Q2 2021 Caesars Entertainment Inc Earnings Call

August 3, 2021

[music].

Ladies and gentlemen, thank you for standing by and welcome to Ccr's Entertainment incorporated 2021 second quarter earnings Conference call. At this time, all participants lines are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

Ask a question during the session you will need to press star 1 on your telephone.

Now like to hand, the call over to your speaker today, Mr. Brian <unk> Senior Vice President Corporate Finance Treasury and Investor Relations. Please go ahead.

Thank you point out and good afternoon to everyone on the call and welcome to our conference call to discuss our second quarter 2021 earnings.

This afternoon, we issued a press release announcing our financial results for the period ended June 32021, a copy of the press release is available on the Investor Relations section of our website at Investor Dot Caesars Dot com.

Joining me on the call today are Tom Reed, 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, 1 should not place undue reliance on them forward.

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.

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 Companys web site at Investor day at Caesars Dot com by selecting the press release regarding the company's 2021 second quarter financial results.

Starting with our earnings press release today, we are now breaking out sports and gaming into our new Caesars Digital segment. This segment includes sports betting I gaming in poker.

And finally, as we mentioned in our press release today, we have divested London clubs. So starting in the third quarter of this year. Our former managed an international segment will just reflect our managed operations on a pro forma basis I will now turn the call over to Anthony.

Thank you, Brian and good afternoon to everyone on the call. The second quarter of 2021 represented a consolidated EBITDA and EBITDA margin record for the company.

Starting with Las Vegas demand trends accelerated meaningfully versus Q1.

We generated $425 million of adjusted EBITDA in the quarter and 436 million of property level EBITDA, excluding real rent payments EBITDA.

EBITDA improved 162% on a quarterly sequential basis EBITDA margins were 59%, excluding the Rio rent payment of 200 basis points versus Q2 of 2019.

Total occupancy for Q1 was 89% with weekend occupancy, 99% and midweek occupancy, 85%. We delivered these outstanding Las Vegas segment results, despite operating with capacity and social distancing restrictions for the first 2 plus months of the quarter.

In addition, we had minimal group business and weak table hold in the quarter.

Looking ahead, we remain encouraged by booking trends for the second half of 'twenty, 1 and into 2022, we're expecting groups to start returning to Vegas with each month getting better as we progress throughout the second half of the year.

Group and convention revenues on the books for the second half of 'twenty, 1 versus 19 are currently pacing up approximately 18%.

2022 group revenues on the books are pacing up approximately 15%.

Caesars Forum continues to exceed the original underwriting expectations with over 170 to 176 events booked currently currently representing $1.7 million room nights and $657 million of revenues for all future periods 7.

76% of this business is brand new to Caesars.

Turning to our regional markets operating results improved significantly versus Q2 of 2019 with EBITDA growth of 56%, Excluding Lake Charles which remains closed EBITA margins in our regional segment were 44%, excluding Lake Charles and expanded 280 basis points versus Q2 of <unk> 19.

On a same store sales basis, we achieved the highest EBITDA and EBITDA margin in the regional segment in the history of the company.

26 regional properties set all time quarterly EBITDA records with 31 properties setting all time EBITA margin records during the quarter.

And our newly disclosed teachers digital segment, we generated revenues of $117 million in Q2 of 'twenty..1. We currently operate sports betting in 17 States plus Washington, DC 13 of which offer mobile sports betting our apps are now rebranded to Caesars Sports book and our new marketing campaign launched August.

<unk>.

We have now integrated our digital offerings with Caesars rewards and our customers can interact with us both online and in our physical casinos, while earning loyalty rewards.

On the development front construction is well underway on our new land based facility in Lake Charles the significantly upgraded properties should be completed and ready for business in the second half of 'twenty 2.

In New Orleans construction work has started on a new hotel tower and property upgrades in Las Vegas, the remodeling of the entrants to Caesars Palace has begun and we look forward to a dramatically improved arrival experience later in the year.

In Indiana, we are well underway with our casino expansion of Indiana Grand which should be finished by January of 2022.

We've come a long way in a short time, our operating teams are collaborating and sharing best practices across the enterprise. This is leading to continued efficiencies. We believe our margin gains are sustainable and will continue to look for incremental cost savings opportunities.

I am extremely proud of our operating teams their execution and their exceptional guest service during the second quarter with that I'll now turn the call over to Tom for some additional insights on the second quarter.

Thanks, Anthony and good afternoon, everyone, what I spoke last quarter.

And throughout the day I would expect us to hit $1 billion in EBITDA in a quarter in 2021 I wasn't thinking it was going to be second quarter I was actually I think it would be this quarter.

So we're a little bit ahead of schedule.

And as you look at the.

Quarter, Anthony touched on some of this but remember that.

Particularly with mass mandates coming back in Nevada, remember to Las Vegas numbers that you are looking at included a little over 2 months of social distancing.

<unk> occupancy and masks.

<unk> and restaurants on the casino floor plus masks.

And we were able to put up the numbers that we put up in the quarter. If you think about drags in the quarter, we held poorly in Las Vegas.

Loss from the London clubs business flow through in the quarter, because we didn't close the transaction until.

The middle of July.

And Lake Charles was closed.

Rebuilding post hurricane.

Drags that I look at in the quarter were about $40 million in aggregate.

Vs. What you would expect to see normally we are 89% occupied in Las Vegas, If you look.

Forward.

It started in May may was the best.

<unk> in the history of Las Vegas for Caesars from an EBITDA perspective June was better than May and then July was better than June.

And I would expect that third quarter occupancy will finish significantly ahead of second quarter's 89%.

Brian touched on.

That we're presenting.

Financial value can see Caesars digital on its own youll be able to measure our progress I will talk more about that in a moment, you'll be able to see that bricks and mortar business and now you can see the managed business, which was in that <unk>.

<unk> that the historical Caesars used to have as those managed international and other but you can see that that business generates.

<unk> generated a little over $100 million of annual EBITDA and that will grow when the southern Indiana transaction closes because we will get a management fee and licensing stream from the Cherokee tribe at that property.

If you look at the bricks and mortar business I touched on Las Vegas, If you look at it on a consolidated basis as we sit here today, we're run rating well north of $10 a share in free cash flow.

Significant ramp from <unk>.

June to July obviously, we see the same public health situation that you see.

There could be bumps along the way in terms of masks.

Yes.

Protocols that we need to follow but the demand is exceedingly strong and has continued to build so we feel very good about where we are in the bricks and mortar business.

Yesterday morning, we launched Caesars Sports book.

We had we closed the William Hill transaction.

Little over 100 days ago, and we have spent and that was kind of a standing start.

Does the rules in the U K, we really could not do much in terms of per.

Preparing for when we would close the transaction and we wanted to be in position to launch ahead of football season, So what youre seeing youre going to see is a slight leaning the entire organization into this vertical you see the.

The AD campaign with Jb's move patent Oswald our first national commercial air during the USA mens basketball game Thursday night.

The Olympics you're.

We are activating the entire enterprise so connecting to Caesars rewards more than 60 million people.

Tiered levels of service ability to earn and use <unk>.

On or offline, we're activating our player development teams across the organization.

To sign up new accounts, we're activating our entire workforce, our frontline labels to labor force will each have their own individual QR code and we will be able to sign up customers and be incentivized to help us do that so this is really a true lean in by this organ.

Nation that has not happened before.

The numbers that you see and that we've generated before had been in this.

Kind of lame Duck universe, where we had bought Caesars we had the partnership that needed to be restructured and then we had.

The time between announcing the William Hill deal and closing it where.

The business that we were doing was kind of just incidental not enough real focus. This is truly leaning the whole organization and if you will in terms of how I think about it I look at this like I would look at any business opportunity within the business.

Think that we can generate cash on cash returns in this business at maturity.

In excess of 50% of what we will invest but we realized net where we operate in a world that is competitive and that we've got to jump in and compete so you should expect us to spend over $1 billion in the next 2 and a half years to build our customer base.

I can't give you a more precise number because a lot of the acquisition spend is success based but I would expect it to be over $1 billion and I would expect to add maturity be generating at least 50%, possibly approaching 100% of that in EBIT.

And the difference in terms of a bricks and mortar investment.

If I could find a brick and mortar investment like that we would do that.

Every day of the week.

The differences youre going to see that flow through our income statement, which is why it's important that we're able to separate this and show you what is the brick and mortar business look like versus what it what is the digital business look like but with us free cash flowing in excess of 10.

$10 a share we think we have plenty of capital to invest in this business. We know this is not going to be just a straight line up.

We expect that we will make mistakes, we'll have to we'll have to continue to evolve all from our marketing strategy and a technology strategy, but the tools that we have in our portfolio to prosecute this opportunity I'm really excited to play this hand and.

We're just getting started as of yesterday.

And with that I'm going to turn it to Brad to talk about book.

Liquidity.

Thanks, Tom.

Our record setting operating performance in the second quarter generated over $500 million of free cash flow, which in turn we applied to retire our remaining convertible debt and make a onetime payment to acquire the license rights for planet Hollywood in Las Vegas in perpetuity.

This combination of debt repayment and license fee buyout results in over $40 million of annualized free cash flow and set the table for further free cash flow benefits from deleveraging and refinancing activity.

With investment plans for Caesars digital now formalized our 2021 calendar year capex moves to $500 million to $550 million, which includes approximately 100 million for Caesars digital and acceleration of spend in New Orleans.

Net of growth Capex, our annual core Capex remains approximately $400 million.

We commenced a sale process for William Hill's non U S assets in the second quarter and expect to announce a transaction no later than early Q4 of this year.

With that I'll turn it back to Tom.

Thanks, Brad Bueno with that I will turn it back to you for question and answers.

Thank you.

If you would like to ask a question. Please press star 1 on your telephone.

Your first question is from <unk>.

Risks of Jpmorgan. Your line is now open.

Good afternoon, guys congratulations on the strong results.

First question Tommy.

And for all of you going back collect Vegas.

If you look at sequential flow through in Las Vegas.

That 75%.

Which is remarkable and just seeing 50% margins on a page.

It also sort of remarkable can.

Can you talk about is there an operating expense lag relative to revenue covering that there is.

Is there still.

With respect to labor day, or a way to quantify that.

Yeah.

The answer to your first question Joe is no not really I mean, we're.

We're having challenges across the country in terms of filling.

<unk> positions.

Sure.

To the extent that we sell them.

Also seeing revenue lift as I said July was.

Stronger than June which was stronger than may so.

<unk>.

I would tell Ya Vegas margins in July were stronger than they were in the second quarter. So I think you should expect us to be.

In that 50% neighborhood for the foreseeable future.

Great and then.

1 thing that stood out to us in the quarter as well Tom.

That was digital.

With positive EBITDA.

Even with the investment.

Is there a way that you can sort of think about the next few quarters.

I know you are trying to build the business and I heard the level of investment over the next 2 and half years.

Thank you.

Excess fleet.

Still be EBITDA positive each and every quarter or you really look at it starting now with the new launch.

Yes.

Before you reap the benefits of incremental EBITDA.

Youll see a little bit of an EBITDA loss book before you kind of get to those great returns that you're targeting.

Should expect digital to be a material.

EBITDA loser, starting this quarter as we were launching.

In addition to all the customer acquisition activity that we intend to do we are launching a new brand. So youre talking about a nationwide advertising campaign.

In addition to everything you do.

And social so youre talking about TV, both national and local and some expensive markets I would expect to be you should expect that billion plus of spend.

To run through that EBITDA line over the next 2 and a half years or so and it should be front end loaded.

Great. That's helpful. Thank you.

Your next question is from Carlo Santarelli of Deutsche Bank. Your line is now open.

Hey, Thank you.

Tom kind of a bigger picture question and really just playing on the success you guys are having right now obviously, 90% occupancy in July 89% quarter, the EBITDA numbers youre, putting out the margins youre putting out.

I guess, you don't Las Vegas as a market has migrated more towards group convention business and whatnot has this period made you guys at all think about the go forward strategy and the use of kind of group and convention type elements to fill rooms.

Just given how strong it is at this point I mean, you talked about some of the tailwind obviously that you still expect to see coming out of the business have you guys thought about it all the way the model is configured in terms of room night mix on a go forward basis.

Yes, Carla Thats a good question I would say.

As you know we are a company that kind of led to mass dictate what state what's the correct.

Path to go down I fully expect that that convention customer coming back.

Is going to help us in terms of rate compression and when you see what's missing even running 89% versus what it was 2 years ago 90, 798%. It's an extraordinary amount of EBITDA that is left on the table So high.

I think there is absolutely.

Significant addition, as that group business comes back it is heartening to see what we can do without that business, though because in the second quarter.

We had very little group business to speak of.

Nothing thats, even statistically significant and we're still able to post the best quarter that Caesars had ever posted from an EBITDA perspective.

Understood. Thank you and then if I could just follow up you talked a little bit about kind of what I think the way I interpreted your comments was a.

Stabilized Caesars digital business that was doing $500 million, 2.1 billion of EBITDA at some point in the future.

Just holistically as you think about those numbers what are you kind of envision.

Mix between kind of the casino piece versus the sports piece and how do you think about it.

Great.

I mean, I think that if I'm looking at the current landscape.

That day in the timeframe that I am thinking of I think they end up share.

Early evenly split because there is fewer casino states available than there are sports on a per state basis, I think I casino is considerably more profitable than sports.

Great. Thank you very much that's helpful.

Your next question is from Barry Jonas of curious Securities. Your line is now open.

Thank you.

Tom Your comments on July sounds incredibly strong, but I just wanted to be very clear around the increasing.

Pieces for Covid, and specifically, the new Nevada masked mandate.

The impact to the outlook or timing for Vegas recovery, whether Thats group International.

Just wanted to.

Get any color there.

Yes, Barry this is all real time right the mass mandate came into.

<unk> being less than a week ago.

What's going on now with the mass mandate as far.

Far less onerous in terms of restrictions that we have dealt with in the last quarter.

I don't know what impact that will have ultimately on group.

Roofs coming back.

We had the.

Widely leach internal memo last week on <unk>.

Cancellation rate, which I should hit on that.

What that measures is a week's worth of reservations, if I get 10000 reservation and.

<unk> 4700, cancellations, that's a 47% cancel rent versus what's typically.

27%, it's not we went from 98% occupancy at a 50% occupancy so we fully expect to remain.

In the low to mid nineties.

Occupancy in Vegas.

Through.

This current situation with the Delta vary.

Got it and then just.

Are we thinking about land based expansion here at Florida.

Chicago's that was out there and I know you are starting to do something in Nebraska.

So I've got no interest in Chicago.

Florida, we have already operate in Pompano, we've got a significant.

Joint venture development that's.

Still churning at that site, Nebraska was a unique opportunity in net we have.

Significant operations in Council bluffs, right on the Nebraska, Nebraska border.

Could be impacted by <unk>.

Nebraska legalization and doing the Columbus track allows us to participate in sports.

Online to the extent that we're able to in that state so for a modest investment and entry into a state where we think we can get a good return out of that investment that was a very easy decision.

Perfect Alright, thanks, so much and congrats on hitting the $1 billion.

Thanks Barry.

Your next question is from David Katz of Jefferies. Your line is now open.

Hi afternoon, everyone. Thanks for taking my question I appreciate it.

Look we've been walking around with a $10 a share free cash flow.

Bogey for interest.

I mean really quite some quite some time.

How do we think about.

Given the pieces and the way the table is shut now where it could go.

From there and some qualitative way.

Not necessarily asking for guidance.

So.

We're <unk>.

Still missing.

Group business in Las Vegas, we still see.

Plenty of opportunity in the portfolio in terms of.

Areas, where we could tighten up.

So.

If you.

Do you think about it in broad terms I've got to do.

Portfolio of $5 billion of EBIT dollar out of the bricks and mortar business to be $10 a share in free cash flow.

Told you that we're <unk>.

Significantly in excess of that at the current run rate and we see further upside from there.

Lucia David.

Hi.

Did for a moment and it's.

Yes.

Much more likely on on my side.

If I may day.

Just W work from home.

Look if I may follow up please.

With respect to labor.

It's been an area, we've all been hearing quite a bit about and read them quite a bit about in hospitality and the challenges of engaging people and the cost thereof.

Im.

Not sure if you've talked much about that but.

How do you see that we've heard less of a problem in Vegas than other places but.

How much of an issue is that and of course your day.

I don't think its less of an issue in Vegas I think it's an issue.

Everywhere and I'm sure our friends at MGM will concur tomorrow.

Later this week.

It's difficult to find.

Enough frontline employees and it does impact what youre able to do and we're behaving as if there isn't some magic date, where it's all going to be better.

Hopeful that as.

Unemployment supplemental unemployment rolls off.

That the picture will get better, but we're doing incentives were raising wages were doing job fairs were doing.

Referral bonuses were doing everything we can defined as many employees as we possibly can.

In a.

Regional property.

Tends to be easier because youre not hotel dependent.

Whether I have.

300 hotel rooms opened in our regional property versus <unk>.

175.

Really doesn't make a huge difference in materiality to my EBITDA in Las Vegas, that's an entirely different animal.

So we are our team in Las Vegas are doing a fantastic job of managing through this but it's there's a lot of stress in the system and Theres times, where we've got a.

Pull back on the throttle to make sure that the customer experience endures.

Perfect.

Thank you.

Your next question is from Steve.

C&C of Stifel. Your line is now open.

Yes, Hey, good afternoon guys.

Tom So if I start with the digital side of things.

Obviously, we've seen all of these sports betting companies out there and they are spending like crazy to try and gain market share and now theyre going have you gotten out there throwing around.

A decent amount of money as well so I guess the question is what gives you the confidence that.

The $1 billion spend will eventually turn into $2 billion or some some higher number because that competitive environment stays pretty pretty cut throat at this point.

Steve if it turns into $2 billion, who are having.

A very good experience in terms of gathering customers because.

Away from this initial brand launch.

Most of what Youre doing ends up being success based as you bring new depositors into the system.

And.

Look my view is.

This is a unique situation in that you've got a bit of the wild west where.

Things opened up.

Quickly and everybody is looking for where the customers are.

If you look at the companies that have very large databases coming into this or even look at the ones that have been successful converting smaller databases, it's because they know where the customers are we've got over 60 million people in our database we have.

So wherewithal to serve the highest level customer down to the lowest level customer we have a well developed to rewards program in place that treats customers too.

Increasing levels of service.

As their value to us increases thats all that mouse trap has already been built it's never really been used.

In the sports business anywhere.

Because.

You have companies that are off to a quick starts here that just don't have that kind of database and that kind of system and <unk> got others like us that are.

Kind of just getting our.

Ducks in a row, but I.

I look at it like we can create.

If we lean into this appropriately we've got 54000 salespeople in our company.

That work with customers every day can open accounts, we have dedicated player development executives that deal with building relationships and expanding those relationships every day and have for decades, we have physical.

<unk> that we can offer.

Tie into that business that I think position us well ultimately for success.

And that's not to say that others are not going to succeed or that our paths will be as I said just straight up but.

I think we've got everything we need to be a success in this space and we really kicked it off yesterday.

Okay got you. Thank you for that and then.

If we go back to the margin side of things. It seems like you think current margins are pretty sustainable even down the road as the world hopefully goes back to normal but whats the biggest delta that you guys are seeing today to drive those margins so much higher relative to pre pandemic time, because it wanted to.

Is it 1 or 2 things or is it up.

Is it 100 different things.

Or is it adjusted the businesses were closed down that gave you guys a chance to look at every single thing under the roofs or is it.

Now the previous management teams were just filling out.

Levi.

I'll leave the inept.

Comment alone, but that's everything else that you.

Laid out there is peace, we operate with less labor than we than the historical company operated with both at the property and corporate level, but it's really.

The attention to detail the focus on every P&L now give you. An example of this this quarter.

We were cash.

Operating income positive in food and beverage for the first time in the history of Caesars.

So just on a quarter over quarter basis.

That's over $60 million cash swing, so that's a quarter of a $1 billion a year.

And Thats.

How are you pricing your day.

Your product how are you yielding it how are you managing your labor how are you managing your marketing and what are you, giving away. It's all sorts of different areas that roll up into.

Big numbers. So we're a big company now so 53 properties, if everybody finds 5 million Bucks a quarter of a $1 billion.

We have historically been a good company at 5.5 million Bucks.

Okay, great. Thanks, I appreciate it.

Your next question is from Thomas Allen of Morgan Stanley. Your line is now open.

So as we think about the digital business.

As the market matures.

Customer acquisition is becoming less of a driver in product picked up some of it.

You launched your new.

Sports book yesterday of the new App can you talk about some of the key features of it.

Tim.

Yeah.

Well, yeah, we encourage you to download it and experience it yourself, but.

It has very deep bedding markets, it's very fast <unk> is great.

It's going to tie into Caesars rewards here and we think it's the best in class App looking at funding and withdraw and the clarity for any sports better and.

And then you layer on top JV is moving in a great marketing campaigns and tie that together not only online but across our brick and mortar portfolio.

And we like our digital mousetrap.

Alright, Thanks, Brett and then just a numbers question. So when you announced the volume held deal in 2020, you said you expected sports brand items delivered $600 million to $700 million above non try 21.

Is that still a good baseline or how you're thinking about it.

Thomas with the with the rollout of the Caesars Sports book yesterday in our new strategy for marketing and investment I think promos.

So net revenue could be below that 6% to $700 million as we invest in the business, but it doesn't diminish from the long term growth opportunity at all but.

But relative to that initial 6% to $700 million our attempt to increase.

And be more competitive in the market could impact that net revenue line. This year, yes that was the business in the.

In the World, where it was kind of just wandering in the wilderness without the.

The way to the business behind that change yesterday, I will say were $2.60 year to date, obviously, we're coming into the seasonally strongest period.

So you should see those revenues start to accelerate into the all important Q3.

Alright, Thank you all.

Your next question is from John Decree CEB I E. Your line is now open.

Hi, everyone. Thank you for taking my questions.

To stick on the digital theme.

Perhaps a 2 part question Tom a lot of the.

The discussion so far today has been on the vast probably underappreciated opportunity of mining your database and brand, but you also have a lot of other customer acquisition channels that were assembled over the last couple of years between you and your predecessor, William Hill like ESPN CBS agreements Daily Fantasy style I was wondering if you could talk a little.

About how those kind of fit into the strategy going forward and have a tag along to that if there is other media partnerships channels.

Customer channel that you could look at to bolt on going forward or if you think you've got everything you need.

Youre right John we have.

Numerous league and team partnerships, plus the ESPN and Cvs Partnership's net.

Give us access to <unk>.

Data bases that are.

Certainly extremely interested in whatever team or sport, they're following and likely sports betters and part of what we're doing here. In addition to Caesars rewards, we're leaning into all channels into our own database.

Net databases of partners that we have.

Transactions with and then out into that wild west for people that we don't have a relationship with yet.

We are looking to build a leader in this space and we think.

Tying it to everything that we've described.

Should make it an attractive option for players.

And.

And the second part is there other things that youre looking at or potential.

Tuck in M&A, whether it's additional technology or other avenues.

You will continue to look at going forward.

Nick Technology will continue to evolve for.

As long as we're doing this so if there are.

Areas, where tuck in acquisition makes sense to advance the ball on the technology side, you should expect we would look at that if there is some brand or M&A opportunity that allows us to improve our position in customer acquisition, you should expect us to look at that you've known as <unk>.

Long time, we're looking for how do we drive the most value for our stakeholders.

And.

The answer the answer can change over time, but as we sit here today.

We think we've got everything we need to launch with strength and then to add to that over time as we built the business.

Alright, good thanks, Tom and good luck on the rollout.

Thanks, John.

Your next question is from Chad Beynon Macquarie. Your line is now open.

Hi, good afternoon, Thanks for taking my question.

Tom given your.

Las Vegas margin success in the quarter of running over 20000 rooms in a much higher EBITDA result than any of US were expecting I'm wondering if anything has changed in terms of your thinking of divesting an asset out there and the timing around that thanks.

Yes, I would say nothing has changed there we still expect to sell a.

A vegas strip asset.

Single asset and I would expect that sale to take place in 2022.

Great and then with that cash or I guess, the near term cash of selling the U K <unk> business what are your plans with the.

The cash that you have on the balance sheet, you've talked about what the digital vision will cost, but youll still have some excess cash, particularly given the $10 of free cash flow projection.

With that.

You can expect us to be deleveraging, we want to drive our leverage below 4 times on a gross lease adjusted basis.

That.

In the relatively near future for us and I look at it like.

If you think about something north of $1 billion of investment into sports and online.

I think between just the proceeds out of the assets that we're going to sell out of that came with William Hill, I think thats going to match up pretty nicely with what we need to spend.

Sports and online to build that business in the U S.

Great. Thank you very much.

Your next question is from Daniel Adam with capital markets. Your line is now open.

Hi, good afternoon, everyone. Thanks for taking the question.

For Caesars digital it sounds like that segment includes both your retail sports betting business and online is that correct.

That's correct.

Okay.

Can you break out what online only revenue and EBITDAR was in the quarter.

No in that segment.

No I can't.

Okay.

And then Tom ill take another stab at this but I'm wondering if you have a long term target online sports betting and gaming market share number in mind that you'd be willing to share with us.

Also I would expect us to be.

A leader in mobile market share among certainly among the leaders in both sports and online.

And Daniel.

Daniel given that we operate in 13 states mobile and now we've rebranded the Caesars Sports book the bulk of the growth obviously for the sports business is going to come online over time and as new states legalize.

Okay that makes sense fair enough alright, thanks, guys.

Your next question is from Shaun Kelley of Bank of America. Your line is now open.

Hey, good afternoon, everyone.

I just wanted to go back to the Vegas environment. Tom You gave some really great color on.

Sort of your occupancy thoughts and I was wondering if you could sort of give us a little bit of color on what youre seeing on the right side of the equation in the past.

Yes, there has been some volatility there and it's been competitive but obviously.

What youre seeing now is really different from the consumer. So it was just kind of curious on what youre able to see out in the future and maybe how that trended across the quarter as well.

Yes for the fast.

A few months, we have seen higher rates.

Occupancy that climb to equal prior year level, we would expect that to grow further and faster as group business.

Comes back.

Fairly.

Comparable from a rate standpoint over the last call it 2 and a half months to.

Prior year, a little bit ahead.

And historically, we have seen some seasonality in Vegas, but obviously, that's been driven a bit by the group business.

The booking windows can be sure, especially now, but just any any thoughts on sort of let's call. It the fall progression as some people may add back to work in schools, maybe more back in session that trade off in August relative to sort of the upside opportunity as you probably see the group calendar fill in post.

Our day.

Yes, I am expecting to be back toward more normal seasonality in Vegas.

Through the rest of the year I would expect you'd see the same holiday softness that.

You typically see on a relative basis.

And we'll see what happens in terms of.

Group cadence coming back, but I would expect we'd be certainly in 'twenty 2 I would expect.

Kind of a normal year end seasonality in Vegas.

Great. Thank you very much.

Your next question is from Stephen Grambling of Goldman Sachs. Your line is now open.

Alright, Thanks, I've got a couple of follow up questions on the digital side I guess, starting with the database. How do you think about the overlap of sports betting customers versus <unk> gaming versus kind of the existing total rewards database do you have any sense for how much of your total rewards customer base, maybe overlapping with peers, where you may be pushing for a customer who perhaps.

We can already been caught.

I don't have any real insight into what's in others databases, but I'd tell you.

With the amount of.

People in ours that day.

That database has been built over.

20 years in mind I would expect that.

A substantial amount of the gambling customers.

That everybody is searching for is in our database and has.

Our relationship with us so giving them.

And ability to stay home and not look elsewhere is a key piece of what we're doing here.

And then perhaps on the regulatory front I know you mentioned you always follow the math I guess, what's your strategy and willingness to pursue states, where taxes <unk> license fees or material higher do you need to be in those markets to get national scale or are there other ways to create value.

Youre going to look at each state on its own there is going to be.

Envision scenarios, where there will be states, where it's just not economic to participate I haven't seen 1 of those yet so you should expect us to be.

Active everywhere, we can be.

<unk>.

There are states that you could miss or if it's impossible to make money, but the reality is if.

If you look at the history of the business.

In states, where the initial tax structure was.

Difficult.

There is history, where those have been adjusted you can participate in that if youre not involved on the front end.

Helpful. Thanks, so much.

Thank you.

Alright, Thanks, everybody, we'll talk to you again.

After third quarter.

And this concludes today's conference call. Thank you for participating you may now disconnect.

Yes.

[music].

Yes.

Sure.

Thank you.

Yes.

[music].

Okay.

[music] strength.

Great.

[music] accounts.

Okay.

[music].

Yeah.

[music].

Sure.

Okay.

Yes.

[music].

Ladies and gentlemen, thank you for standing by and welcome to see source Entertainment incorporated 2021 second quarter earnings Conference call. At this time all participants lines are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

To ask a question during the session you will need to press star 1 on your telephone.

I would now like to hand, the call over to your speaker today, Mr. Brian <unk> Senior Vice President Corporate Finance Treasury and Investor Relations. Please go ahead.

Thank you point out and good afternoon to everyone on the call welcomed.

Welcome to our conference call to discuss our second quarter 2021 earnings.

Joining me on the call today are Tom Reed, our Chief Executive Officer, Anthony Carano, Our President and Chief operating Officer, and Bret Yunker, our Chief Financial Officer.

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.

Dr. Caesars dot com by selecting the press release regarding the company's 2021 second quarter financial results.

Starting with our earnings press release today, we are now breaking out sports and I gaming into our new Caesars Digital segment. This segment includes sports betting I gaming in poker.

And finally, as we mentioned in our press release today, we have divested in London clause. So starting in the third quarter of this year. Our former managed an international segment will just reflect our managed operations on a pro forma basis I will now turn the call over to Anthony.

Thank you, Brian and good afternoon to everyone on the call. The second quarter of 2021 represented a consolidated EBITDA and EBITDA margin record for the company.

Starting with Las Vegas demand trends accelerated meaningfully versus Q1.

We generated $425 million of adjusted EBITDA in the quarter and $436 million of property level EBITDA, excluding real rent payments EBITDA improved 162 percentage on a quarterly sequential basis.

Our margins were at 59%, excluding the Rio rent payments.

200 basis points versus Q2 of 2019.

In addition, we had minimal group business and weak table hold in the quarter.

Group and convention revenues on the books for the second half of 'twenty, 1 versus 19 are currently pacing up approximately 18%.

2022 group revenues on the books are pacing up approximately 15%.

Caesars Forum continues to exceed the original underwriting expectations with over 170.176 events, but currently currently representing $1.7 million room nights and $657 million of revenues for all future periods.

76% of this business it is brand new to Caesars.

Turning to our regional markets operating results improved significantly versus Q2 of 2019 with EBITDA growth at 56%, Excluding Lake Charles which remains closed EBITA margins in our regional segment were 44%, excluding Lake Charles and expanded 280 basis points versus Q2 of 19.

On a same store sales basis, we achieved the highest EBITDA and EBITDA margin in the regional segment in the history of the company.

26 regional property set all time quarterly EBITDA records with 31 properties setting all time EBITA margin records during the quarter.

And our newly disclosed Caesars digital segment, we generated revenues of $117 million in Q2 of 'twenty..1. We currently operate sports betting in 17 States plus Washington D. C 13 of which offer mobile sports betting our apps are now rebranded the Caesars Sports book and our new marketing campaign launched.

August 2nd.

We have now integrated our digital offerings with Caesars rewards and our customers can interact with us both online and in our physical casinos, while earning loyalty rewards.

In New Orleans construction work has started on a new hotel tower and property upgrades in Las Vegas, the remodeling of the entrants of Caesars Palace has begun and we look forward to a dramatically improved arrival experience later in the year.

In Indiana, we are well underway with our casino expansion of Indiana Grand which should be finished by January of 2022.

We have come a long way in a short time, our operating teams are collaborating and sharing best practices across the enterprise. This is leading to continued efficiencies. We believe our margin gains are sustainable and will continue to look for incremental cost savings opportunities.

Thanks, Anthony and good afternoon, everyone, what I spoke last quarter.

And throughout the day I would expect us to hit $1 billion.

In EBITDA in a quarter in 2021, I wasn't thinking it was going to be second quarter I was actually thinking it would be this quarter. So we're a little bit ahead of schedule.

As you look at.

The quarter Anthony you touched on some of this but remember that.

Particularly with mass mandates coming back in Nevada, remember the Las Vegas numbers that Youre looking at included a little over 2 months of social distancing restricted occupancy and masks.

Certainly occupancy in restaurants genomic casino floor.

Masks.

And we were able to put up the numbers that we put up in the quarter. If you think about drags in the quarter, we held poorly in Las Vegas.

The loss from the London clubs business flow.

Low through in the quarter, because we didn't close the transaction until.

The middle of July.

In Lake Charles was closed.

Rebuilding post the hurricane.

Drags that I look at in the quarter were about $40 million in <unk>.

The aggregate.

Vs. What you would expect to see normally we are 89% occupied in Las Vegas, If you look.

Forward.

It started in May may was the best.

Once in the history of Las Vegas for Caesars from an EBITDA perspective June was better than May and July was better than June.

And I would expect that third quarter occupancy will finish significantly ahead of second quarter's 89%.

Bryan touched on the way that we're presenting our.

Our financial value can see Caesars digital on its own you'll be able to measure our progress I'll talk more about that in a moment, you'll be able to see the bricks and mortar business and now you can see the manage business, which was in net.

Jumbo that the historical Caesars used to have as those managed international and other but you can see that that business.

Generation, a little over $100 million of annual EBITDA and that will grow when the southern Indiana transaction closes because we'll get a management fee and licensing stream from the Cherokee tribe at that property.

If you look at the bricks and mortar business I touched on Las Vegas, If you look at it on a consolidated basis as we sit here today, we are run rating well north of $10 a share in free cash flow.

Significant ramp from.

June to July obviously, we see the same public health situation that you see.

And there could be bumps along the way in terms of masks and.

Protocols that we need to follow but the demand is exceedingly strong and has continued to build so we feel very good about where we are in the bricks and mortar business.

Hmm.

Yesterday morning, we launched Caesars Sports book.

We had we closed the William Hill transaction, a little over 100 days ago.

We have spent and that was kind of a standing start because of the rules in the U K, we really could not do much in terms of prepay.

Preparing for when we would close the transaction and we wanted to be in position to launch ahead of football season, So what you're seeing what you're going to see is a slight leaning the entire organization into this vertical you see the.

The AD campaign with Jb's move patent Oswald our first national commercial will air during the USA mens basketball game Thursday night.

The Olympics you're eating.

We are activating the entire enterprise so connecting to Caesars rewards more than 60 million people.

Tiered levels of service ability to earn and use points non or offline. We're activating our player development teams across the organization.

To sign up new accounts, we're activating our entire workforce, our frontline labels. The labor force will each have their own individual QR code and will be able to sign up customers and be incentivized to help us do that so this is really a true lean in by this organ.

Nation that has not happened before you know the the numbers that you see and that we've generated before had been in net.

Kind of lame Duck universe, where we had bought Caesars we had the partnership that needed to be restructured and then we had.

The time between announcing the William Hill deal and closing it where that was that the business that we were doing was kind of just incidental not enough real focus. This is truly leaning the whole organization in and if you will in terms of how I think about it I look at.

There's like I'd look up at any business opportunity within the business.

Think that we can generate cash on cash returns in this business at maturity well in excess of 50% of what we'll invest but we realize net where we operate in a world that is competitive and that we've got to jump in and compete so you should expect us to spend.

Over $1 billion in the next 2 and a half years to build our customer base you know I can't give you a more precise number because a lot of the acquisition spend is success based but I would expect it to be over $1 billion and I'd expect to add maturity be generating at least.

East 50 per cent, possibly approaching 100 per cent of that in EBIT.

And the difference in terms of a bricks and mortar investment then.

If I could find a brick and mortar investment like that we would do that.

Every day of the week.

The difference is youre going to see that flow through our income statement, which is why it's important that we're able to separate this and show you what is the brick and mortar business look like versus what is it what is the digital business look like but with us free cash flowing in excess of 10.

$10 a share we think we have plenty of capital to invest in this business. We know this is not going to be just a straight line up.

We expect that we will make mistakes will have to book will have to continue to evolve all from a marketing strategy at a technology strategy, but the tools that we have in our portfolio to prosecute this opportunity I'm really excited to play this hand in.

And we're just getting started as of yesterday.

And with that I'm going to turn it to Brad to talk about.

Liquidity.

Thanks, Tom.

Our record setting operating performance in the second quarter generated over $500 million of free cash flow, which in turn we applied to retire our remaining convertible debt and make a onetime payment to acquire the license regs for planet Hollywood in Las Vegas in perpetuity.

This combination of debt repayment and license fees by out results in over 40 million of annualized free cash flow and set the table for further free cash flow benefits from deleveraging and refinancing activity.

Net of growth Capex, our annual core Capex remains approximately $400 million.

We commenced a sale process for William Hill's non U S assets in the second quarter and expect to announce a transaction no later than early Q4 of this year.

With that I'll turn it back to Tom.

Thanks, Brad Bueno with that we'll turn it back to you for questions and answers.

Thank you.

If you would like to ask a question. Please press star 1 on your telephone.

Your first question is from <unk>.

Joe Greff of Jpmorgan. Your line is now open.

Okay.

Good afternoon, guys congratulations on the strong results.

First question Tommy.

And for all of you going back collect Vegas.

If you look at sequential flow through in Las Vegas.

About 75%.

Which is remarkable and just seeing 50% margins on a page.

It also sort of remarkable can.

Can you talk about is there an operating expense lag relative to revenue covering net there is.

Is there.

With respect to labor day, or a way to quantify that.

Yeah.

The answer your first question Joe is no not really anywhere.

We're having challenges across the country in terms of filling available positions.

But.

To the extent that we sell them. It. We're also seeing revenue left as I said July was.

Stronger than June which was stronger than may so.

I would tell you that Vegas margins in July were stronger than they were in the second quarter. So I think you should expect us to be.

In that 50% neighborhood for the foreseeable future.

Great and then.

I'd say, 1 thing that stood out to us in the quarter as well Tom.

Was digital.

With positive EBITDA.

Even with the investment is there a way that you can sort of think about you know how to you know the next few quarters.

I know you are trying to build the business and I heard that the level of investment over the next 2 and a half years.

Yeah. Thank you could you know successfully invested and still be EBITDA positive each and every quarter or you really look at it starting now with the new launch.

Yeah.

Before you reap the benefits of incremental EBITDA.

That youll see a little bit of a an EBITDA loss book before you kind of get to know those great returns that you're targeting you should expect digital to be a material EBITDA loser, starting this quarter as we embed we're launching.

In addition to all the customer acquisition activity that we intend to do we are launching a new brand so you're talking about a nationwide advertising campaign.

In addition to everything you do.

And social so you're talking about T V, both national and local and some expensive markets I would expect to be you should expect that billion plus overspend turan.

To run through that EBITDA line over the next 2 and a half years or so and it should be front end loaded.

Okay.

Great. That's helpful. Thank you.

Yeah.

Your next question is from Carlo Santarelli of Deutsche Bank. Your line is now open.

Hey, Thank you Tom.

Kind of a bigger picture question and really just playing on the success you guys are having right now obviously, 90% occupancy in July 89% quarter, the EBITDA numbers youre, putting out the margins youre putting out.

Just given how strong it is at this point I mean, you talk about some of the tailwind obviously that you still expect to see coming out of the business.

Have you guys thought about it all the way the model is configured in terms of room night mix on a go forward basis.

Yeah Carlo that's a good question I would say.

As you know we were a company that kind of leads the math dictate what's the what's the correct.

The path to go down I fully expect that that convention customer coming back.

Is going to help us in terms of rate compression and when you see what's missing.

Even running 89% versus who I was 2 years ago 90.798 per cent.

It's an extraordinary amount of EBITDA that's left on the table. So I think there's absolutely.

And a significant addition, as bad growth business comes back it is heartening to see what we can do without that business, though because in the second quarter.

We had very little group business speak to speak.

The thing that's even.

Fittingly significant and we're still able to post the best quarter that Caesars had ever posted from an EBITDA perspective.

Understood. Thank you and then if I could just follow up you talked a little bit about you know kind of what I think the way I interpret your comments was a.

Our stabilized Caesars digital business that was doing $500 million 2 billion of EBITDA at some point in the future.

Just holistically as you think about those numbers what are you kind of envision as the as the mix between kind of the I casino piece versus the sports piece and how do you think that.

Great.

I mean, I think that if I'm looking at the current landscape.

That day in the timeframe that I'm thinking of I think they end up fairly evenly split because there is fewer I casino states available than there are sports on a per state basis, I think I casino is considerably more profitable then.

Force.

Great. Thank you very much that's helpful.

Your next question is from Barry Jonas of curious Securities. Your line is now open.

Thank you.

Tom Your comments on July sounds incredibly strong, but I just want to be very clear around the increasing.

Cases for Covid, and specifically, the new Nevada masked mandate.

The impact to the outlook or timing for Vegas recovery, whether that's group international.

Just wanted to.

Again any color there.

Yes, Barry this is all real time right the mass mandate came into.

And it being less than a week ago.

Whats going on now with the mass mandate is sorry.

Far less onerous in terms of restrictions that we have dealt with in the last quarter you know I.

I don't know what impact that will have ultimately and groups coming back.

We had the.

Widely leach internal memo last week.

Cancellation rate, which I should hit on that.

What that measures is a week's worth of reservations, if I get 10000 reservation and 4700 cancellations, that's a 47% cancel rep versus what's typically.

27%, it's not we went from 98% occupancy at a 50% occupancy so we fully expect to remain.

In the low to mid nineties.

Occupancy in Vegas.

Through this.

This current situation with the Delta Mary.

Okay.

Got it and then just.

Are we thinking about land based expansion here at Florida, Chicago that was out there and I know you are starting to do something in Nebraska.

So I've got no interest in Chicago.

Florida, we have already operate in Pompano, we've got a significant.

Joint venture development that.

Still churning at that site, Nebraska was a unique opportunity and that we have.

Hum.

Significant.

Operations in Council bluffs, right on the Nebraska, Nebraska border that would be impacted by.

Nebraska legalization and doing the Columbus track allows us to participate in sports and online to the extent that we're able to in that state so for a mark.

Modest investment and entry into a state where we think we can get a good return out of that investment that was a very easy decision.

Perfect Alright, thanks, so much and congrats on hitting the $1 billion.

Thanks Barry.

Your next question is from David Katz of Jefferies. Your line is now open.

Hi afternoon, everyone.

Thanks for taking my question I appreciate it.

Look we've been walking around with a $10 a share free cash flow.

Bogey for seemingly quite some quite some time.

How do we think about given the pieces and the way the table is shut now where it could go.

From there and some qualitative way.

Not necessarily asking for guide.

Okay.

So.

Where.

Still missing.

Group business in Las Vegas, we still see.

Plenty of opportunity in the portfolio in terms of <unk>.

Areas, where we could tighten up.

So.

Do you think about it in broad terms I've gotta do.

But $4.5 billion of EBIT dollar follow the bricks and mortar business to be $10 a share in free cash flow.

I told you that were cigna.

Significantly in excess of that at the current run rate and we see further upside from there.

Okay.

Yes.

I lose here David.

Hi.

You did for a moment and it's.

Okay.

Much more likely on on my side.

If I may.

Just W work from home so look if I may follow up please with.

With respect to <unk>.

Labor.

It's been an area, we've all been hearing quite a bit about quite a bit about in hospitality and the challenges of engaging people and the cost thereof.

I'm not sure if you've talked much about that but.

How do you see that and we've heard less of a problem in Vegas than other places, but you.

How much of an issue is that in the course of your day.

Yeah.

I don't think it's less of an issue in Vegas I think it's an issue.

Everywhere and I am sure.

Friends at MGM will concur tomorrow or later this week.

It's difficult to find.

And our frontline employees and it does impact what you're able to do with we're behaving as if there isn't a magic date, where it's all going to be bad.

We're hopeful that as unemployment supplemental unemployment rolls off.

That the picture will get better, but we're doing incentives were raising wages were doing job fairs were doing well.

Referral bonuses were doing everything we can define as many employees as we possibly can.

N a.

Regional property.

It tends to be easier because youre not hotel dependent so whether I have 3.

300 hotel rooms opened in our regional property versus <unk>.

175.

Really doesn't make a huge difference in materiality to my EBITDA in Las Vegas, that's an entirely different animal. So we are our our teams in Las Vegas are doing a fantastic job of.

Managing through this but it is theres a lot of stress in the system and Theres times, where we've got a pullback on the throttle to make sure that the customer experience endures.

Perfect. Thank.

Thank you.

Okay.

Your next question is from Steve.

C&C of Stifel. Your line is now open.

Yeah, Hey, good afternoon guys.

Tom So if I start with the digital side of things.

Obviously, we've seen all these sports betting companies out there and they are spending like crazy to try and gain market share and now theyre going have you gotten out there throwing around the.

Decent amount of money as well so.

I guess the question is what gives you the confidence that.

The 1 billion dollar spend will eventually turn into $2 billion or some you know some higher number of epic is that a competitive environment stays pretty cut pretty cut throat at this point.

Steve if it turns into $2 billion were having.

A very good experience in terms of gathering customers because you know.

Away from this initial brand launch.

Most of what Youre doing ends up being success best as you bring new depositors into the system.

And.

Look my view is the.

This is a unique situation in that you've got a bit of the wild west where.

Things opened up.

Quickly and everybody is looking for where the customer is that if you look at the companies that have very large databases coming into this or even look at the ones that have been successful converting smaller databases, it's because they know where the customers are we've got over 60 million per.

People in our database, we have the wherewithal to serve the highest level of customer down to the lowest level of customer we have a well developed to rewards program in place that treats customers too.

Increasing levels of service.

As their value to us increases that's all that mouse trap has already been built it's never really been used.

In the sports business anywhere.

Because.

You have companies that are are off to a quick starts here that just don't have that kind of database and that kind of system and you've got others like us that are kind of just getting our dock.

Ducks in a row, but I look at it like we can create.

If we lean into this appropriately we've got 54000 salespeople in our company.

<unk> says that we can offer.

And tie into that business that I think position us well ultimately for success.

And that's not to say that others are not going to succeed or that our paths will be as I said just straight up but.

I think we've got everything we need to be a success in this space and we really kicked it off yesterday.

Oh, Okay got you. Thank you for that and then.

If we go back to the margin side of things. It seems like you think current margins are pretty sustainable even down the road as the world hopefully goes back to normal, but what's the biggest delta that you guys are seeing today to drive those margins so much higher relative to pre pandemic time, because it wanted to.

Is it 1 or 2 things or is it up.

Is it 100 different things.

Our as adjusted the businesses were closed down to give you guys a chance to look at every single thing under the roofs or is it.

No the previous management teams were just filling up.

Levi.

I'll leave the Inapt.

Comment alone, but this does everything else that you.

Laid out there is a piece of it we operate with less labor than we than the historical company operated with both at the property and the corporate level, but it's really.

The attention to detail the focus at every P&L now give you. An example of this this quarter.

We were cash net operating income positive in food and beverage for the first time in the history of Caesars.

Just on a quarter over quarter basis.

That's over a 60 million dollar cash swing, so it's a quarter of $1 billion a year and that's.

How are you pricing your.

Your product how are you yielding it how are you managing your labor how are you managing your marketing and what are you giving away.

All sorts of different areas that roll up into.

Big numbers, so we're a big company in house.

53 properties, if everybody finds 5 million Bucks a quarter of a $1 billion and.

We have historically been a good company at 5.5 million Bucks.

Okay, great. Thanks, I appreciate it.

Your next question is from Thomas Allen of Morgan Stanley. Your line is now open.

That's.

So as we think about the digital business.

As the market matures.

Customer acquisition is becoming less of a driver in product.

Some of it.

You launched your new.

Sports book yesterday, the new App can you talk about some of the key features of it.

1 thing.

Yeah.

Well, yeah, we encourage you to download it and experience it yourself, but.

It has very deep bedding market. So it's very fast with you actually was great.

Again, it's going to tie into Caesars rewards here and we think it's the best in class App looking at funding and withdraw and clarity for any sports better and.

And then you layer on top JV is moving ahead of great marketing campaign and tie that together not only online but across our brick and mortar portfolio.

And we like our digital now strategy.

Okay.

Alright, Thanks, Brett and then just a numbers question. So when you announced the volume held deal in 2020, you said you expected sports brand identity to deliver $600 billion to $700 billion about non try 21.

Is that still a good baseline or how you're thinking about it.

Thomas with with the with the rollout of the Caesars Sports book yesterday in our new strategy for our marketing and investment I think promos.

So net revenue could be below that 6% to $700 million as we invest in the business, but it doesn't diminish from the long term growth opportunity at all.

But relative to that initial $6 million to $700 million are our attempt to increase and.

And be more competitive in the market could impact that net revenue line. This year, yes that was the business in knee.

Well in the World, where it was kind of just wandering in the wilderness without the.

The way to the business behind that arch changed yesterday, I will say were 260 year to date, obviously, we're coming into the seasonally strongest period.

So you should see those revenues start to accelerate into the all important Q3.

Alright, Thank you all.

Your next question is from John Decree C. B R. E. Your line is now open.

Hi, everyone. Thank you for taking my questions.

Just stick on the digital theme.

Perhaps a 2 part question Tom you know a lot of the.

The discussion so far today has been on the vast and probably underappreciated opportunity of mining your database and brand, but you also have a lot of other customer acquisition channels that were assembled over the last couple of years between you and your predecessor, William Hill like ESPN CBS agreements. That's daily Fantasy style I was wondering if you could talk a little.

Bit about how those kind of fit into the strategy going forward and as a tag along to that if there is other media partnerships channels customer channel that you could look at to bolt on going forward or if you think you've got everything you need.

No Youre right, John we have numerous league and team.

<unk> ships, plus the ESPN and Cvs partnerships that give us access to databases that are.

Certainly extremely interested in whatever team or sport, they're following and likely sports betters and part of what we're doing here. In addition to Caesars rewards we're leaning into.

All channels into our own database.

Ed databases of partners that we have.

Transactions with and then out into that wild west for people that we don't have a relationship with yet.

We are looking to build a leader in this space and we think.

Tying it to everything that we've described.

Should make it an attractive option for players.

And.

And the second part is there other things that youre looking at or potential.

In M&A, whether it's additional technology or other avenues.

Youll continue to look at going forward.

The technical technology will continue to evolve for.

As long as we're doing that so if there are.

Areas, where I'm talking an acquisition makes sense to advance the ball on the technology side, you should expect we would look at that if there is some brand or M&A opportunity that allows us to improve our position in customer acquisition, you should expect us to look at that you've known as <unk>.

Long time, we're looking for how do we drive the most value for our stakeholders.

And.

The answer can be the answer can change over time, but as we sit here today.

We think we've got everything we need to launch with strength and then to add to that over time as we build the business.

Alright, good thanks, Tom and good luck on the rollout.

Thanks, John.

Okay.

Your next question is from Chad Beynon Macquarie. Your line is now open.

Hi, good afternoon, Thanks for taking my question.

Tom given your.

Las Vegas margin success.

Quarter of running over 20000 rooms in a much higher EBITDA result than any of US were expecting I'm wondering if anything has changed in terms of your thinking of divesting an asset out there and the timing around that thanks.

Yeah, I'd say nothing has changed there we still expect to sell a.

The Vegas strip asset.

Single asset and I would expect that sale to take place in 2022.

Great and then with that cash or I guess, the near term cash of selling the U K William Hill business, what are your plans with the.

The cash that you have on the balance sheet, you've talked about what the digital vision will cost, but youll still have some excess cash, particularly given the $10 of free cash flow projection.

With that you should.

Should expect us to be deleveraging, we want to drive our leverage below 4 times on a gross lease adjusted basis.

See that.

<unk>.

In the relatively near future for us and I look at it like.

If you think about something north of 1 billion of investment into sports and online.

I think between just the proceeds out of the assets that we're going to sell out of that came with William Hill.

I think that's going to match up pretty nicely with what we need to spend in sports and online to build that business in the U S.

Great. Thank you very much.

Yeah.

Your next question is from Daniel Adam with capital markets. Your line is now open.

Hi, good afternoon, everyone. Thanks for taking the questions.

For Caesars digital it sounds like that segment includes both your retail sports betting business and online is that correct.

Correct.

Okay.

So can you break out what online only revenue and EBITDAR was in the quarter.

No it isn't that sudden.

No I can't.

Okay.

And then Tom ill take another stab at this but I'm wondering if you have a long term target online sports betting and.

Gaming market share number in mind that you'd be willing to share with us.

Also I would expect us to be.

A leader in mobile market share among certainly among the leaders in both sports and online.

And Daniel Daniel given that we operate in 13 states mobile and now we've rebranded the Caesars Sports book the bulk of the growth obviously for the sports business is going to come online over time and as new states legalize.

Okay that makes sense fair enough alright, thanks, guys.

Your next question is from Shaun Kelley of Bank of America. Your line is now open.

Hey, good afternoon, everyone.

I just wanted to go back to the Vegas environment. Tom You gave some really great color on.

What are your occupancy thoughts and I was wondering if you could sort of give us a little bit of color on what youre seeing on the right side of the equation in the past.

Yes, theres been some volatility there and it's been competitive but obviously.

What you're seeing now is really different from the consumer. So it was just kind of curious on what youre able to see out in the future and maybe how that trended across the quarter as well.

For the fast <unk>.

Few months, we have seen higher rates.

Occupancy that <unk>.

Lime to equal prior year level, we would expect that to grow further and faster as group business comes back we're fairly.

Comparable from a range standpoint over the last call it 2 and a half months too.

Prior year, a little bit ahead.

And historically, we have seen some seasonality in Vegas, but obviously, that's been driven a bit by the group business.

The booking windows can be sure, especially now, but just any any thoughts on sort of let's call. It the fall progression as cash.

Some people may add back to work in schools, maybe more back in session that tradeoffs in August relative to sort of the upside opportunity as you probably see the group calendar fill in post labor day.

Yeah, I'm expecting to be back toward more normal seasonality in Vegas.

Through the rest of the year I would expect you'd see the same holiday softness that.

You typically see on a relative basis.

And we will see what happens in terms of.

Group cadence coming back, but I would expect we'd be certainly in 'twenty 2 we expect.

Kind of a normal year end seasonality and bankers.

Great. Thank you very much.

Your next question is from Stephen Grambling of Goldman Sachs. Your line is now open.

Alright, Thanks, I've got a couple of follow up questions on the digital side I guess, starting with the database. How do you think about the overlap of sports betting customers versus <unk> gaming versus kind of the existing total rewards database do you have any sense for how much of your total rewards customer base may be overlapping with peers, where you're maybe pushing for a customer who perhaps.

We've been already been caught.

I don't have any real insight into what's in others databases, but I'd tell you.

With the amount of.

People in ours that day.

That database, it's been built over.

20 years in mind I would expect that.

A substantial amount of the gambling customers.

Net debt that everybody is searching for is in our database and has.

Our relationship with us so.

Giving them.

And ability to stay home and not look elsewhere is a key piece of what we're doing here.

And then perhaps on the regulatory price I know you mentioned you always follow the math I guess, what's your strategy and willingness to pursue states, where taxes, Andrew or license fees or material higher do you need to be in those markets to get national scale or are there other ways to create value.

Youre going to look at each state on its own there is going to be did I can.

Envision scenarios, where there will be states, where it's just not economic to participate I haven't seen 1 of those yet so you should expect us to be active everywhere, we can be.

Aye.

There are states that you could miss or if it's impossible to make money, but the reality is if.

If you look at the history of the business.

In states, where the initial tax structure was.

Difficult.

There is history, where those have been adjusted you can participate in that if youre not involved on the front end.

That's helpful. Thanks, so much.

Thank you.

Alright, Thanks, everybody, we'll talk to you again.

After third quarter.

And this concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

Q2 2021 Caesars Entertainment Inc Earnings Call

Request a DemoDemo

CZR

Caesars Entertainment

Earnings