Caesars Entertainment, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Las Vegas: Softer market demand in hospitality, but encouraged by forward group pace in Q4 2025 and H1 2026. Missed high-end entertainment acts last year, but group calendar strong for Q4 2025, Q1 and Q2 2026.
• Regional: Negatively impacted by onetime items, but excluding them flat year-over-year. Rebranding and construction in Tahoe, strategic customer reinvestment and slot capital investments.
• Digital: Strong momentum, on track to meet 2021 financial goals. Sports book hold increased, iCasino volume up. Tech enhancements and game launches driving results.
• Balance Sheet: Fully redeemed most expensive debt, annual free cash flow savings over $40M. Tax deductions reduced cash taxes as % of EBITDAR.

Segment Performance

• Las Vegas Segment: Second quarter consolidated net revenues were $2.9 billion, with same-store adjusted EBITDA of $469 million. Occupancy was 97% vs. 99% last year, and gaming vertical faced lower year-over-year table games volume. CapEx investments at Flamingo generating strong returns. Revenue contribution from Las Vegas is part of the overall consolidated revenues.
• Regional Segment: Adjusted EBITDA was $439 million. Negatively impacted by onetime items, but excluding these, flat year-over-year. Danville and New Orleans performed strongly, with strategic customer reinvestment and slot capital investments driving gaming revenues. Rebranded Harvey Lake Tahoe to Caesars Republic Lake Tahoe, with Phase 2 construction starting in fall 2025.
• Digital Segment: Net revenues were $343 million, up 24% year-over-year, and adjusted EBITDA was $80 million, up 100% year-over-year. Sports and casino net revenues grew 28% and 51% year-over-year, respectively. Tech enhancements like universal digital wallet and proprietary player account management system, along with iCasino volume, hold, and MAUs growth, contributed to results.

Guidance

• Digital on track to achieve financial targets set in 2021, with momentum continuing into 2026 and beyond.
• Expect Regional EBITDA flat to up for full year 2025.
• Vegas expected to improve with strong group calendar in Q4 2025, Q1 and Q2 2026.

Risks

• Vegas market demand softness, especially in leisure.
• International business variability, particularly Canadian market.
• Uncertainty around regulatory environment for digital initiatives like prediction markets.

Question and Answer

Q: Dan Politzer on Las Vegas stabilization.

A: Tom Reeg on forecasted cash occupancy stabilization and strong group calendar.

Q: Brandt Montour on promotional efforts.

A: Anthony Carano and Tom Reeg on targeted marketing, test and control, and slot spend.

Q: David Katz on Digital acceleration.

A: Tom Reeg on Digital momentum, partnership expenses rolling off, and future growth.

Q: Steve Pizzella on OpEx and labor.

A: Thomas Robert Reeg on union contract increases in Vegas and inflation impacts.

Q: David Katz on Digital run rate.

A: Thomas Robert Reeg on Digital momentum continuing into football season and partnership expenses rolling off.

Q: Elizabeth Dove on Digital OSB hold.

A: Anthony Carano on favorable sports outcomes inflating hold but upward trend in structural hold.

Q: Barry Jonas on NYC CAC race.

A: Thomas Robert Reeg on confident in submission and potential separation of Digital.

Q: John DeCree on asset-light opportunities.

A: Thomas Robert Reeg on incremental EBITDA from asset-light deals and pursuit of more opportunities.

Q: Shaun Kelley on Las Vegas Q4 group.

A: Thomas Robert Reeg on Q4 Las Vegas expected to be up year-over-year.

Q: Chad Beynon on share repurchases.

A: Thomas Robert Reeg on focus on debt repayment and intention to repurchase shares as stock is attractive.

Q: Jordan Bender on international expansion.

A: Thomas Robert Reeg on focus on domestic opportunities over international for now.

Q: Daniel Guglielmo on business confidence.

A: Thomas Robert Reeg on confidence in diversification and momentum in Digital