The speaker, Brian Agnew, welcomes everyone to the Caesars Entertainment Inc. 2023 Second Quarter Earnings Conference Call. He reminds the audience that they may make certain forward-looking statements about the company's performance, but that these statements are not guarantees of future performance and should not be relied upon. He also mentions that additional information concerning factors that could affect actual results can be found in the company's press release and filings with the Securities and Exchange Commission.

In the second quarter of 2023, Caesars Entertainment reported strong financial results with consolidated EBITDA exceeding $1 billion. The Las Vegas segment reported second best Q2 adjusted EBITDA of $512 million, while the Regional portfolio delivered $508 million in adjusted EBITDA and the Digital segment reported $11 million of adjusted EBITDA. The Las Vegas segment benefited from strong leisure and casino guests demand, the return of international guests, an exciting events calendar, and the continued strength of the group and convention segment.

Anthony thanked all of the team members for their hard work in the first half of the year, noting that their dedication and commitment to delivering exceptional guest experiences has led to success. He then gave an overview of the second quarter, which included a decline in the group and convention segment EBITDA in Las Vegas, but a positive outlook for the remainder of the year. The Regional segment saw slight revenue growth and a 1% decline in adjusted EBITDA. Two new temporary facilities were opened in Danville, Virginia and Columbus, Nebraska, and construction has started on the Versailles Tower rebrand in Las Vegas. Eric Hession will be providing insights on the Digital segment.

Caesars Sportsbook reported $11 million of adjusted EBITDA and $216 million of net revenue in the second quarter of 2023, compared to a $69 million EBITDA loss in the same quarter of the previous year. The improved performance is attributed to targeted promotional investments and the introduction of new technology improvements, such as the Caesars Palace online iCasino product, the Liberty product, and the native iOS Sportsbook app. The new products are expected to increase customer satisfaction and improve loading speeds and stability.

Eric has outlined four products that have been consuming significant technical resources over the past year, and are expected to be introduced to customers soon. Bret has discussed the acquisition of the minority interest in Horseshoe Baltimore, which allowed them to fully repay its Term Loan B, yielding significant interest expense savings. Tom has commented on the strong quarter in Las Vegas, despite the absence of a large group that was present in the previous year's numbers.

The Nevada numbers from last week showed that June's hold was not as strong as it was the previous year, negatively impacting margins. However, the gambling business is still doing well, as evidenced by strong demand and higher rates for events such as Formula One and the Super Bowl. The average customer for the Super Bowl is also more valuable than before.

Vegas is still doing well and the only disruption is the Jubilee Tower at Horseshoe, which is being converted to Versailles. Other regional properties, such as Tunica, Council Bluffs, and Chicago, are facing competitive pressure due to new casino openings. However, capital investments in Danville, Indianapolis, Lake Charles, and Atlantic City have helped to keep regional EBITDA flat year-over-year. Through July, regional EBITDA is on track to beat last year's third quarter.

The digital sector of the business was a loss last year, but the company is confident that they will reach their targets for this sector by 2025. They recently soft-launched the Caesars Palace casino and are expecting approval in a few jurisdictions soon. The new technology is much more advanced than before and has already resulted in a 27% increase in iGaming revenue. The company is aware of the competition in the iCasino space, but feels they have the product to start gaining market share, especially when combined with Caesars rewards.

The second quarter of last year was the best quarter the company ever had, and this year they topped it in EBITDA. The company has moved to Liberty in Nevada, which is a dramatic leap in technology, and 95% of their handle in Nevada will be on Liberty by the middle of the month. They are well-positioned heading into the season and are continuing to pay down debt, with conventional leverage now around four times. The company is looking at what to do with the free cash flow that will be generated in 2024 and 2025, and is considering a return of capital piece.

Tom Reeg is optimistic about the future of Caesars Entertainment, citing improved cash flow, lowered interest expenses, and a stronger digital presence. He anticipates occupancy in Las Vegas to be between 96-98% over the next three months and anticipates net revenue growth in the third quarter. Eric Hession is also asked to answer a question about digital.

Eric Hession explains that the reinvestment levels as a percentage of gaming revenue for Caesars is around 22%, which is on the lower end. He also states that the reinvestment for existing customers is below that and will increase slightly depending on the number of new customers. He believes that the iCasino side is an area where the company is optimistic about, as they have a competitive product that will allow customers to move over to the online casino side.

Tom Reeg has commented on the need for external opportunities to enhance growth going forward. He believes that the team has delivered a lot of value through external opportunities in the past decade and will continue to look for potential future opportunities while still having confidence in the growth potential of the existing portfolio.

Tom Reeg is discussing the company's digital business and brick-and-mortar business in terms of cash flow and shareholder value. He believes that the company has a good track record of putting cash flow to work and will continue to explore that option. He also mentions the Rio hotel coming online, labor negotiations, and Formula One as factors that could affect margins in the back half of the year.

Eric Hession and Tom Reeg are discussing the possibility of increasing the sports betting hold percentage from 6.4% to 7.5%-8%, with the expectation that customers will be betting more on in-play and player prop wagers. Reeg also mentioned that he is not short on cash and does not anticipate exercising the roofers on Baltimore or Virginia.

Tom Reeg is discussing the free cash flow and how they have a great track record of using it elsewhere. He also talks about the June in Vegas and how the high end business has been strong, both domestically and internationally. He mentions that Caesars had a strong international business before the pandemic, and that they have continued to build on the domestic business in the interim.

Tom Reeg stated that the company will become visible in terms of promoting the Caesars Palace app but not at the same level as when they launched the sports app. He also expects the digital business to be close to breakeven in the third quarter, with a significantly positive quarter in the fourth quarter. He concluded by saying that the "going on offense" comment was directed more towards domestic and digital casino side.

Tom Reeg commented on the US leisure trends and said that he is not seeing any recessionary activity or anything. He stated that the only property that may be soft is the Rio due to the transition out of the property. He also stated that volumes in Las Vegas have been strong for a year and a half and occupancies are between 96-98%. Finally, he commented on Atlantic City and said that it performed well through the summer.

Tom Reeg stated that the renovation work at Caesars Palace is finished, aside from the Nobu Hotel Tower which should be done by the end of the year. Atlantic City is not as strong as expected, but it is still within the regional business. Eric Hession then discussed the potential for improvement in the digital business, noting that expenses such as marketing and team deals can be reduced over time, while labor expenses may increase.

Tom was asked about the longer-term goals from 90 days ago and what specifically he was trying to get across. Eric Hession mentioned that variable expenses should be around 50%, which Shaun Kelley summarized as possibly greater than that when fixed expenses are factored in. Tom mentioned that his goals were related to free cash flow, return on digital investments, and other areas.

Tom Reeg discusses MGM's partnership with Marriott, as well as the impact of rising energy costs and weather on player visitation. He notes that last year, unhedged utility costs affected the company, but that they are in a much better position this year. He also states that there is nothing to point to as a reason for particular weakness or strength in their markets due to the weather recently.

Tom Reeg and David Katz discuss the three components necessary to reach profitability targets, which include continued execution in the OSB arena, increasing iCasino share, and rolling off of partnership and talent contracts. Katz then follows up by asking about the regional business and how much CapEx is needed for it, to which Reeg answers that it is a macroeconomic question.

David Katz asked a question about whether there is growth available in the regional portfolio. The speaker responded that they do 52 quarterly reviews each quarter and have seen properties improve 2x and 3x in EBITDA. He also noted that there are varying levels of defense, and that investing in properties that have been around a long time can be seen as defensive or as growth from where they are starting from. He used the example of the Tunica property to illustrate this, and concluded that people can make different decisions in similar circumstances.

Eric Hession states that live dealer games will be a major part of the business going forward and that the new Caesars Palace app will have a higher percentage of slot business than table games. He also states that they will want to have some branded customized games, but will not be bringing it in house anytime soon.

Bret Yunker discussed the decision to purchase the minority interest in Horseshoe Bolt for under $70 million, which allowed them to take advantage of the cost of debt and pre-payable term loan. Tom Reeg and Eric discussed the success of the World Series of Poker, noting that online poker is a strong suit for their iGaming business going forward.

Eric Hession discussed the success of the World Series of Poker, noting that it drove a lot of activity to the property, including food and beverage and hotel revenues. He also discussed the online poker side, noting that there has been little movement in terms of new states legalizing, and that the business is currently flat. However, he believes the brand is accretive to the company and provides incentives for customers to come to the brick and mortar locations for tournaments. Tom Reeg then thanked everyone for their time and attention and said they would talk again in November.

This summary was generated with AI and may contain some inaccuracies.