Thank you for standing by, and welcome to Caesars Entertainment, Inc. First Quarter 2024 Earnings Call. [Operator Instructions]. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Brian Agnew, Senior Vice President of Corporate Finance, Treasury and Investor Relations. Please go ahead.

Thank you, Jonathan, and good afternoon to everyone on the call. Welcome to our conference call to discuss our first quarter 2024 earnings. This afternoon, we issued a press release announcing our financial results for the period ended March 31, 2024. A copy of the press release is available in the Investor Relations section of our website at investor.caesars.com. As usual, joining me on the call today are Tom Reeg, our CEO; Anthony Carano, our President and COO; Bret Yunker, our CFO; Eric Hession, President, Caesars Sports & Online Gaming; and my colleague, Charise Crumbley, Investor Relations. 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 and inclement winter weather in our regional segment, plus a loss on the launch of Sports Betting in North Carolina. Despite these transitory issues, there were several bright spots during the quarter, including record Q1 occupancy in Las Vegas, driven by strong visitation, 23% OSB net gaming revenue growth and 54% iCasino net gaming revenue growth in our Digital segment and sequential improvement in operating results in our Regional segment each month during Q1. 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 3 of these projects will deliver strong returns on capital to drive growth in 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 2 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 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 on the Sports Betting side, 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 project -- 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 JV 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 is the kind of -- kind of answer the questions I would have if I was in your seat. If you look at the biggest buckets that this was kind of a kitchen sink type quarter for us, everything that could go wrong did for us. The biggest pieces are hold in Las Vegas, weather across the country that was well understood and you've seen with others and then losses around the launch of North Carolina in Digital. There's others that I'll touch on that are more minor, but there's well over $75 million of what's clearly onetime negatives for us in the quarter. So if I look at kind of the -- where we came out of the quarter and the way the business was operating fundamentally during the quarter, it looks more in my estimation, like a flattish quarter, notwithstanding the EBITDA that we posted. Starting in Vegas, our typical hold is a range of 20% to 23% tables in Vegas. We were 15% for the quarter. So 500 to 800 basis points below normal range. Midpoint of that is 650, and that's on $850 million of drop. So you can see that's in a very, very large piece of the shortfall in the quarter. This is -- table hold is a typical bell curve, 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 were -- are the reverse. I'm sure you -- as you're listening, you can think of some -- in…

[Operator Instructions] And our first question comes from the line of Carlo Santarelli from Deutsche Bank.

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

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

We have made 0 changes in promotional strategy.

Okay. Some of it perhaps -- Rio coming out. I imagine probably 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, the Q has -- your table game drop was down 10% year-over-year. And slot handle down about 7% year-over-year. Last year's numbers include the Rio. What are those numbers, excluding the Rio? I'm presuming, I mean there wasn't that much net revenue from Rio last year. It was like $55 million in the first quarter. 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. And recall, last year's first quarter was ginormous.

Okay. Great. And then you mentioned CapEx coming down. Obviously, the numbers you're talking about from an operating perspective would suggest attractive free cash flow generation the last 3 quarters of this year and through next year and earmarked presumably for debt pay down. Outside of deploying excess free cash flow to debt paydown and EBITDA moving in the right direction to reduce your 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 noncore to the business, non-operating casinos that could potentially be monetized at attractive rates where you wouldn't have to change your model much. And without getting too forward-looking, you shouldn't be surprised if some of those types of things start to happen in 2024 that our leverage reduction is not limited to only free cash flow.

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

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

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

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

Correct.

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

There was no -- there were no positives coming out of the weather. So there were no savings there. I mean you've known us long enough that we're constantly looking at how can we improve our margins. We're trying to not just be a cork in the ocean in terms of just being washed with where the economy goes. So we're always looking for efficiencies, and that's a testament to our team who has been together a very long time knowing we're in an environment that's generally inflationary, we're in both Vegas and Atlantic City, where our biggest union exposure is dealing with increased costs, and we don't tend to just eat that. We intend to improve the business from an operating perspective, become more efficient and deliver growth. And that's our expectation as we move forward.

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

Yes. We haven't disclosed our current structural hold, but we've set the target at 8.5%, and we're well on the way there. Tom had referenced the increase in the Parlays. But on top of that, we also have increased of the people making Parlays. They're making more legs, which has a compounding effect. And so we're very pleased with the progress we're making. And as we mentioned, absent those 2 large event outcomes, we would have seen even a larger increase year-over-year than what we did. What we were able to achieve.

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

So Tom, can you help me with some of the numbers that you listed out in your prepared remarks. I got somewhat confused. So -- and that's not difficult to do. But I thought you said $75 million kind of total in terms of weather-hold losses around North Carolina. But then I thought I heard you say Vegas was kind of tied to a $70 million hold the rest of the year. So just trying to reconcile what that -- make sure I have that $75 million total impact, right? And then maybe how that broke down a little more between Vegas-Regionals-Digital?

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

Okay. That's perfect. That makes sense. And then Tom, you indicated you guys will start to go on the offensive as or on offense as your CapEx is reduced. And you mentioned that, that means you could look at external growth opportunities. So I guess the simple question is what do you consider a growth opportunity these days?

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

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

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

I don't have anybody else's numbers yet in terms of the quarter. Our hotel revenues are up. Our food and beverage revenue was up about 14%. I'll be surprised if that's lagging the market.

That's ex Rio, I assume?

Correct.

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

I'm not going to help you on the clues. I'll tell you, Centaur is -- would certainly not be described as a nonoperating casino generating cash flow. So that's not part of it. But there's a lot of assets in this company that don't make it into your sum of the parts that have real value that we can realize and you shouldn't be surprised if we start to put some of them on the board in '24.

And our next question comes from the line of 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. And maybe just touch on visitation as opposed to spend per visit trends?

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

Got it. Got it. And then just curious, what are your expectations today around VICI exercising its call option for Centaur?

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

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

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

The partnership roll-off is significant and material. I'm giving you -- we grow like the market grows. We're growing in excess of that. And that's where I said we can argue about is $500 million the full year of '25? Or are we just short of it and we surpassed it early in '26? I would say the jury is out there. The argument that we're not going to get to $500 million. The math does not support that at this point.

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

Yes, they are chunky and kind of roll off in that -- the bulk of them in that '25 time frame. But also note, again, whether that's a full year of '25 or its beginning of '26, it's a point in time, and we're going to continue growing beyond that.

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

And our next question comes from the line of Stephen Grambling from Morgan Stanley.

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

Yes, Stephen, I'd say we're always on defense on costs. And we are -- you should presume in a quarter like this, after the run that these businesses have had that we would be going to our local leaders and saying show me how we can tighten further, either by generating more revenue or more or fewer costs so that it's EBITDA additive. I'm not in the habit of coming up with a pithy name for that type of program. And laying out what those targets would be. But you should expect that we have initiatives in place that are well into 9 figures that we would anticipate flowing through the business by the end of this year. And that's partly just that's what we do, but it's also -- we recognized that growth is going to be not as easy to come by in the brick-and-mortar as it's been coming out of COVID. And we intend to continue to grow. So you should expect that's ongoing. I don't have a good acronym for it, but expect that you're going to see that flowing through in the coming quarters.

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

Correct.

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

I wanted to just dig in on -- or go back to digital for a second. Some of the numbers given in the prepared remarks on both OSB growth and iGaming are obviously super compelling. They don't totally tie out some of the disclosures in the 10-Q. I think some of this has to do with what you're seeing in maybe the brick-and-mortar side of the Sports book business or maybe the way that some of that played through with Super Bowl. Could you help us square some of those because, again, like I think some of the sports betting numbers, in particular, that were quoted -- on the OSB side, we're up very, very strongly. But we see in the disclosure, at least actual volumes were on Sports Betting handle were slightly down. So could you help us with that a little bit?

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

And Tom, just to clarify that Retail Sports Book hold was actually negative for the entire quarter? Was there the outlook for that...

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

Okay. Okay. That's helpful. And then look, I know this one may be a little bit of the dead horse. But just to go back to the Las Vegas volumes. I mean, I think the bottom line here, Tom, is when you see the numbers that you see and you strip out or adjust for the Rio, it really sounds like you don't believe there's much of a volume or a consumer challenge or change here at the margin. And I just kind of wanted to A, double check that and B, just get your thoughts on kind of broader market share because it does feel like what we see just mostly through industry statistics, is share gains particularly consolidating it like the top end or some of the luxury and more Baccarat focused properties on the market. How are you kind of adjusting or moving around the portfolio to compete or to hold share in this environment today?

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

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

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

John, same comments on group and convention as we talked about on the last call. For the year, we would expect group and convention to be up in '24 versus '23. That segment set records in 2022 and 2023. In the first quarter, we were down a little bit as a percentage of occupied room nights. We were at 19% this year versus 21% last due to CON/AGG. But the pace for the remaining quarters 2Q, 3Q and 4Q looks very good.

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

Short answer, John, is yes, we think there are but those that are of -- those that make a difference in terms of talking about in terms of scale would require equity as a piece of a transaction and in the current neighborhood, I'm certainly not a seller of my equity for any reason.

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

On the Digital side, can you just remind us or kind of help us think about what's additive versus cannibalization after you launched your casino brand? And could this just be kind of a step forward for another thing? How many brands do you think makes the most sense in your consumer data?

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

And then coming back to margins. I know before you've said in some of the markets you need to grow revs, I believe, 5% to hold margins. Does that broad statement hold true? Or could you grow slightly lower than that and still keep margins flat on a year-over-year basis?

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

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

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

So the only place we have a similar undeveloped real estate piece is Scioto Downs in Columbus, which could be a longer-term opportunity, but that Pompano development has been, what, 5 plus years in the making at this point. Slow developing, but it's gratifying to see what it's doing for both revenue and EBITDA at that property.

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

No, not really, other than what I've discussed in terms of opportunities on both revenues and expenses that we are targeting based on the list we put together at the beginning of the year. There's nothing. It's a lot of small stuff that adds up to a big number that we need to go block and tackle, and that's what we intend to do.

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

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.