Caesars Entertainment, Inc. Q3 FY2025 earnings call

• Las Vegas: Soft summer with ADR and occupancy down, but trends improving in Q4 with positive leisure trends and strong group/convention calendar. Upcoming CapEx projects include Omnia Day Club, Vanderpump Hotel rebrand, and Project 10 by Luke Combs.
• Regional: 6% net revenue growth, early results from strategic customer reinvestments promising, margins improved sequentially. Will refine marketing approach and expand successful tactics.
• Digital: Volume growth in sports and iCasino, but impacted by headwinds like poor hold, incremental state taxes, etc. Progress on universal digital wallet with 22 states live, and Missouri launch planned for December.

The diversified portfolio delivered third quarter consolidated net revenues of $2.9 billion and adjusted EBITDA of $884 million. On a hold normalized basis, consolidated EBITDA was $927 million.

• Las Vegas Segment: Reported same-store adjusted EBITDA of $379 million and hold normalized EBITDA of $398 million. Occupancy was 92% vs 97% last year, ADR decreased 5% due to citywide visitation weakness. CapEx investments at Flamingo exceeded return expectations. Revenue contribution: N/A.
• Regional Segment: Adjusted EBITDA of $506 million and hold normalized EBITDA of $517 million, driven by 6% net revenue growth. Early results from strategic customer reinvestments are promising. Revenue contribution: N/A.
• Digital Segment: Net revenue of $311 million, adjusted EBITDA of $28 million, hold normalized adjusted EBITDA of $40 million. Impacted by NFL hold in September and loss of World Series of Poker revenues. Revenue contribution: N/A

• Las Vegas expects recovery in Q4 and 2026 driven by group business, with rate compression and healthier market in 2026.
• Regional expects flow-through of marketing reinvestment to continue improving as they refine marketing and expand successful tactics.
• Digital expects to exceed 50% target flow-through for the year, with progress on technology and product enhancements like redesigned Horseshoe Online casino in Q4.

• Volatility in sports outcomes impacting Digital segment results.
• Uncertainty around prediction markets and regulatory environment affecting Digital.
• Macro-economic factors impacting leisure demand in Las Vegas, though group business is expected to drive recovery.

Q: Good day, and thank you for standing by. Welcome to the Caesars Entertainment, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brian Agnew, Senior Vice President of Corporate Finance, Treasury and Investor Relations. Please go ahead.

A: Thank you, Shannon, and good afternoon to everyone on the call. Welcome to our conference call to discuss our third quarter 2025 earnings. This afternoon, we issued a press release announcing our financial results for the period ended September 30, 2025. A copy of the press release is available in the Investor Relations section of our website at investor.caesars.com. As usual, joining me on the call today are Tom Reeg, our CEO; Anthony Carano, our President and Chief Operating Officer; Bret Yunker, our CFO; Eric Hession, President, Caesars Sports and Online; and Charise Crumbley, Investor Relations. Before I turn the call over to Anthony, I would like to remind you that during today's conference call, we may make certain forward-looking statements under safe harbor federal securities laws, and these statements may or may not come true. Also, during today's call, the company may discuss certain non-GAAP financial measures as defined by SEC Regulation G. Please visit our press releases located on our Investor Relations website for a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure. Our Q3 investor presentation has been posted to our website, and our Form 10-Q has also been issued as well. We experienced hold volatility in our reported results. Management will discuss hold normalized results in our call today, and a full reconciliation can be found in our earnings presentation posted on our website on Slide 21. I will now turn the call over to Anthony.

Q: So Tom and team, I want to start with Las Vegas. And I want to just sort of dig into some of the comments that you made, Tom, specifically around leisure demand. And I heard positive leisure recovery, but I also heard that the group fill-in is most of the sequential improvement that you are looking for or seeing into the fourth quarter. And so maybe you could highlight some other metrics in terms of how we should think about the sort of very near-term sequential leisure recovery, whether that's bookings 4 weeks out, occupancy, et cetera, or anything else that might be helpful there?

A: Yes. So when we talked to you last quarter, we're looking at the same forward booking calendar that we can see. Now looking at that point, it looked particularly soft, which is why we told you we were expecting a soft summer. That came in when you adjust for hold about where we anticipated it would be as we sit -- and if you think about sequentially and the quarter that you're in, because it's the third quarter, it's a leisure-dominated quarter. There's not a lot of group business in Vegas when the weather is particularly hot relative to other quarters. And that leisure customer continued to get better during the quarter. July was the worst month of the quarter. August built on that and then September, October has continued, but that leisure customer is still softer on a year-over-year basis. The difference is what you get in group activity allows us to compress rate much better than we were able to in the third quarter, and you don't have nearly the amount of miss in occupied rooms. We had 90,000 in the third quarter, about 500 basis points of occupancy. Our occupancy looks better and our rate looks better than it did third quarter.