative level; that's not useful to get into on the call. But you should consider there's $200 million casino revenue on an annual basis that's running through the business now about 70% of that into destination markets, the rest into regional.

Stephen Grambling, Analyst

That's helpful. And maybe if I can see one other one on that cohort, meaning, have you been actually trying to market at all at this point to that cross-sell, or is that something that could actually build the incremental cross-sells as we think about moving throughout the year?

Tom Reeg, Chief Executive Officer

I would say we've had baby steps in that direction to date that most of that number is naturally occurring. You should expect that to be a considerable area of focus for us when I talk about marketing to profitable customers. This is a group that really all came in the door in kind of a 120-day period. As I talked about that swamps what the rest of the organization does on an annual basis. So as we sort through them, you should expect that to be a target focus for us as we move forward in an area where we can drive revenue throughout the enterprise. Thanks, Stephen.

Operator, Operator

Thank you. And our next question comes from John DeCree from CBRE. Your line is now open.

John DeCree, Analyst

Hi, Tom, thanks for taking my questions. Just to follow up on some of your comments in the prepared remarks. First on the regionals. If you mentioned that margins ramped from the high 20s in January till we're 37% in March, and sounds like a lot of that was Omicron impact in January, the occupancy coming back in Las Vegas is a bit more tangible for us to kind of contemplate. Can you kind of talk about that margin ramp in regionals that you mentioned New Orleans normalized maybe that's a chunk of it? But kind of help us understand the ramp there. Was it just Omicron or some other stuff kind of working through as well as you ramp back up in the regionals?

Tom Reeg, Chief Executive Officer

It's just Omicron. Remember, John, in our regional markets, we have a number of destination markets, New Orleans, Atlantic City, Northern Nevada, that all would have had the same similar visitation and occupancy trajectory as Vegas had in the quarter. It's really a function of that.

John DeCree, Analyst

Okay, that's helpful clarity. And lastly, on the cutting back on the mass marketing or media spend at the digital level, where you really have seen your handle share unchanged or normalized. Was that surprising to you? Or anything about that surprising, and some of the resilience that you've seen? I mean, is that Caesars Rewards at its finest, or how would you kind of characterize that trend once you pulled back on that spend?

Tom Reeg, Chief Executive Officer

I think it's the effectiveness of the campaign that was developed by Chris Holdren and Sharon Otterman in digital that we started this in August with very little recognition from the average consumer that Caesars was associated with sports and sports betting. Certainly after the New York launch, there’s very few people that would be likely sports bettors looking for an app that didn't know that Caesars was a choice. It was really just a job well done in terms of getting our customer recognition up. You hook them into Caesars Rewards. We told you that what we've seen in Caesars Rewards is that creates a stickier customer, and we're seeing the benefits of that since we pulled back on mass market spend.

John DeCree, Analyst

Great. Thanks, Tom. I appreciate the additional color.

Operator, Operator

And thank you. And our next question comes from David Katz from Jefferies. Your line is now open.

David Katz, Analyst

Hi, afternoon, everyone. Thanks for taking their questions. Tom, if we could just go back to the strip asset row for a minute. I'd like to just be clear about there is a time period. And is that, should we consider that an outside time limit? In other words, could it potentially be sooner than that? Or is it necessarily six months?

Tom Reeg, Chief Executive Officer

Well, David, miracles happen every day. But my experience has been when you get a lot of lawyers involved, the work extends to whatever the maximum allowable deadline is. So if we finished one day ahead of that six months, I'd be very pleased.

David Katz, Analyst

Okay. Fair enough. And I just like to go back to one of your prepared comments around being, I believe the quote was meaningful free cash generator this year? Have you sort of put any order of magnitude around that or sort of walked across any of the approximate details to help us with our just sanity check our model?

Tom Reeg, Chief Executive Officer

Yes, I mean, we can go through offline. But if you think about round numbers, we've been run-rating, ex-Omicron, something $4 billion or better in EBITDA. You had about $2 billion in outflows between interest expense and lease expense, about a billion of CapEx and a billion of digital loss. Roughly speaking, in then the capital from asset sales would be excess that pays down debt now with half a million of EBITDA loss plus in front behind us in digital. As you look through the rest of the year, we should be a free cash flow producer on an operating basis after CapEx addition to the proceeds that we generate from asset sales. Brad, Brian and our team did a great job of managing through a heavy cash use quarter to where we come out in a good position and should be a significant free cash flow producer from now forward.

Operator, Operator

Thank you. And our next question comes from Dan Politzer from Wells Fargo. Your line is now open.

Dan Politzer, Analyst

Hey, guys, good afternoon. Thanks for taking my questions. So we've heard a lot of this earnings season about strong travel and leisure demand. I mean, I guess as you look across your portfolios and your properties, do you think that these properties in Northern Nevada, New Orleans, Atlantic City, those markets, you kind of mentioned, do you think they have a longer runway for growth from here than maybe some of the earlier to recover properties in some of your other segments?

Tom Reeg, Chief Executive Officer

I think that there's, you’re seeing a migration of the customers, right? When—and I think this is the crux of your question. When we had the reopening after the pandemic, people wanted to get out of their house they were trapped for quite some time. They were comfortable traveling, in a lot of cases limited amount, but they wanted to get out of the house, and they were comfortable going somewhere in their car. You saw this big burst of demand in regional markets. If you think about other times where demand was crimped for any reason in casinos, you see some substitution out of destination trips into regional markets. If you want to argue that there was some of that in 2020 and 2021, I think you've got a leg to stand on. As the picture surrounding the virus has gotten better, we've seen an increasing willingness to travel, willingness to get on a plane, go somewhere where you're staying away from home for 2, 3, or 4 nights. That's what you're seeing now in our regional destination properties in Vegas, in particular, and I think you've got some pent-up demand for group travel that we're really just getting into now. You're seeing wash rates come down considerably; I'd expect that to continue. You have people that were used to being on a plane going to group meetings that haven't really done that in two, two and a half years at this point. You're going to see that as the group calendar begins in earnest. That’s kind of another leg that we haven't seen yet.

Dan Politzer, Analyst

Got it. And then on digital, I guess, high level, I think about you guys have this big database, big omni-channel presence, all these trip properties. How do you think about leveraging this over time given, up to this point, you've been mostly sports-centric? Whereas I think right now, you're just kind of real-time rolling out your iGaming content? Like, is it reasonable that over time we should expect the mix to shift more to the casino and online casino side?

Tom Reeg, Chief Executive Officer

From where we are today, most definitely. I would expect iCasino to be a significant contributor to the profitability metrics that we laid out.

Operator, Operator

Got it. And then just one quick housekeeping. On corporate expense, I think that ticked down a bit, sequentially. And was there anything specific to call out there?

Tom Reeg, Chief Executive Officer

Good old Eldorado business model in effect, but nothing specific.

Operator, Operator

Thank you. And we’re about to close. Thank you for joining the call.

Tom Reeg, Chief Executive Officer

Thanks, everybody for dialing into the call, and we will talk to you following the completion of the second quarter. See you soon.

Operator, Operator

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