Caesars Entertainment, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Las Vegas: Non-gaming revenue and cash flow were records. Table-hold was the laggard but within expectations. Expect strong Q4 with Versailles Tower online and catch-up accrual for union contract not recurring.
• Regional: New Orleans renovation and Danville opening to offset regional competition. 2025 expected to have tailwinds from these openings to offset competitive impacts.
• Digital: Strong growth in iGaming and Sports Betting, with structural hold increase. Developing shared wallet in multiple states.
• Strategic and financial: Sold LINQ Promenade retail lease portfolio, executed $140 million share buyback, focused on debt reduction, with future non-core asset sales in progress.

Segment Performance

• Las Vegas: Same-store consolidated net revenue was $1 billion, adjusted EBITDA was $472 million, down 2% year-over-year. Hotel and F&B cash revenue was a record, with occupancy at 97.1%. EBITDAR margin was 44.4% roughly flat year-over-year.
• Regional: Adjusted EBITDA for the quarter was $498 million, down 13% year-over-year. Impacted by tough year-over-year comparisons, competitive pressures, and construction disruption. Opened Caesars New Orleans and set to open Danville, Virginia in December.
• Digital: Caesars Digital delivered third quarter net revenues of $303 million, up 41% year-over-year, with adjusted EBITDA of $52 million, an all-time quarterly record. iGaming net revenue growth rate accelerated to 83%, driven by volume and hold increase. Sports Betting net revenue growth also accelerated to 36% year-over-year, with structural hold improvement expected.

Guidance

• Strong fourth quarter expected, with continued strong growth in 2025. Digital business expected to exceed the $500 million target. 2025 budgeted cash CapEx excluding Danville JV is approximately $600 million. Free cash flow expected to increase with debt reduction and CapEx decline.

Risks

• Regional faced competition, construction disruption, and weather impact in Gulf Coast/Florida. Sports outcomes could affect Sports Betting performance. Non-core asset sales had complexity, long timelines, and lower probability compared to executed ones.

Question and Answer

Q: Carlo Santarelli re: digital promotional investment; A: Eric Hession said Sports and iCasino have different promotional strategies, with Sports on lower reinvestment and iCasino in line with market Q: Joe Greff re: non-core asset sales; A: Tom Reeg said other non-core assets are more complex with longer timelines Q: Brandt Montour re: OSB October performance; A: Tom Reeg said October sports outcomes impacted OSB, but structural hold story remains Q: Dan Politzer re: Danville transition; A: Tom Reeg said Danville transition is margin-dilutive initially but will lift regional segment Q: Steven Wieczynski re: asset sale interest; A: Tom Reeg said more inbound interest in assets post Fed rate move but no active casino asset sales ongoing Q: Barry Jonas re: digital shared wallet; A: Eric Hession said shared wallet is being rolled out in multiple states Q: Shaun Kelley re: OSB expansion; A: Tom Reeg said desire for OSB and iGaming in all US jurisdictions Q: Stephen Grambling re: digital customer types; A: Eric Hession said iCasino has more slot players moving over and crossover with brick-and-mortar; Sports has higher average worth per customer with hold improvement Q: John DeCree re: Florida legalization and CapEx; A: Tom Reeg said less optimistic on Florida entry soon, Bret Yunker said steady-state CapEx is ~$400M maintenance and $200-250M growth CapEx Q: Chad Beynon re: iGaming flow through; A: Eric Hession said flow through expectation is around 50% with bounce around but reasonable for next year Q: Jordan Bender re: Regional hotel revenue; A: Tom Reeg said New Orleans underperformance will be recouped in 2025 Q: Daniel Guglielmo re: Vegas table game drop; A: Tom Reeg said large player trip impact caused table-hold lag