Joyce Arpin - Vice President of Finance and Assistant Treasurer Mark Frissora - President and CEO Eric Hession - CFO.

Carlo Santarelli - Dan Politzer - JPMorgan Cameron McKnight - Credit Suisse Shaun Kelley - Bank of America Thomas Allen - Morgan Stanley Chad Beynon - Macquarie Harry Curtis - Nomura Robin Farley - UBS Jared Shojaian - Wolfe Research.

It is now my pleasure to turn today's webcast over to Joyce Arpin, Senior Vice President of Finance and Assistant Treasurer. Joyce, the floor is yours..

Good afternoon, and welcome to the Caesars Entertainment third quarter 2018 conference call. Joining me today from Caesars Entertainment Corporation are Mark Frissora, President and Chief Executive Officer; and Eric Hession, Chief Financial Officer.

A copy of the press release, earnings presentation slides and a replay of this conference call are available in the Investor Relations section of our website at caesars.com. Also, please note that prior to this call, we furnished a copy of the earnings release to the SEC in the form 8-K and we'll also file our Form 10-Q.

Before we get underway, I would like to remind you to reference slides 2 through 4, which include forward-looking statements, Safe Harbor disclaimers and definitions of certain non-GAAP measures. Our comments today will include forward-looking statements as defined by the Private Securities Litigation Reform Act.

Forward-looking statements reflect our expectations as of today's date and we have no obligation to update or revise them. Actual results may differ materially from those projected in any forward-looking statements due to unanticipated hold fluctuations, weather or other unforeseen circumstances that we do not control.

There are certain risks and uncertainties, including those disclosed in our filings with the SEC, that may impact our results. In addition, Caesars Entertainment Operating Company, or CEOC, emerged from bankruptcy on October 6, 2017, and Caesars Entertainment Corporation completed its merger with Caesars Acquisition Company, or CAC, on that date.

We also deconsolidated the results of the Horseshoe Baltimore in the third quarter of 2017 and closed on the acquisition of Centaur Gaming in the third quarter of 2018. Therefore, U.S. GAAP results do not include CEOC in Q3 2017, but include Horseshoe Baltimore in Q3 2017 and include Centaur in Q3 2018.

Enterprise-wide results include CEOC in the prior year and include Centaur in the current year, but exclude the Horseshoe Baltimore in both years unless otherwise stated. Enterprise-wide holds-adjusted results reflect hold versus our expectation. You can find reconciliations of GAAP and non-GAAP figures starting on slide 37.

I will now turn the call over to Mark. Please turn to Slide 6..

Thank you, Joyce. As most of your read in our press release this afternoon, we announced that I will be leaving the company on February 8. It's been an honor to serve as the CEO of Caesars since 2015, particularly given all that this management team has accomplished to transform the company during that period.

I'm very grateful to the entire team for their efforts and proud of what we've accomplished together and very optimistic about our company's future. I plan to remain focused on operating discipline and maintaining stability during the transition. So now we'll turn to the operating results.

We reported third quarter enterprise-wide revenues of nearly $2.2 billion, up 2.9% from the prior year quarter despite headwinds in Las Vegas and Atlantic City and a very challenging year-over-year comparison.

The increase was due primarily to the acquisition of Centaur and strong performance across our diversified regional portfolio, excluding Atlantic City. Note that we had a very strong Q3 2017, which benefited from favorable items, including a credit and bad debt expense and we also had unfavorable hold versus our expectations this quarter.

Taking these items into consideration, we are very pleased with our performance this quarter. Outside of Las Vegas, we realized an 8.4% increase in revenue and a 10.7% increase in adjusted EBITDAR for our other U.S. properties, despite the increased competition in Atlantic City.

Excluding the acquisition of Centaur and the impact in Atlantic City, adjusted EBITDAR growth would have been 3%, demonstrating the continued broad-based strength across our regional portfolio and momentum in our operational efficiency efforts. In Las Vegas, revenues fell 2.4%, attributable to soft demand.

Adjusted EBITDAR declined 7.5% impacted by unfavorable hold of $10 million to $15 million year-over-year as well as higher collections than normal in the prior year period, resulting in $11 million of increased bad debt expense year-over-year. As a result, adjusted EBITDAR margin compressed by 190 basis points in Las Vegas.

Adjusting for these two factors, Las Vegas adjusted EBITDAR would remain flat year-over-year. Our results validate the strength of our business model and ability to execute despite these calendar-driven headwinds. Enterprise-wide adjusted EBITDAR of $600 million declined 2.1% driven by softness in Las Vegas as well as a drag from Atlantic City.

Hold-adjusted EBITDAR was $616 million, down 2.7% year-over-year. As we described on our last call, the third quarter of 2017 was a record quarter for our Las Vegas a schedule and our target gaming customer mix was meaningfully lighter this quarter on a year-over-year basis.

With that said, another aspect of our enterprise-wide performance in the quarter was reflected in the benefits of our geographically diversified network and continued focus on operational excellence as results and regional markets partially offset the softness in Las Vegas and Atlantic City.

Our enterprise-wide adjusted EBITDAR margin declined 140 basis points to 27.5% compared to an all-time record third quarter adjusted EBITDAR margin in the prior year period. Marketing improvements and efficiency efforts remained a key focus over the quarter.

We reduces domestic marketing cost by $146 million year-to-date, while holding market share in Las Vegas and most of our regional jurisdictions. Year-to-date domestic marketing cost now represent just 20% of our gross revenues, reflecting 200 basis point reduction year-over-year. Hold was $15 million to $20 million below normalized level.

Despite quarter-over-quarter volatility in our business, we remain focused on executing our strategic priorities to drive sustainable long-term growth and shareholder value. I'm proud of the company's execution on third quarter. We manage the business well in the face of softer than anticipated demand in Las Vegas.

Within the quarter, we had several important wins. Regionally, results were strong with other U.S. enterprise-wide adjusted EBITDAR growing 10.7% or 3%, excluding Centaur and the impact of increased competition in Atlantic City. We successfully closed the Centaur acquisition in July and integration is progressing ahead of schedule.

We managed EBITDAR margins well despite revenue declines in Las Vegas and Atlantic City. We launched new sports betting offerings in Mississippi and New Jersey. We plan to open Caesars Dubai on November 15, demonstrating our ability to leverage our brands and organizational assets to grow cash flows in a very capital-efficient way.

And we returned cash to shareholders through $311 million in share repurchases this year-to-date. There were some notable challenges in the quarter, too, many of which we have already discussed on recent investor events.

Demand in Las Vegas was softer than we anticipated based on our pace in the quarter and historical trends and dropped sharply in the back half of September. Despite the strong Hotel and Casino performance we had in the second quarter, we were surprised how quickly demand deteriorated through the end of Q3.

When demand fell off in September, we took actions to improve occupancy and EBITDAR by utilizing our casino database. Las Vegas RevPAR came in below our expectations. Eric will discuss RevPAR later in the call.

Our analysis indicates that the third quarter softness in Las Vegas was temporary and we are already seeing strong momentum in bookings for the fourth quarter and early into 2019. And we were impacted by increased competition in Atlantic City in the quarter, as discussed on our prior earnings call.

As you will see on Slide 8, we haven't updated our outlook for the full year, due to the softer-than-expected third quarter results in Vegas. We now expect enterprise-wide hold-adjusted EBITDAR for the full year between $2.32 billion and $2.37 billion, reflecting year-over-year growth of 4% to 6%.

We still expect a strong fourth quarter and our guidance implies enterprise-wide hold-adjusted revenue of approximately $2.06 billion to $2.14 billion and hold-adjusted EBITDAR of approximately $550 million to $600 million in the fourth quarter or year-over-year growth of 4% to 8% and 6% to 16%, respectively.

Revenues from our in-house groups and citywide group business remains solid, which implies increased hotel revenues year-over-year. We're also filling more rooms with casino customers early in the booking window, which will improve gaming revenues and hedge against any potential volatility in late booking and leisure demand.

As of now, we have approximately 100,000 total additional Las Vegas room nights on the books in the fourth quarter versus the same time last year, reflecting an increase of 7% at this time. Also as a reminder, we had a negative EBITDAR impact of $25 million in the fourth quarter of 2017 due to the tragic event on October 1, 2017.

We also had $15 million in unfavorable hold versus expectations in Q4 '17. Finally, we expect to have approximately 40,000 room nights on the market year-over-year due to renovations. In other U.S. regions, we budgeted roughly $20 million of adjusted EBITDAR impact in the fourth quarter in Atlantic City due to the increased capacity there.

We have seen a decrease in revenue since the peak period and are maintaining our $40 million adjusted EBITDAR impact for the second half of the year. All other areas remain stable and consistent with the first 3 quarters of this year.

In the all other segment, we expect adjusted EBITDAR to remain in line with the first, second and third quarters of this year. Let's move to Slide 9. Taking a step back from the results, we made further progress on our growth initiatives and we're confident we have the right strategies in place to drive sustainable value creation over the long-term.

We're taking a balanced approach to capital allocation across the investment in - across investment in our properties, debt reduction, disciplined M&A and share repurchases.

We are expanding our footprint with accretive acquisitions and asset-light licensing opportunities and we're broadening our product offerings in areas like sports betting and areas where we under-index versus peer such as corporate meetings.

Our industry-leading Total Rewards program, now with over 55 million members, continues to drive cross-property visitation and a fair share revenue premium in most regions where we operate, making us an advantaged acquirer of regional assets.

Our technology investments across the company have helped us draw increasingly valuable customer insights from the database, allowing us to generate strong returns in our marketing investments and drive growth in our core business. On Slide 10.

Our operational excellence and continuous improvement efforts have accelerated our ability to realize synergies at Centaur through the full turnover to our systems, which is expected to occur this month at those properties.

The results of Centaur validate our thesis that we can utilize the power of the Total Rewards database and our efficient and scalable operating model to drive traffic and synergies for future M&A. We continue to project that we will drive $200 million of EBITDAR at these properties in 2 full years.

It's also worth reiterating that we funded the purchase of Centaur in part from the proceeds of our sale of the real estate assets of Harrah's Las Vegas to VICI Properties. As shown in the table, we anticipate our effective post-synergy OpCo multiple to be approximately 5.7x and to be further reduced to 4.8x upon the introduction of table games.

We will update you as we continue to integrate the properties. Slide 11. Caesars Entertainment's unique platform is also a key competitive advantage as we look towards the future of sports betting.

During the quarter, we launched new sports betting offerings in New Jersey and Mississippi, which saw strong guest traffic and a 10% to 20% increase in revenues at adjacent bars, restaurants and gaming properties.

We launched a mobile betting app in New Jersey, which is fully integrated with Total Rewards and caesarscasino.com, which saw a 20% increase in September as customers played between products.

We recently added sports bonusing features to the app and bolstered our partnership with SG Digital with the addition of a larger sports operations and marketing team located in Gibraltar. With these actions, we expect to drive increased volume from the initial launch period beginning in November.

And at the LINQ in Las Vegas, we opened The Book, a more modern and social take on the traditional sports book, which has been well received and has driven double F&B revenue in October versus the prior year.

We believe we're uniquely positioned to compete as sports betting expands to other states such as Pennsylvania, where we received an initial license yesterday due to our strong brands, distribution model, investments in technology and partnerships and footprint across 14 states.

We expect sports betting to become an increasingly important component of our overall business in the future. As part of our broad-based efforts to raise our profile with sports fans, we recently announced several high-level partnerships with pro sports teams and venues.

Here in Las Vegas, we're proud to be one of the first corporate sponsorship - sponsored partners with the Las Vegas Raiders and we're excited for the imminent arrival.

On the East Coast, we're branding the lounge the Prudential Center and are working closely with the Devils and the 76ers to have our branding and experiences present at all of their home games.

In Baltimore, our relationship with the Baltimore Ravens, who play just a few blocks from our Horseshoe property, is also core to our local and national marketing strategy. On Slide 13. As I mentioned earlier, we under-index compared to peers in revenue we get from corporate meetings.

This is why the construction of Caesars Forum is such a great opportunity to diversify and expand our business into areas with significant upside potential. According to Carlson Wagonlit Travel, Las Vegas will be the number 1 destination for hosting meetings in 2019.

There is more demand for meeting space in Las Vegas than we can currently accommodate. In fact, our meeting spaces at Caesars run at 90% capacity outside of holiday weeks, demonstrating the potential upside from adding additional capacity.

We're investing approximately $375 million in the development of Caesars Forum and expect to generate substantial incremental revenue. We're already seeing strong interest in the venue and we're pleased to say that we've already booked $112 million of business at Caesars Forum. We expect construction to be completed in early 2020.

So on Slide 14, the improvements we're making in our operating model will drive significant value in the future.

In the first 9 months of 2018, we've increased our net revenue per full-time employee 4% and reduce our domestic marketing cost by $146 million, primarily through targeted reinvestment strategies, which have sharpened our ability to offer the right incentives to guests at the right times, while reducing nonaccretive offers.

We've been successful in ensuring that rebalancing our marketing spend does not impact profitable market share or the customer experience. Despite the decreases in marketing and labor expenses, we've achieved record Net Promoter and customer satisfaction scores from our guests during the last 3 years.

In the first 9 months, we saw a 2.8% increase in our Net Promoter Score and a 5.1% increase in customer service scores from our guests. Moving to Slide 15, we have a balanced approach to capital allocation and we have multiple avenues by which we are creating shareholder value.

After using cash for rent, interest, maintenance capital and same-store growth projects, we plan to utilize our remaining free cash flow to reduce debt, pursue disciplined and accretive M&A, pursue new development activities and repurchase shares. Importantly, we anticipate that any acquisitions we make will be neutral or deleveraging post synergies.

Debt paydown is an important priority at this time to derisk the balance sheet and provide dry powder for opportunistic deployment. We remain committed to reduce our gross lease adjusted leverage to 4.5x and our gross financial leverage to 3.25x by the end of 2021.

We believe our shares are undervalued and will continue to repurchase them as we are able to under the current $750 million authorization.

That we think our shares are undervalued even if they are worth what our consensus price target of $13 suggest deploying the remaining $439 million authorized under our program will yield $0.30 per share of value uplift, which is attractive, but there may be better alternatives.

We are focused on generating multiple dollars per share of incremental value through sustainable free cash flow and EBITDAR growth in multiple expansion. Thus, we will ship dynamically about those capital allocation priorities to be responsive to varying market and economic conditions as well as our evaluation.

Given our aspirations for value creation and the opportunities we are seeing, we're currently most focused on debt reduction and disciplined M&A to increase our trading multiple and drive long-term value for shareholders. Sale-leaseback are another tool at our disposal to create value.

They can be an efficient source of capital and as you saw with the Centaur deal, can be used to finance accretive expansion opportunities. We'll continue to evaluate sale-leasebacks in the context of all the other opportunities available to us and we'll keep you updated on our strategy.

I'll now turn the call over to Eric to review our financial results in more detail..

Thank you, Mark. Before I discuss the details on our segment results, I'd like to start on Slide 17 to discuss RevPAR and specifically detail the drivers of our Q3 RevPAR decline of $4 or 3.6%.

As you see in the waterfall chart, the RevPAR weaknesses is primarily attributable to lower rate in occupancy due to weak demand in the leisure segment driven by fewer citywide events year-over-year.

In addition, we took inventory off of a key online travel agency as we negotiated better contract terms, which will positively impact EBITDAR for the long term, but negatively affect RevPAR this quarter. In response to the unexpected weaker leisure demand, we leveraged our large gaming loyalty database to fill rooms with casino customers.

Because of the lead time associate with this strategy, most of the improvement impacted, Q4 but we saw some benefit in September as well. In addition, annualization of resort fees also had a positive impact on RevPAR of about $1.60. Now turning to Slide 18, let's review our results for the third quarter in more detail.

As in quarter past, our commentary includes CEOC results but excludes Horseshoe Baltimore from the prior year. Starting in the third quarter, Centaur is included in our results.

First in Las Vegas, as Mark noted, it was a challenging quarter primarily driven by lower casino volumes, unfavorable hold and lower occupancy given weaker than anticipated demand and a very difficult comparison versus last year's robust event calendar. Overall, Las Vegas net revenue totaled $910 million, down 2.4% versus the prior year period.

Hospitality results were soft, driven by lower occupancy rates in the leisure segment. As a result, overall Las Vegas cash room revenue fell 5.5% and RevPAR as noted fell 3.6%. Cash ADR in Las Vegas was down 2% versus last year.

Gaming results in Las Vegas were also softer than expected, down 9.8% from a year ago, due to lower volumes and unfavorable hold. Turning to our U.S. regional segment. Revenues grew 8.4% and adjusted EBITDAR grew 10.7%, driven primarily by the acquisition of Centaur and broad-based strength at our regional properties outside of Atlantic City.

The impact in Atlantic City due to higher competition negatively impacted hold-adjusted EBITDAR by approximately $20 million versus 1 year ago.

In the all other segment, which includes our managed, international, CIE and corporate areas, revenues remained essentially flat, while adjusted EBITDAR decreased $18 million year-over-year due to a credit related to IT corporate costs and lower than normal insurance expense in the prior year period due to large claims that settled significantly slower than reserved.

We provided a breakdown of our results by owned versus leased assets in the appendix. RevPAR is one of the many indicators we use to measure our progress. We're pleased to say that we have outperformed our Strip peers in year-over-year RevPAR growth by an average of 300 basis points over the last 10 quarters.

As we head into the fourth quarter, we're seeing solid RevPAR growth, particularly in October. Competitive dynamics in Las Vegas make RevPAR difficult for us to forecast as it's influenced by many factors.

First, we operate fewer than 25% of the rooms on The Strip due to our database sell - and we sell even lower percentage of rooms in the leisure segment. Therefore, our rates are affected by competitive factors. Second, approximately 40% of our room nights are comprised of casino customers and our comps are discounted.

Effective January 1 of this year, changes to our revenue recognition policy caused our comp room rates to be determined by a discounted component of our leisure rate. Because of this dynamic, RevPAR has become more volatile and can be negatively impacted in a soft market.

The bar chart on the right-hand side of this page shows the month-over-month volatility of our Las Vegas RevPAR. Our goal is to create shareholder value - value for our shareholders. To that end, we believe that adjusted EBITDAR is the most important measure of our enterprise-wide performance.

For the reasons mentioned, RevPAR has many influencing factors and at times, we may take actions to improve other metrics at the expense of RevPAR. So we've decided to stop providing RevPAR guidance going forward and will, of course, continue to disclose RevPAR results each quarter for the benefit of the investing community. Turning to Slide 19.

I'd like you - to walk you through our debt, cash and liquidity position. As we ended the quarter with approximately $1.6 billion in cash enterprise-wide, we also currently have $100 million drawn on our CRC revolver. Both cash and revolver balance is reflected in the purchase of Centaur.

Cash capital expenditures totaled $127 million in the quarter, driven by ongoing renovations in the second phase of our room refresh project at Flamingo.

Excluding the convertible note and capitalizing on our new expected cash lease payments at 8x, our net leverage stands at approximately 5.4x our new outlook for adjusted EBITDAR and our net traditional leverage is at 4x adjusted EBITDAR.

Recall last quarter, we executed another $1 billion of swaps, increasing our fixed to floating ratio starting in 2019 to 60%. At this time, we believe this is an appropriate mix of fixed and variable-rate debt. Through September 30, the company returned $311 million of value to shareholders through repurchasing approximately 31 million shares.

We stopped buying back shares midway through the quarter and through our quiet period. We continue to believe their shares are an attractive use of capital and plan to buy back shares opportunistically as we are allowed. Turning to slide 20, we'd like to provide you an illustrative view of our expected discretionary cash flows in the coming years.

Taking the midpoint of our full year guidance plus the fully integrated run rate adjusted EBITDAR for Centaur, we'd expect to generate about $270 million in discretionary cash flow after maintenance CapEx, lease payments and interest expenses.

We continue to expect healthy cash flows, which will enable us to invest in our core business, reduce our leverage, pursue disciplined M&A and repurchase shares as Mark explained, according to our capital allocation strategy. Now I'll turn it back to Mark for some closing comments..

Thanks a lot, Eric. On Slide 22. So coming back to our full year outlook for a moment, note that we are slightly lowering our CapEx guidance with same-store at $500 million to $550 million, which includes our room renovations. Development CapEx is at $250 million to $275 million, which includes Caesars Forum, Korea and the Centaur integration.

The development CapEx range was lowered as spend at Caesars Forum shifted more into 2019 from 2018. Slide 23, turning to the fourth quarter specifically. As I mentioned, we are seeing good momentum in Las Vegas. In October, we generated one of the highest monthly hotel revenue results in the history of the company.

We had 50,000 additional casino room nights on the books versus the same time last year and we're seeing solid growth in our VIP and VVIP segments, all important indicators of performance.

Our Total Rewards gaming database and unique distribution model is a significant competitive advantage that we can use to drive increases in casino room nights, which reduces our reliance on the leisure segment. Looking further out to 2019, our business is healthy. We already have 90% of our target room nights booked for in-house groups.

Overall room nights in the books for January 2019 are up by approximately 28,000 versus the same time last year. We expect positive ADR growth in Las Vegas and Caesars Bluewaters Dubai will be fully operational and generating fees as well as Buena Vista, opening in the second quarter.

To recap, we remain confident in delivering value to our shareholders through our continued operational focus and disciplined growth strategy. On Slide 25, there is a summary of progress on some of our key strategic objectives.

In the 13 months since CEOC's emergence from bankruptcy, we have continued to focus on cash flow margins, while gradually shifting investments towards long-term growth initiatives.

We're expanding the Caesars Entertainment network through accretive MNA, Las Vegas real estate development, international development and asset light branding and licensing opportunities with a focus on capital discipline.

We have also prioritized investments in innovation in our core gaming business to attract new demographics and capitalize on emerging trends, including building out our U.S. sports betting business where Caesars is extremely well positioned to compete.

We are well positioned to generate sustainable top- and bottom-line growth through our successful and disciplined execution of these initiatives. In summary, we are successfully executing on the plan that we set out at emergence and we have a clear path forward to creating significant shareholder value.

We remain focused on executing against these growth areas in a disciplined manner. We're now ready to open up the line for Q&A, operator..

[Operator Instructions] Our first question comes from the line of Carlo Santarelli. You may ask your question..

Congratulations on a great job with the company through the bankruptcy up until the present.

Just in terms of the commentary on Las Vegas, I guess, there is a little bit of - I guess, from your comments, obviously, there were a couple of one timers in the 3Q and some of the changes that you made around the way you're addressing some of the FIT business as well as some of the wholesale and group business and obviously, that's - more of that will be on the com when you do get the Caesars Convention Center open.

But Eric, maybe you could talk a little bit about just some of the nuances of some of those changes and how the moving parts all come together to kind of serve as a little bit of headwind to RevPAR growth?.

As we mentioned at a few of the investor conferences throughout the third quarter, we were clearly surprised by the falloff in the pace of that leisure demand segment. One of our largest competitive advantages is the sizable database that we have.

And the database is most effective when used out looking a few months ahead in terms of being able to market to those customers. So we tried to do that in the middle of the third quarter. And as Mark mentioned in his notes, we did affect a little bit of the September month.

However, unfortunately, our occupancy fell overall because we weren't able to backfill with those casino customers. When we look into fourth quarter, and even into next year, utilizing the database has been very effective.

We have 100,000 more room nights on the book at this point compared to the prior year period and over half of those are from the casino segment. So that is certainly providing us with optimism regarding the strength of the quarter.

In addition, we finished the October month where we saw October finishing either as the best or the second best hotel revenue month ever in the history of the company. So the fourth quarter is shaping up quite well. And then as we head into 2019, the group demand also seems quite strong.

We have significant percentage of the anticipated rooms already on the books, well over 90% and they're at solid rates that would indicate further strength in the Las Vegas market..

And obviously, Eric, as you mentioned, that casino customer impact, just given the way the accounting works on the optical way that you'd report RevPAR, would obviously have a negative influence, correct?.

Yes, so the casino room nights because of the way revenue recognition was changed at the beginning of this year, we book the casino room nights at a discount to one of our transient segments. And so as a result, if we are trading rooms from that segment, casino segment, it would drive down RevPAR.

To the extent that we're actually increasing occupancy, it would be a good side of the ledger, but when you're making that trade-off to the casino rooms, it does cause it to decline.

In addition, in this case, in Q4, we also have approximately 40,000 more rooms available to sell than we did in the prior year period due to the schedule of the renovations, which that certainly provides downward pressure on the RevPAR calculation, but obviously an opportunity to have incremental revenues by filling rooms with profitable customers..

And then Mark, if I just could ask one follow-up. In your remarks, you talked a little bit about uses of capital going forward and obviously, debt paydown was one of the focus, but you also mentioned acquisitions and M&A strategically.

Would there be a scenario where you guys would embark on an M&A transaction that didn't involve a real estate partner?.

I think that, in general, I'll let Eric answer, I guess.

Why don't you go ahead?.

Yes. I would say that it's very unlikely. I'd hate to say never. And it could be the size of the transaction might not be applicable to a real estate transaction. But if we're talking about a tuck-in acquisition of any size in the regional markets, it would certainly make sense given our other needs of capital, to use a real estate partner..

Our next question comes from the line of Dan Politzer. You may ask your question..

So I want to hit on the change, the CEO change first.

How are you guys going about the search for a potential candidate? And are you guys looking externally, internally? And do you guys have a time line of when you think that seat could be filled?.

I think that we have a committee on the Board, search committee, and they've engaged obviously an external consultant and the process can yield candidates right away or it could take 4 months, 5 months, I don't know. As you know, it is very variable. We're looking obviously internally, externally.

And again, other than just stating what we're doing, that's about all I can speculate on. We don't know how that search will ensue and we obviously want to find someone that will allow us to move forward in a real seamless way and do that as quickly as we can..

And just given the recent headlines on M&A regarding your company, I mean, does the vacancy change the time line or approach to M&A?.

No, I think, we've got a very active - we have different committees within the Board. We have an active committee that looks at all of our acquisitions and that process hasn't slowed down at all. And so I don't anticipate any delay. If there is something that we think creates value, shareholder value, we will move very quickly or it..

And then, you guys talked about your strong October trends in Las Vegas.

How should we think about going forward your performance in terms of lodging, relative to your peers on The Strip and the industry in general?.

Yes, Dan, we've included in the earnings deck a slide that covers the RevPAR that we have generated in Las Vegas compared to that reported by the LVCVA and the change year-over-year. And we've outperformed The Strip by about a little over 300 basis points on average for 9 quarters.

We believe that, that's largely due to our business model and also the room renovations that we have undertaken. We're about 70% of the way done with those by the end of the year. So I would anticipate some continued performance heading into next year that would outperform The Strip.

At some point, you get diminishing returns after all of our rooms get back up to the level that they otherwise should be at, and so that will eventually diminish, but I would think heading into 2019, it's reasonable to expect continued outperformance..

The next question comes from the line of Cameron McKnight of Credit Suisse. You may ask your question..

So first of all, in terms of The Strip, Mark, I mean, we all know the third quarter was tough and a lot of words have been written and spoken about that.

Looking forward, do you think anything has changed since the first quarter or the second quarter of this year? Or was the third quarter a genuine one-off or an outlier?.

I think that the only thing that for us that was a surprise was the precipitous drop that we saw in September, but everything that we've seen since then has been pretty much a return to normalcy. So in terms of looking at the Vegas business model going forward, we remain bullish..

And could you talk about expected city wide convention attendance for the fourth quarter and the first half of next year? And the magnitude to which you expect attendance might be up in those periods?.

I know we've previously reported the citywide attendance will be up in the fourth quarter of this year, and particularly in October.

We did highlight for you that October was probably one of the best revenue months we've ever seen in hotel revenue for the month of October and that was, when you look at the citywides, I think, they went from last year in October, if I remember right, something like 250,000 to this year, 305,000.

So we saw evidence of that and demand that we saw in October. And then in terms of other citywides, I think November is positive as well, roughly 20,000.

I think December ends up being on citywides, at least as of a couple of weeks ago, still down because there weren't really any citywide events last year in December, but Eric, you can correct me if I'm wrong..

Yes, I think, that's right..

And then finally, in terms of room renovations and renovations you're making to the common areas at some of the properties on The Strip, do you think that you're taking share to some extent in Las Vegas?.

Every month, we have been fairly neutral to positive. I don't think - I don't know what the numbers on a month or day basis, but I know generally speaking, we were flat, at least flat to up on share in Vegas. And I know that at least through September. We were looking at it yesterday. So we're doing well.

I think that what you see in market share here is, you've got to kind of look at the trend over time. One month, it will be blips based on, could be even baccarat play, it could be based on an event that's occurring at one of your facilities, but over time, I think, we have taken share, quite a bit of share, over the last three years.

And we've seen kind of the similar kind of trends that we've had in the past, we're seeing it now. So we're hopeful that as we continue to reduce our reinvestment by targeting customers in a much more precision-oriented way that will be able to continue to either increase share or keep it flat with less reinvestment..

Our next question comes from the line of Shaun Kelley of Bank of America. You may ask your question..

Just maybe one big picture one and then a more detailed one. So the big picture question would be, there's been a lot of press reports and media speculation about just sort of larger scale strategic options that the company could consider.

I know these are really difficult to comment on in a public forum, but can you just give us a sense if there are any option that you guys can perceive of that is necessarily off the table as it would relate to kind of how the company looks at some of these things going forward and what structures it may or may not consider?.

Wow. It's a good question, Shaun. Unfortunately, we can't answer it. I just can't comment we've got a policy on anything with regards to M&A, so. I appreciate the question, though..

I had to ask. So let's move on. The other area would be on the gaming side. Eric, you talked a lot about Las Vegas on the hotel side and the environment, all the detail.

By our calculation, I think, gaming revenues were down roughly 5% and maybe even if we adjust for hold, but can you just give us a sense of what you saw in the third quarter there? Because last quarter, I believe in the second quarter, you saw some real strength with some initiatives you're rolling out on the casino side.

What's the status there? Is that a number that we should expect to see bounce back? And how do you see trends in the gaming customer?.

Yes. It's a great question. We did see a lot of strength in the second quarter. We saw our gaming revenues, as you recall, on The Strip grow by about 7.5%, which is one of the better quarters that we've had. And then, of course, as you know in the third quarter, they fell off. We previewed it a little bit.

Actually, at your conference, we had some slides that showed the VIP and VVIP segments down in the July and August periods. And unfortunately, that's the reality. Those two key segments' business were down. In the second quarter, they were up well. And as we head into the fourth quarter, we're seeing those two key components of our business up as well.

So again, it is consistent with our belief that it was a 1-quarter dip in interest of coming to the city. There are a lot of variety of rationale for that, that we discussed over time from the activities that were going on.

But the return of that piece of business as well as the demand in the hotel side gives us a lot of confidence as we look forward into 2019 and '20..

The next question comes from the line of Thomas Allen from Morgan Stanley. You may ask your question..

So thinking about the third quarter, you've talked a lot about how the event calendar just didn't really shape up and that's why revenues declined to the way they did for the market.

Are you seeing the market fill 2019 in a more aggressive way now and do you have more confidence around, not kind of conventions or city-wise, but more your event calendar?.

I think that for the third quarter, I think, we may have said this before, but Celine Dion had canceled 20 performances in the third quarter, which was a big hit for us at Caesars Palace, which is, as you know, our number one gaming casino here. So I think that, that was definitely a factor.

And we don't anticipate to see anything like that happen in the future, but you never know because we got a lot of theaters, a lot of performances that are good.

And right now, we're making sure that we have a robust calendar for our own and we think what we see so far, the visibility we have into 2019, which is not that far, frankly, I mean, it is not totally - you wouldn't be able to say that '19 is, you see you have a lot of visibility, but what we see so far, we're bullish on.

Eric, if anything you want to add to that, please do..

I'd just add, after the learnings in the third quarter, we're obviously actively tracking it with a whole lot more specificity and we're crying to come up with an option to slide in additional acts at short notice.

Typically, acts that don't require a lot of staging like comedians or other shows like that, that we can bring in to backfill when one of the major acts has to cancel shows. So we're trying to derisk that type of environment. In the fourth quarter, the shows from the city look quite good.

We've seen MGM added a couple of shows recently that should drive additional visitation to the city and then we have good bookings at ours as well..

And then, I think, I missed some of your comments on Atlantic City in your prepared remarks.

Can you just repeat, how did that perform versus your expectation in the third quarter? And how are you thinking about your previous guide of the $40 million impact in the second half of this year?.

We haven't altered the $40 million impact. We believe we were negatively impacted by about $20 million in the third quarter and we continue to expect about $20 million in the fourth.

We will try our best to offset a lot of the revenue declines that we're seeing and reduce expenses where we can, but the reality is that with two new operators entering the market in a period of low demand due to the time of year, it makes operating fixed cost businesses very challenging, and so, we're continuing with our guidance of the $40 million impact and that's reflected in our updated Q4 and full year projections..

The next question comes from the line of Chad Beynon of Macquarie. You may ask your question..

Mark, congrats on the last 4 years. I wanted to start with the guidance for the fourth quarter. You've still got $50 million EBITDA range out there. I think when you issued guidance back in July, it was a $50 million range.

So given that here we are in November 1, in Vegas, you've mentioned that you've kind of filled your rooms with gaming customers, you weren't really taking much risk. Why still the $50 million range? And if you're able to provide any details on kind of what would put that closer to the top versus the bottom, that will be helpful..

It's a good question. And we did - we reduced the midpoint of the range by approximately $50 million to reflect the impact on the third quarter and we also kept the variance of the range at the same level.

As you can see, we did come in lower than our expectations in the third quarter and we've also tried to provide what we think is a reasonable range for the fourth quarter to ensure that we're able to achieve the range even in the face of any unexpected headwinds that we might face.

So given we are through 1 month from the revenue side, October looks quite strong, we haven't closed our books yet for the month and November and December look good here in Las Vegas as well. So we just wanted to make sure that we provided a range that was conservative enough for us to be able to ensure that we achieve..

And then for the regionals, I guess, backing out Centaur and Atlantic City, pretty consistent EBITDA growth throughout the year, I believe, 8% to 10% or 11% per quarter and you've talked about the reduction of marketing cost and how that has gone towards the bottom line.

How should we think about this in the fourth quarter and going forward? Are there still opportunities to reduce marketing further? Or do you think the comps are just so difficult that it might be hard to experience the same flow-through with revenue growth as you've seen in the first 3 quarters of the year?.

We have had great success this year in terms of our marketing efficiency. The marketing department's been able to reduce marketing spend consistently across all 3 quarters. We would expect heading into the fourth quarter that we'd continue to be able to do that, particularly in the regional markets where it's less hotel-comp-centric.

And next year, there is opportunity as well. We're currently putting together our plan and we're evaluating what we think we can do. We need to make sure that we don't lose profitable market share and that's an important distinction.

There are certain segments of our customers that we are either marginally profitable or don't - could be unprofitable and those are the ones that we're trying to really pare back from a marketing perspective. We do have a number of technologies that we're going to introduce.

The most important is our sales force initiative, which will come in, in the early part of next year and we think that, that's really going to enable us to continue this effort to push down our marketing expense and really allow us to target customers in a much more specific one-to-one dynamic..

The only thing I'll add to that is the fourth quarter comparison year-over-year is a little rougher than, let's say, the first three quarters because we took a significant amount of cuts out that started actually in the fourth quarter of last year. Those kind of anniversary out here in November or December.

But having said that, we - our whole marketing organizations continuously mine the data base, looking at our offers, determining whether or not which offers work, which don't. We're looking as many revenue initiatives as we are, efficiency initiatives.

But the idea is to always look at them and always study and we keep studying and see what we can come up with. So I think, it's like one of those things where we're not prepared to give you numbers but the effort on continuous improvement is constant in the company..

Our next question comes from the line of Harry Curtis of Nomura. You may ask your question..

I just had 1 quick question. Most of my questions have been answered.

Turning back to Total Rewards, when you think about the typical Total Rewards customer that comes in, what is the total revenue and profit per occupied room lift, say, compared to an OTA customer? And the reason I'm asking is, assuming that it's substantially higher, do you see yourself getting a lot more active, trying to increase the weeks of Total Rewards customers so you don't run into the same kind of booking gap that you had in September?.

Yes, it really depends on, ultimately, which segment of customer that we're letting into the casino for that particular day. So we rank our customers' worth in terms of their daily expected spend.

And depending on the rate of the room on that particular day, we'll either let certain segments of customers have free rooms or they'll pay a certain amount and that's effectively how we yield it. So there's a little bit of nuanced answer there.

The goal, however, is to make sure that we're trading off a cash room for a casino customer room where the profits of both of those customers are about the same. Otherwise, we should raise the price of one or the other to drive the profit.

What I will say is, in particular, in November and as we head into December, where occupancy levels are relatively low, those incremental gaming customers have great value because you're trading them off against an occupied room.

And so, in that sense, all of that gaming value is incremental plus those customers at that level will typically pay the resort fee, which more than offsets the cost to clean the room. So we believe that trade-off is very profitable approach and that's why we're leaning heavily into it into the fourth quarter..

So Eric, you did mention the resort fee and I guess, I would follow up with a question on that.

Have you seen pushback from group meeting planners in particular with the resort fee and do you plan on taking that up again for 2019?.

It's a good question, Harry. When meeting planners for large meetings, typically shop around to numerous cities like San Francisco, Boston, New York and other convention-centric locations. Las Vegas is still a great bargain, regardless of whether you account for all the fees or how they're added in.

Typically, they'll negotiate a rate as well as a minimum banquet spend and then that will include a store fee and other fees like that. So we don't see a lot of pushback from the meeting planners because they're looking at it as a total value package for their meeting or their trade show..

Have you given any thought to some of the softer drive-in business from California? I'm wondering to what degree the resort fees, parking and so forth have kept some of those marginal visitors away?.

It's definitely something we're looking at. We have - we're well aware that from both the analysts' perspective, investors' perspective and customer perspective that we need to watch and make sure that we're not inhibiting the demand by the fees more so than we're losing in terms of the ability to drive the incremental profit.

So we went out and we've conducted a very large survey of both our customers and customers that are just visitors who would come in not part of the database. That data is being analyzed right now and we will use that to inform us going forward.

So far, we don't believe that, that's the case, but it's certainly something we watch and something we take very seriously. We don't want to end up in a situation where we're depressing demand and impacting our profitability more so than we'd intended..

Very good. And Mark, best of luck on your next adventure..

Thank you..

Our next question comes from the line of Robin Farley from UBS. You may ask your question..

Two things I wanted to ask. One of them Mark may have addressed a little bit already. But just looking at your EBITDA growth guidance for the full year and your reduced marketing expense accounts for kind of more than the entire amount of that EBITDA growth guidance.

And so my question was, in Q4, that anniversaries and may be tougher to get that level and so I was sort of looking for what might drive your same-store EBITDA growth there? I don't know, it sounded like you didn't maybe want to put numbers on that, but I don't know if you had anything else, any other thoughts on that.

And then I did have a question about Q3 as well..

I think you're talking about next year, Robin?.

No, in other words, looking at your EBITDA growth guidance for 2018, the entire amount of the marketing reduction accounts for more than the entire EBITDA growth. In other words, the same-store EBITDA growth would have been down without the reduction in marketing cost.

But what happens after Q4 or in Q4, when you anniversary that significant reduction in marketing expense? Kind of what becomes the driver for same-store EBITDA growth?.

So, obviously, our organic growth rate helps drive incremental same-store growth, so we do expect some - a lot of our gaming strategies to actually take an impact. We're improving our hold, for example, this year.

We don't give specific numbers, but we have a very focused initiative around control of the hold and we try to take anything that we can and, whether it's improving the game mix equipment that we have on the floor, whether it is putting in a more impulse-oriented area of the floor.

There's a number of initiatives we have that have been improving actually our overall gaming profitability. So that will be one of the drivers that we'll use in the fourth quarter that will help.

And then in terms of just the general strategies around Centaur and looking at how we're going to drive incremental growth synergies there, I think, that will help - that will play itself out also in the fourth quarter.

Eric, you want to add to that?.

The only other thing I'd add, Robin, is that the marketing expenses that we reflect as a percentage of our gaming spend, that doesn't flow 100% to the bottom line. So a lot of that is in kind. It's beverage rounds, it's other types of complementaries. So the notion that it's 100% accretive to EBITDA, you need to profit adjust that figure..

And then, my question on Q3, you mentioned there were some decline in VIP and VVIP gaming segments in Q3.

And I'm just wondering, is that tied to the group calendar issue that you mentioned? In other words, what would be kind of nonrecurring or behind - is that what you put in the bucket of nonrecurring or just one-time? And just thinking about your - I understand not wanting to give the RevPAR guidance because of the factors that can change your comps and things, but would you guide to kind of a cash rate for Q4 just to give a sense of where kind of cash demand is for the rooms aside from your changes in marketing?.

Sure. To answer your first question, the customer mix that we receive into our casinos for a given month or even a quarter can be very volatile.

So I wouldn't want to call it 1 time because it can certainly recur, but when you take in the portfolio of the business over the entire year period, it's certainly something that's an anomaly and something that we don't think is representative of the true business. In fact, when you look at the second quarter, we saw the exact opposite happening.

And then when we look into the fourth quarter, we believe that the strength is coming back as well. So in that sense, it's second quarter up strong, third quarter down fairly significantly and in the fourth quarter, back. All averaged out to having reasonable growth here in Las Vegas from those casino segments.

So overall, there are a lot of factors that drive those decisions by customers, but that's not a permanent decline that we're going to see and we wouldn't expected to happen every single year going forward..

And then I didn't know if you had any thoughts on the cash rate part of the question?.

I'm sorry. Yes, regarding the guidance, we're evaluating what guidance we're going to provide for next year.

We're not providing any hotel-related guidance for the fourth quarter, but as part of our efforts to try to make sure that we have the best indicators out for the analyst and investing community, we're evaluating whether we should provide an alternative metric like you suggested or something similar that we could help guide for 2019..

Our next question comes from the line of Jared Shojaian of Wolfe Research. You may ask your question..

First, just a quick clarification, in case I may be missing something. You gave fourth quarter hold-adjusted EBITDAR guidance.

Was there any unusual hold activity in October that we need to be aware of in terms of the actual fourth quarter?.

We haven't said anything about the current year hold. What we said was relative to the prior year. So we're assuming normal hold for the fourth quarter when we provided the guidance, Jared..

You said you're 90% booked in terms of your target group room nights for 2019.

Can you just tell us how that compares to this time last year? And at what price point are those booked at? Eric, I think you had said solid increase, is that correct?.

Yes. So the way that the group segment works is that we do book, say, an extra 20 to 30% room nights during the year, but we also have wash, meaning that somebody commits to a group of 1,000 room nights, they always - or not always but they typically come in a little bit lower.

So to the extent that our room nights that we're booking in the year offset that wash, that's how you get to these really high numbers when you're entering the year. So the 90% is better than we typically run. It gives us confidence into next year and it lets us know that we can start really yielding that segment of business up.

In terms of the rates, the rates are up heading into next year.

And when we talk about that segment of business, we look at it as a combination of the rate that's charged as well as the banquets business because the banquet business is a very profitable component and we want the meeting planners to think of them in combination when they're booking the piece of business.

You might book a lower-rated piece of business on a RevPAR basis, but take a much higher banquet component, and ultimately, the profitability could be better in that segment or vice versa..

And then just one last one for me, more higher-level. Given a lot of volatility in your store, I just want to ask about the potential opportunity to be added to the S&P 500.

Have you had any conversations with them? I think in the past, they've had stipulations on GAAP profitability, which may be challenging for you to overcome just given the failed sale coming out of bankruptcy? So can you speak to that a little bit?.

Yes, you are right. There are profitability requirements. We do have a headwind. We break it out in the materials from the failed sale and accounting treatment that we have and that does affect our GAAP EPS and does have a headwind in terms of our retaining profitability for the required number of quarters.

That said, we think we posted positive GAAP earnings per share in this quarter. We do have a lot of charges, including the convert, which is a derivative of the share price, and so it makes it very difficult to predict earnings per share with respect to having this component that's a derivative of the actual trading value of our stock..

There are no further questions at this time. I would now like to turn the call back to Ms. Joyce Arpin for closing remarks..

Okay. Thank you, everyone, for joining. We'll talk to you after we report our fourth quarter results next year..