Q1 2022 Caesars Entertainment Inc Earnings Call
Okay.
Good day, and thank you for standing by and welcome to Caesars Entertainment, Inc. 2022 first quarter earnings call. At this time, all participants are in a listen only mode.
After the Speakers' presentation, there'll be a question and answer session.
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I would now like to hand, the conference over to your host today.
Brian Agnew senior Vice President of corporate Finance Treasury and Investor Relations you may begin.
Thank you Justin and good afternoon to everyone on the call and welcome to our conference call to discuss our first quarter 2022 earnings.
This afternoon, we issued a press release announcing our financial results for the period ended March 31 2022.
A copy of the press release is available in the Investor Relations section of our website at Investor <unk> 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, one should not place undue reliance on them forward. Looking statements are also subject to the inherent risks and uncertainties that could cause actual results to differ materially from those expressed for additional information concerning factors that could cause actual results to differ.
From those discussed in our forward looking statements you should refer to the cautionary statements contained in our press release as well as the risk factors contained in the company's filings with the Securities and Exchange Commission.
Caesars Entertainment undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances that occur. After the call. Today 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 web site at Investor <unk> Caesars Dot com.
By selecting the press release regarding the company's 2022 first quarter financial results with that I will turn the call over to Anthony.
Thank you, Brian and good afternoon to everyone on the call we delivered another strong quarter to start the year in 2022 <unk>.
Adjusted EBITDA in the first quarter, excluding teasers digital was $850 million up over 60% versus the first quarter last year.
Margins in our brick and mortar business were 36, 2% despite the negative impact of the omicron in January .
Operating results reflect a new first quarter record for adjusted EBITDA and our Las Vegas segment, despite multiple headwinds during the quarter.
In total 18 of our property set a record for the highest first quarter EBITDA, while 28 set a record for the highest Q1 EBITA margin.
Turning to Las Vegas demand trends strengthened throughout the quarter, leading to an all time first quarter record of $411 million and adjusted EBITDA, excluding real rent payments EBIT.
EBITDA improved 140% versus the first quarter of 'twenty, one and margins improved 1000 basis points to 45%.
Total occupancy for Q1 was 83% with weekend occupancy of 95% and midweek at 77%.
As of April one 2022, we lifted all occupancy caps in Las Vegas.
And would expect to see a material improvement in occupancy for the second quarter of 2022.
Group room nights during Q1 represented approximately 13% of occupied room nights in Las Vegas up from 11% in the second half of 'twenty, one despite January weakness to omnicom.
Elevated attrition rates continue to decline and group revenue pace in Las Vegas is strong for the remainder of the year and into 'twenty three 'twenty four with convention demand accelerating we are excited to finally see the full potential of the New Caesars Forum Convention Center Foreign currently has 150 future events, but with over $1 3 million.
Room nights and over $500 million in revenue over 70% of this contracted business is new to Caesars as a company.
In our regional markets operating results remained strong and revenues and EBITDA improved sequentially each month of the quarter trends that further improved into April EBITDA for the first quarter was 459 million with margins of 33, 6% higher.
Highlighting a few specific properties trends normalized in New Orleans in Q1, following the removal of masks and vaccine mandates in March.
In Atlantic City had a great quarter, despite still having rooms offline for remodeling.
We are encouraged by the early returns on the capital spend at the recently rebranded Horseshoe Indianapolis and look forward to starting construction on our Harrah's Hoosier Park expansion this year.
Following the launch of sports betting and casino in Ontario on April 4th we now offer sports betting in a combination of 24 domestic states in North American jurisdictions.
17 of which are offer mobile wagering.
In March we converted Illinois, who are Liberty platform and expect all of our remaining Caesars branded absent sports books to be running Liberty by year end 2022.
We remain focused on growing our digital business during Q1 through customer acquisition, especially in new markets, including New York, and Louisiana, while customer acquisition and handle exceeded our internal expectations, especially in New York in Louisiana net revenues were negatively impacted by promote promotional investment to support the new <unk>.
Kit launches.
Our capital program remains unchanged from our Q4 call. We are excited to have most of our room Remodels completed in Atlantic City for the upcoming summer season, and look forward to many new food and beverage and entertainment offerings. This fall our new land based facility in Lake Charles remains on track to open in Q4 of this year and.
<unk> is our casino expansion and new parking garage and pompano.
We anticipate breaking ground on our expansion plans for Harrah's Hoosier Park this quarter and construction is slated to begin on our Columbus, Nebraska project later this year.
These are exciting projects, which will collectively generate a meaningful EBITDA contribution for our company.
As we look to the remainder of 'twenty two we remain optimistic about our business as consumer trends remained strong. We are also encouraged regarding improving group and convention trends in Las Vegas, as well as the potential for the full recovery of our older demographic consumer who has been the most impacted to COVID-19.
In addition, our property rebranded or exceeding return expectations, which gives us confidence in future announced rebranding opportunities in St. Louis Blackhawk, Las Vegas and Florida.
I want to thank all of our employees for their hard work in 2022, so far I'm extremely proud of our operating teams their execution and their exceptional guest service.
With that I will now turn the call over to Tom for some additional insights on the quarter.
Thanks, Anthony and good afternoon, everyone. Thanks for joining us.
Echo Anthonys comments.
So work that our employees have done to drive results for the organization personally this.
Now feels like what we thought we were buying when we originally bought we bought.
Caesars Entertainment, we're almost two years in now, but with all the virus disruptions.
That went out over those two years, it's really the last eight weeks or so that were starting to hit on all cylinders and really feel the potential of the organization.
So we talked to you in well into the first quarter and what we described then was all micron was kind of a wet blanket around the entire business.
The bulk of January and into February It was really right before the Super Bowl AD.
Events changed with the virus and we saw a surge in visitation. This is you'll hear a common theme.
As I go through I know that.
Investors are.
Extremely concerned with health of the consumer and what's going on.
Inflation wise, what impact is that having on the business I can say unequivocally that the biggest correlation that we see in the business over the last two years is the state of the virus and that when the virus receives in case counts are benign.
There is a pent up demand for travel and entertainment activity and we see a burst of demand in our business that was <unk> was no exception. So as you got through.
AUM across if you look at the regional market as Anthony discussed we ended up up considerably year over year margins in the 33 plus percent range. If you think about that in the quarter and this is true throughout when when volumes are down.
We experienced negative operating leverage so regional margins in January were 29%.
In March they were above 37%, so we ramped up through the quarter as demand increased and that has continued into April into the second quarter with margins in excess of 37% on a preliminary basis.
In April and volumes remaining strong. So obviously, we have a tough comp second quarter and regional but we have been holding up particularly.
Particularly well as we've gone through April .
In Las Vegas.
If you look at from an occupancy standpoint.
We had told you before.
January was around 75% occupancy.
February was about 80 came in at about 81%, we thought that March would come in in the mid eighties. It actually came in at 91% for the month and so we were able to have a record first quarter, even with a slow start where we lost the.
Bulk of CES, which is one of the biggest group.
Groups on the calendar market wide.
And if you think about margins in Las Vegas, we were a little over 45% in January in March we were a little over 47%.
The strength has continued into April April was the single largest month in the history of the Caesars organization for cash room revenue.
Occupancy was just under 97%.
Rates were up a little less than 40% over.
Last year last April and a little less than 20% over 19.
So Vegas is extraordinarily strong for us.
As we as we sit here today I would expect us to break the record again in May for cash hotel revenue.
Second quarter is going to be considered particularly strong in the group business. This is where a lot of the <unk>.
Cancellations post pandemic star.
Started to rebook into so we expect a significant bump in group business recall that.
When we talk about.
Group business, we did not have Caesars in 19 did not have the Forum Convention center operating so when we say group will be considerably stronger than 19 that includes the forum 19 did not but we'd expect vegas to continue.
A very strong trajectory as I said April all time room room cash room revenue record. Despite only 30 days and the Easter holiday in April which is not a particularly good casino holiday may at 31 days should be even better so feel very good about.
Where the brick and mortar business is heading as you look at digital let me I'm, sorry, before I go to digital.
I spoke in artfully on the last conference call about <unk>.
Timing of the Vegas asset sale I want to be very clear, we started the process to sell a Las Vegas strip asset early in 'twenty two.
There are public documents that show you how long the ROFO process and the process to reach a definitive agreement.
<unk>, which would put us somewhere in the middle of summer for <unk>.
A consummation of a transaction you shouldn't expect us to be giving you a play by play in the interim we will be back to you. When that's resolved know that it is in motion and governed by the documents that we are that we that govern our vinci agreement.
As you go to digital as I said on me.
The fourth quarter call first quarter is our peak EBITDA loss of the $5 53 of EBITDA loss in the quarter a little over 400 million is attributable to the launches in New York and Louisiana with New York, the lion's share of that.
As discussed.
We got to our handle share goals far earlier than we anticipated and we did cut back.
All of our mass media spend so we cut about a lot.
Over a quarter of the $1 billion of expected spend from.
When we started cutting in February through the end of this year, we've seen no degradation in handle share other than our planned retrenchment in New York bag fruit as we've talked about we were more aggressive than we needed to be out of the box in New York and got.
37, 40, 40, plus percent share you see as kind of in that 15% to 20% share since we have retrenched, that's the only material movement in share even though we've cut over a quarter of a billion dollars for marketing if you look at the quarter we lost.
About $44 million in March so as you got out out of those that heavy launch period, our losses moderated considerably. If you think about the investment that we talked about making in terms of cumulative EBITDA losses.
We said north of $1 billion in my mind when that when I made that.
<unk> statement in when we launched in August I was thinking $1 billion in a quarter to a 1 billion and a half based on where we've gotten share wise I think a billion and a half is the right neighborhood and if you look at what we've done to date.
And then about two thirds of our cumulative EBITDA loss, our investment into digital measured in that way is now in the rearview mirror, so our losses come down considerably as we move forward and we fully expect to inflect to EBITDA positive in digital.
As we move into football season.
Of 23.
And if you think about numbers that we've talked to in the past the cross market play out of sourced in digital into brick and mortar. We said was run rating about $150 million of gaming revenue at the time of our last call that has since increased to over.
$200 million.
Or what what are we focused out in the off season were focus on the.
Shoulder season, I should say, there's never an off season, but football is clearly the driver of sports. So before next football season, we're bolstering our customer service capability, we're bolstering our technology or both bolstering our payments capability. So that we're ready for next football.
And as I look back we closed William Hill.
In April we had almost exactly 100 days to or expect to the start of football season, when we closed.
William Hill, and our relaunch. So we were kind of spring king to keep up throughout football season last year. This year is going to feel much more comfortable for us in terms of being.
Well prepared for anything that can come our way we are absolutely thrilled with the billed business that we've built to date, but we're excited about what we can do as we move forward.
To give you some context.
We've had.
1.4 million Caesars reward the sign ups.
Since we relaunched digital that came in through the digital channel. If you think about a typical caesars property.
We get we get about 50000 on average per property per year of new sign ups, a little more in destination properties a little less in.
Regional properties, if you think about a million for customers coming into the pipeline in really a span of five months it's extraordinary.
And now the work in front of US is to identify which are the most valuable customers. There as you look back at the way football season was last year.
You were getting the same offer whether you were a 50 dollar player or you were a thousand dollar and above plan.
We didnt discriminate that's that's kind of what we inherited as we bought all of these brick and mortar assets for various operators in the past.
Marketing to the masses with note with little discrimination and what you've seen us do repeatedly in the brick and mortar business is target that spend to our most valuable players and.
And not waste money on the unprofitable players that's the task in front of us in digital so youre going to see us.
Segmenting in terms of our marketing as we move forward and that's going to be a dramatic improvement in profitability as we move forward. So we are excited for that.
As you think about where we are now that we've got two thirds of the losses behind us we should be a significant free cash flow producer as an enterprise going forward.
We're expecting to close on the.
The non U S. William Hill sale within this quarter I talked about Vegas strip asset sale in motion, we would expect to be.
Making significant reductions in our leverage within this calendar year and into 'twenty, three and beyond that I'll pass to Brad for some specifics on liquidity and capital.
Thanks, Tom 2022 is off to a nice start in terms of executing on our growth objectives alongside continued debt reduction when the sale of William Hill Internationals business.
In June we will apply all proceeds to reduce debt trading aggregate debt reduction over the past 12 months to over $2 billion. We expect the cadence of that reduction to accelerate over the next 12 months through strong free cash flow and further asset sale proceeds.
Our 2022 calendar year Capex spend remains unchanged from our Q4 call at $300 million of maintenance Capex $100 million of digital capital and approximately $700 million related to project capital.
These figures exclude capex spend in Atlantic City, which is escrowed and sits in restricted cash we continue to model minimal cash taxes, and approximately $800 million of cash interest expense for 2022, which we intend to produce through debt repayment and opportunistic refinancings.
Turn it back to Tom.
Thanks, Brett So we've got some exciting projects coming online as Anthony said, we've got a lot of our Atlantic City capital comes online before the summer season, and then some of the restaurants stuff over the summer we've got Lake Charles hitting in the fourth quarter of this year.
In the mid <unk> that we did we just did open.
The expansion of Horseshoe Indianapolis, we'd got a similar project going at.
Harrah's Hoosier Park in Indianapolis, So we've got capital projects that will start contributing that had been drains on us in the past we think we can continue to execute.
On basic operations, both digital and brick and mortar and significantly reduce our debt over the next several quarters.
Back to the key point the key takeaway.
I know theres a lot of concern about what's going on with the consumer what's going to happen around the corner.
I can't stress enough that this business, particularly in Vegas, right now is operating and generating as much cash as it ever has so we feel very good about the balance of the year and with that I'll open it up to <unk>.
Questions operator, we're ready to take.
Any question.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key.
Please standby, we compile the Q&A roster and once again that is star one if you'd like to ask the questions and our first question is going to come from Carlo Santarelli from Deutsche Bank.
Your line is now open.
Hey, guys. Thank you very much.
I'm, just just to kind of make sure I'm understanding how you articulate that.
Looking at all the investment.
As you said kind of a billion five is where do you think it comes down.
That would imply a ballpark $475 million to $525 million of stone for turning profitable again is that is that how you're thinking about it in terms of between now and say August September of next year when the NFL season starts.
You'd be looking at something in the ballpark of $500 million of losses.
Yeah, and Carla obviously that you've got an Ohio launch in front of us.
That would be the only launch that I can think of that would have.
Significant cost.
Surrounding Ed and so how we come out of the box in Ohio will be a.
Governing factor in terms of.
Where we would be but that's the right Zip code.
Okay, and then just on the on the casino side of the business I know you guys, where you talked about it previously.
Putting more content on and making a bigger push there does that does the $500 million kind of contemplate.
Some additional effort on that side of the digital business yes.
Yes, that's inclusive of everything that we have in front of us in digital.
Okay, Great just lastly, kind of on Las Vegas.
Putting into context kind of all that.
The room nights of the revenue that is booked for the Convention center.
As well as kind of 11%.
The room nights in the 14th move into 13% in the <unk>.
Where do you think that that mix kind of say cloud on a 2023 basis, where do you think it shakes out.
Pro forma for the asset sale and the separation from Rio So maybe on the 'twenty 'twenty four basis, just in terms of group room night mix.
So I would say, leaving aside the REO you should expected group room night mix.
In a normal world would be north of 15% for us somewhere between 15 and 20 as you remove REO from the equation.
That will creep up slightly the big group Ad.
Rio is world series of poker, which is coming to the strip. This summer. So that's already shifting as we speak today.
Great. Thank you Tom.
Thank you.
And our next question comes from Joe Greff from J P. Morgan Your line is now open.
Good afternoon everybody.
Tom have you.
Dean or.
The noticeable difference from your competitors with regard to marketing promos.
And just broadly customer acquisition cost, meaning have your larger competitor editor pivoted away.
Providing for an incrementally more rational environment.
In terms of Youre talking about digital on the digital side sorry, yes.
No not that I can speak to I think.
Everybody else is spending.
Fairly much fairly well in line with where they were before.
Great.
And then Brett you talked.
A little bit earlier in our prepared comment comments about opportunistic refinancing can.
Can you talk about the timing of this.
That timing.
Coincide with the closing of William Hill, and later in the year a strip asset sale.
Yes, I think the sync up pretty well through the summer when you think about closing William Hill, where we get to on the Las Vegas asset sale alongside a lot of our debt becomes callable July 1st So I would be looking at.
Third quarter is a likely window for us to be refinancing.
Great. Thanks, guys.
And thank you.
And our next question comes from Steve with Penske from Stifel. Your line is now open.
Yeah, Hey, guys good afternoon.
So.
You talked about the strength in Vegas.
<unk> has continued into.
The second quarter.
So far April has had a lot of.
Big events Com.
Just had the NFL draft and I'm just wondering.
If we kind of think about comparisons moving forward.
As the second quarter going to be a little bit about <unk>.
Normally or.
Is the rest of the year kind of going to be in a very similar position from from not only a group standpoint, but from a bank.
Standpoint, and then maybe as we think about the second quarter for next year.
With the draft big enough to call out or was it just.
Average if that makes sense.
Yeah, So Steve in terms of group calendar going forward good calendar going forward is very.
Very strong.
Second quarter and beyond as we talked about.
World series of Poker comes to the strip in that timeframe as well in terms of the draft I would say from a visitation that standpoint for the market.
Very very strong not a particularly great gambling crowd. So good for visitation, but casino numbers were kind of average so.
I certainly wouldn't expect it we're <unk>.
Pointing to the lack of that next year. It is any kind of headwind.
Okay got you and then.
Tom you talked about getting back to or getting to that breakeven point.
On the digital side of things in the foot.
[noise] season of 2023, and you called out how youre kind of changing around some of your marketing strategies and I guess I'm guessing when you talked about that breakeven point in the fall of 'twenty three does that include.
Those marketing changes or as you're starting to implement those marketing changes could that timeframe get accelerated.
I'd say, yeah, that's that's our best Peg as we sit here today, obviously the.
Couple of quarters before football season in 'twenty three tend to be.
Lower volume sports quarters, so lower loss anyway, so is it possible.
It sneaks a little bit earlier, I'd say, that's possible, but it'd be banking on inflection in fourth quarter as we sit here today.
Okay, great. Thanks, I appreciate it.
And thank you and our next question comes from Barry Jonas from True Securities. Your line is now open.
Yeah.
Great. Thanks, Tom you've talked in the past about a potential 40% ROI on that $1 5 billion in digital losses I'm curious, what you think has to happen across the market and Caesars.
To see those types of returns and what you think a reasonable timeline might be.
So I don't think there needs to be anything heroic for that needs to change for.
The business to become <unk>.
Profitable and I've actually been talking about 50% plus.
Cash ROI you can see.
Where our handle is today you can make assumptions on where our handle will go in the future and you know where.
Hold is going to shake out in sports and I casino based on.
A lot of history.
What happens functionally is your customer base becomes <unk>.
Dominic <unk> by existing customers rather than by brand new customers that are taking advantage of a.
New customer promo offer and so.
As you shift more out of business dominated by new customers and as I said, we had a.
$1 million for sign up for Caesars rewards since we launched and those that.
Deposited and became active in digital almost certainly did did so through a promo does promos are different as you become a seasoned customer.
What gets the headlines in terms of.
Deposit matches things like that that's not what happens as customers season, and your margin profile changes significantly and the other thing that's going to change I touched on in my remarks.
In the in football season of 'twenty one the.
Every customer regardless of value was getting a similar offer and so whats going to happen as we move into 'twenty two football season and beyond.
We're going to segment, our customer base based on words.
And we're going to target our promotional spending AD are profitable customers, which is going to be a much smaller subset of that larger grew and that's going to have.
Two significant change two significant impacts youre going to.
Build loyalty among that that group that is targeted and youre going to increase profitability as you increase share of wallet, you're still going to have activity from those that are not targeted to the same degree, but your profitability on those customers is going to change dramatically because they are not good.
<unk> the marketing officers, the marketing officers that come out and so we have.
Significant history in Nevada in particular, what is a stable state look like from <unk>.
Our margin standpoint customer activity standpoint, a promotional standpoint, all of our states are going to end up looking in some form or fashion.
Nevada with different puts and takes based on tax rate and competitive environment, but it is going to look nothing like the.
The environment that you're analyzing now where a state launches nobody has any customers and it's the wild west.
Those days are already in our rearview mirror in most states as we move forward, there's going to be.
Some new states, but as a percentage of the business, it's going to be much more of an existing customer an existing state crowd.
And the states are going to start to look more like the steep season states in our portfolio.
Got it got it and then just a follow up on the land business current trends and the outlook comments seem really strong, but I'm just curious.
Any remaining negative impact you're seeing.
Covid I guess that would include any of the older demographic not back yet or anything else that you wanted to highlight.
No we had seen 55 plus return post.
Micron, they're still not as strong as the younger cohorts, but there.
They're coming back and Theres more coming back every week.
Great. Thank you so much.
Thank you.
And our next question comes from Thomas Allen from Morgan Stanley .
Your line is now open.
Thank you Sir just on the digital side Tom.
A highlight in Ohio is likely the only state where you would really have to invest in this year, yes, marilynn may launches here.
Is your comment just on Ohio, because you think Maryland will probably lines back sure there.
Different than where you see the opportunity between those two states.
Yeah, Thomas I'm skeptical, Maryland launches mobile in 'twenty two.
Okay, Alright, so still a good maryland selling good opportunity.
Oh, yes, and if and when mobile launches you should expect us to be competitive there as well.
Perfect and then any commentary around dawn parallel market and what you've seen to date.
In terms of the competitiveness and potential of the size of it.
Yeah, I'd say we have.
Ontario is a unique animal given the gray market that existed there before and the restrictions on.
What youre able to do so we are.
We're building our capabilities in Ontario, but you shouldn't expect is you shouldnt expect to see us throw a lot of money at Ontario, We expect to be a player we expect the market to grow.
Steadily, but that's not going to be a big needle mover, one way or another for us.
Perfect and then just lastly on the brick and mortar business. What are you seeing in terms of labor availability.
You know your competitors, increasing marketing or any other kind of cost changes big spring is there anything that you want to call out.
Labor is still tight.
It's gotten better obviously, we talked about how Anthony you talked about how we were able to remove our caps as we ended first quarter.
That was as a result of.
A lot of hiring effort and activity so we're feeling better.
Yes.
Labor costs are higher but nothing that's a considerable drag on in the organization as you know gaming taxes as are our number one.
Expense category.
Thankfully those are.
Those don't inflate and if it if they do it's because youre getting more gaming revenue and getting.
The increase on a percentage of revenue basis. So.
We feel while there are pressures.
No.
The strength in the <unk>.
The underlying customer activity strength is swamping anything that we see on the cost side.
Yeah.
Perfect. Thank you.
And thank you.
And our next question comes from Shaun Kelley Bank of America. Your line is now open.
Hi, good afternoon, everyone.
I don't think this has been touched on but Tom I think in the prepared remarks. It was mentioned today.
If I caught it correctly and please correct. If it is not but on the April in the regional markets as it was was trending well and better than March and I think that's a little different than some of the patterns and some of the other.
Companies that we've heard about so could you talk about that a little bit more if I caught it correctly and what might be driving that.
For us we've gotten.
Margins have continued to increase the rate of increase is not like.
January to March, but we're still improving we've got properties like New Orleans that were under significant COVID-19 restrictions that came off.
Just before the final four in March So we saw the benefits in April Atlantic City has been particularly strong for us even with construction.
Construction disruption so that's been a strong performer northern Nevada for us is.
Has just been incredible for.
Going out about 18 months now so it's we've got some particular pockets that are strong.
We're up we're up against a <unk>.
Very difficult comp in the second quarter. Given this is when stimulus checks went out but we feel good about.
Comping against those numbers.
That's great and then two markets I wanted to touch on specifically one you kind of just did which was we've heard about a little bit of potential softness in northern Nevada, and then also in the southeast So maybe ex New Orleans, which is a bit idiosyncratic to you but.
Any comments on just behavior in those particular markets. It sounds like you said like northern Nevada might might be.
And how long just fine, but just any thoughts there.
Reno Tahoe for us have been stellar.
Stellar performers.
Really since reopening.
We could do.
We can do better than a quarter of $1 billion of EBITDA out of northern Nevada in.
22, which.
It was not in the realm of what we were thinking before we before we did the Caesars transaction. So the strength there is continuing.
And for Us the southeast.
Outside of New Orleans, you're generally talking about smaller properties that whether they move up or down are going to swing our broader numbers much.
So new Orleans is the key there.
Thank you very much.
Yes.
And thank you.
And our next question comes from Stephen Grambling from Goldman Sachs. Your line is now open.
Thanks on the $1 4 million in new adds to the loyalty program through digital how did the demographics of this group compared to what would normally sign up and how is the frequency and spend per visit and the cross sell that you referenced or even mix of tables versus slots on property compared to the existing base of rewards customers.
I appreciate those questions Stephen but that's a level of granularity.
Rather not get into on our database.
Fair enough and then should we interpret that the 200 million in cross sell as purely incremental for the like for like customer revenue as we look at <unk>, we would back out that $200 million might pick that it would be down. So it's really just the digital piece, that's keeping trend strong stable and the industry as we attract a new customer.
So the 200 millions in annual number so you are talking about $15 million of.
Quarterly spend that gets up that gets to that number that's a pure.
Additions through that digital channel, if you want to take it to the level of.
Customers would sign up and there would be some if digital didn't exist there would be an addition through caesars rewards.
A derivative level, it's not useful to get into on the call, but you should consider there's $200 million of casino revenue on an annual basis, that's running through the business now about 70% of that into destination markets the rest into read.
Joe.
That's helpful and maybe if I can sneak one one other one on that cohort I mean have you been actually trying to market at all at this point to two that cross sell or is that something that can actually build the incremental cross sells we think about moving throughout the year.
I'd say, we've had baby steps in that direction to date that most of that number is naturally occurring.
You should expect that to be a considerable area of focus for us when I talk about marketing too.
Profitable customers that this is a group that really all came in the door.
And kind of a 120 day period as I talked about that swamps, what the rest of the organization does on an annual basis. So as we sort through them, but you should expect that to be a.
Target focus for us as we move forward in an area, where we can drive revenue throughout the enterprise.
Sounds great. Thanks, so much.
Thanks, Jim.
Thank you.
And our next question comes from John Decree from BB R E.
Your line is now open.
Hi, Thanks for taking my questions.
Two follow ups on some of your comments in the prepared remarks first on the regionals.
Mentioned that margins ramp from the high Twenty's in January to over 37% in March and it sounded like a lot of that was.
<unk> impact in January I think the occupancy coming back in Vegas.
More tangible for for us to kind of contemplate.
Talk about that margin ramp in regionals I mean, you mentioned New Orleans normalized maybe that's a chunk of it but kind of help us understand what stand the ramp there was it just omicron or.
Some other stuff kind of working through as well as you ramp back up in the regionals.
It's just a crown and remember John in our regional we have.
Number of destination markets, New Orleans Atlantic City, Northern Nevada that Paul would have.
At the same similar visitation and occupancy trough.
Trajectory as Vegas had in the quarter, it's really a function of that.
Okay. That's helpful clarity.
Lastly on the cutting back on the mass marketing or media spend at a digital level, where you've really seen youre handle share unchanged.
Our normalized is that surprising to you or anything about that surprising.
The resilience that you've seen I mean is that caesars rewards that at its finest or how would you kind of characterize that trend once you pull back on that spend.
I think it's the effectiveness of.
The campaign that was developed by <unk>.
Chris Holger and Sharon Otterman in digital.
We started this in August with very little recognition.
The average consumer that Caesars was associated with sports and sports betting.
And certainly after the New York launch.
There's very few people that would be.
Possible likely sports betters looking for that that didn't know that Caesars was a choice and so.
It was really just a job well done in terms of getting our.
Customer recognition up you do you hook them into Caesars rewards. We told you that what we've seen in Caesars rewards is that creates a stickier customer and we're seeing the benefits of that since we pulled back on mass market spent.
Great. Thanks, Tom I appreciate the additional color.
And thank you.
And our next question comes from David Katz from Jefferies. Your line is now open.
Hi afternoon, everyone. Thanks for taking my question, Tom If we if we could just go back to the strip asset Rover for a minute.
<unk>.
I'd like to just be clear about there is there is a time period.
Is that should reconsider that and outside.
And our time limit in other words could it potentially be sooner than that.
Or is it necessarily.
Six months.
Well, David Miracles happen every day, but.
My experience has been.
When you get a lot of lawyers involved to work extends too.
Whatever the maximum allowable deadline is so.
If we finished one day ahead of that six months I'd be very pleased.
Okay.
Okay fair enough.
I'd like to go back to one of your prepared comments around being I believe the court was.
Meaningful.
Free cash generator.
This year.
Have you sort of put any order of magnitude around that are sort of walked across any of the.
Approximate details to help us with our Saturday check our model.
Yes, I mean, we can go through offline, but if you.
If you think about round numbers.
We've been run rating.
Ex omicron something.
$4 billion or better in EBITDA.
You had about 2 billion in outflows between interest expense and.
Lease expense about $1 billion of Capex at $1 billion of digital loss.
Roughly speaking.
And then the <unk>.
Capital from asset sales would be excess that pays down debt now with.
Half a million of EBITDA loss plus in front of it behind us in digital as you look through the rest of the year, we should be a free cash flow producer on an operating basis.
After Capex addition to the proceeds.
We generate from.
Asset sales and.
Brad Brian .
You did a great job.
Managing through a heavy cash use quarter to where we come out in a good position and should be <unk>.
<unk> free cash flow producer from now forward.
Got it okay. Thank you.
Thank you.
Yes.
And our next question comes from Dan Poland, Sir from Wells Fargo.
Line is now open.
Hey, guys. Good afternoon, thanks for taking my questions.
So we've heard a lot of this earning season about strong travel and leisure demand I mean, I guess as you look across your portfolios in your properties do you think that these properties in Northern Nevada Orleans Atlantic City those markets, you've kind of mentioned do you think they have a longer runway for growth from here and then maybe some of the earlier two to recover properties.
Their segments.
I think that there is.
Youre seeing a migration of customers right.
This is the crux of your question.
When.
We had the reopening after the pandemic.
People wanted to get out of their house, they're trapped for quite some time they were comfortable traveling a.
And a lot of cases, a limited amount they wanted to get out of the house.
They were comfortable going somewhere in their car.
So you saw this big burst of demand in the.
Regional markets and if you think about.
Other times, where demand was crimped for any reason in casino.
What you see is you see some substitution out of destination trips into regional markets and if you want to argue.
That there was some of that in 2020, one I think you've got a leg to stand on and as the picture surrounding the virus has gotten better we've seen increasing.
Willingness to travel willingness to get on a plane go somewhere where you're staying away from home for 234 nights and Thats, what youre seeing now in our regional destination properties in Vegas.
In particular, and I think <unk> got some pent up demand.
For group travel that we're really just getting into now youre seeing wash rates come down considerably I'd expect that to continue yes people that we're used to being on a plane going to group meetings that haven't really done that in two two and a half years at <unk>.
This point and I think youre going to see that as the group calendar begins in earnest, we really that's kind of another leg that we haven't seen yet so.
Think this is just part of a migration of people getting more comfortable as the virus receipts.
Got it and then then on digital.
I guess.
High level think about you guys had this big database Big Omnichannel presence all body strip properties.
Do you think about leveraging this over time given up to this point you feel like you've been mostly sports centric.
Whereas I think right now you are just kind of real time rolling out your I gaming content is it is it reasonable that over time, we should expect the mix to shift more to the casino and online casino side.
From where we are today, most definitely I would expect.
The casino to be a significant contributor to the profitability metrics that we laid out.
Got it and then just one quick housekeeping on corporate expense I think that ticked down a bit sequentially was there any kind of.
Anything specific to call out there.
Good old El Dorado business model in effect, but nothing specific.
Got it or make it higher.
Making the AG new paper is lunch now.
[laughter].
Yes.
Thanks, so much.
Thank you.
And our next question comes from David Bain from B Riley.
Your line is now open.
Great. Thank you so much.
First just big picture question, Tom a few.
Have reported.
Positive real time trends just so you have I think here sounds a little bit better than those.
Investor focus on our end.
To be sort of the broader intermediate term macro and I know you spoke to specifics why structurally out of Covid, where stage for potential growth. When you look at gaming as an investment, which I know you do.
In addition to the structural set up with that.
Versus other consumer discretionary industries can you speak to a little bit or speak to the gaming business in general and some things that maybe investors should consider in maybe Anthony you want to speak to that as well.
Yes, I would just say there is.
And there's clearly something about <unk>.
Gaming, even within travel and entertainment with.
The social aspect of it.
You want to.
You walk the floors here and see.
Groups of people that have not been out with each other in.
Quite some time enjoying them. So there is there is a social aspect to this that.
I don't know how well we appreciated it until it was gone.
And that's I think a significant driver of what we've got going here.
No.
As investors.
Serious hitters here today.
<unk> under their desks waiting the next shoe to drop in inflation or economy, we've been living with inflation for winter significantly with a significant inflation for about a year now.
We've seen no real impact on <unk>.
<unk> spend we just reported a quarter.
Where GDP was down.
One five points.
And this business not our business to business.
Casinos in particular held up quite well.
So I can't tell you what's going to happen in.
September or December or March, but the resilience of.
This business.
And.
Casino customers generally.
Has been extraordinary.
None of us would have imagined that.
We would shut our doors for <unk>.
<unk> set a time and nobody knew what would happen when we reopen budd.
Look at other <unk>.
Sectors.
Travel and entertainment consumer facing.
The level of demand that has come back here has just been.
Great to see and like I said as I walked through our properties now.
Now this feels like what we were buying when we announce this deal back in June of 19, So we're super excited to see where it goes from here.
Okay, Great and then my my other one was on California.
Yes.
Passes in November you get a scan I know a lot of unknowns with the landscape and taxes, but big picture. The strategy match, New York, just given the success there or would it move more to partnerships or other other things that you've learned.
From the New York opening I'm, just trying to get a big picture.
On big market openings, because I casino I think still has a ways to go so.
Wondering what we should look for in future years.
So, California, obviously between our Indian partnerships and our Vegas assets, we have.
An enormous California database.
We would expect to be an aggressive competitor for.
Business.
If and when that state launches there are things that we learned in New York in terms of.
How we would tailor an offer and.
What we would shoot for but we would expect to be.
Among the leaders in California like we are in most of the states where we operate.
Okay, and does that change with casino, new states going live versus OSB.
No I casino as we've talked about is.
It's a function of getting our app up to snuff in terms of game count that's.
Finally, almost complete and then you should expect to see us.
Become much more visible in terms of <unk>.
Marketing that business and becoming a real competitor, we didn't want to spend marketing dollars to send customers to what in our view was a sub standard product as we talked we've talked about David.
When we took for William Hill, William Hill had a single employee on the gaming side. So we had a lot more work to do there than we did even in OSB, but we expect to be.
A formidable competitor there and we're we're now in position to start that process.
Okay, great. Thanks, so much.
Thank you and our next question comes from Chad Beynon from Macquarie.
Your line is now open.
Hi, Thanks for taking my question, Tom just kind of piggybacking on the end of your your last comment you mentioned Liberty is expected to be in all markets by the end of the year I think you said, Illinois migrated over in March I'm not sure. If Pennsylvania has migrated over are there any other major markets we should.
Aware of kind of on the.
In the next couple of months and then more importantly, do you believe or how long should it take for you to get to you know market share that youre happy with after.
These platforms are switched over can we get there by the end of NFL season or does it take another.
Cycle of of seasons. Thanks.
So are the other state that still needs to come on Liberty is Nevada, which is obviously a big one for us.
<unk>.
And in terms of building share.
Our states, where we are undeniably late to the game and we're going to be.
Smart about how much resources, we throw at them, but roll tying them into our brick and mortar business.
Obviously, we've got a lot of customers out of Pennsylvania, both at Chester and in Atlantic City, and then we've got.
For a number of three Illinois properties that.
Have significant databases and you should expect us that's what we're going to mine and we'd expect to being continued gram continue to grind higher in market share.
If you're asking.
Do you think will be at our peak by this football season, I think we will still be growing beyond that.
Great. Thank you very much.
Thanks, Jeff.
And and.
Go ahead.
And thank you I am showing no further question I would now like to turn the call back over to Tom Reeg for closing remarks.
<unk>.
Thanks, everybody for dialing into the call and we will talk to you following the.
Completion of second quarter see you soon.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
[music].