Hello! And welcome to today's webcast. My name is Christina and I will be your event specialty today. All lines have been placed on mute to prevent any background noise. Please note that today’s webcast is being recorded.

[Operator Instructions].It is now my pleasure to turn today’s program over to Joyce Arpin, Senior Vice President, Finance & Treasurer. Joyce, the floor is yours..

Thank you.

Good afternoon and welcome to the Caesars Entertainment Corporation, third quarter 2019 earnings conference call.Joining me today from Caesars Entertainment are Tony Rodio, Chief Executive Officer; and Eric Hession, Chief Financial Officer.A copy of the press release, earnings presentation slides and the 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 a Form 8-K and will file our Form 10-Q.Before we get underway, I would like to remind you to reference slides 16 through 21.

These slides 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 statement 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, note that Caesars Entertainment closed on the acquisition of Centaur Holdings in the third quarter of 2018 from July 16. Therefore, U.S.

GAAP results do not include Centaur Holdings prior to the acquisition in the third quarter of 2018 unless otherwise stated. Note that both adjusted results reflect hold versus our expectations. You can find reconciliations of GAAP and non-GAAP figures starting on slide 10.I will now turn the call over to Tony..

Nevada, New Jersey, Pennsylvania, Mississippi, Iowa, Indiana and New York.Mobile sports betting is already live in Nevada and New Jersey and we expect to launch in Pennsylvania pending regulatory approval.

The new sports books are driving increased visitation and customer engagement across our portfolio and we expect sports betting to be a key value driver for the company over the coming years.Now, I’ll turn the call over to Eric to review our financial results in more detail before getting to your questions..

Well, thank you Tony. Please note that our consolidated results include Centaur unless otherwise stated. As Tony mentioned, Las Vegas results were strong in the third quarter.

Net revenue totaled $973 million, up 6.9% year-over-year due to strength across all business verticals from favorable customer demand.Gaming revenues increased 17% due to $37 million of favorable year-over-year hold in increased gaming volumes. Total gamming volumes increased 2% year-over-year.

Table volumes were up 2.5% led by baccarat up 18% and slot volume were up 1.7%. Las Vegas cash hotel revenues grew 8.1% year-over-year, making the highest third quarter Las Vegas cash hotel revenue in company history.

Recall that we also achieved similar records in Q1 and Q2 of this year.Occupancy increased 290 basis points to 95.6% and RevPAR increased 7% to $140. We experienced strong growth in the room nights from the group's segment and from direct bookings on our website and the leisure segment.

We continue to see a healthy consumer environment in Las Vegas and expect hotel demand to remain strong throughout the remainder of the year, specifically with cash paying customers.Food and beverage cash revenues increased $5 million or 2.5% year-over-year, primarily due to higher hotel occupancy levels and recent enhancements we made to our offerings.

Caesars Palace saw the largest increase driven by the new Vanderpump Cocktail Garden and other premium outlets like Hell's Kitchen.Las Vegas EBITDA totaled $356 million up 16% year-over-year or up 4.5% on a hold adjusted basis. EBITDA margins expanded 290 basis points to 36.6%, driven by the solid revenue growth.Turning to the other U.S.

segments, net revenues totaled $1.12 billion down 0.5% as approximately $25 million of favorable impact from two additional weeks of Centaur results versus the prior year period was offset by unfavorable hold of $11 million year-over-year, and the increase in competition Atlantic City and Southern Indiana.In addition, construction disruption as we moved our casino from a boat to land in Southern Indiana impacted results.

This move is expected to be complete in the December. Other U.S. EBITDA declined 1.9% to $304 million due to the decreases in revenues, but was up 1% to $309 million on a hold normalized basis. EBITDA margins contracted 40 basis points to 27.2%.

On a hold normalized basis, our Atlantic City properties EBITDA was flat year-over-year.Our all other segment, which includes unallocated corporate expenses, managed properties and our international operations had net revenues of $144 million, down $6 million or 4% year-over-year, primarily due to decreases in table games volumes at our international properties.

All other EBITDA loss increased $5 million to a loss of $22 million, due to lower performance at our London Clubs operations, which was partially offset by a reduction in corporate expenses year-over-year.

As Tony noted, we reduced payroll, IT and professional services expenses in the quarter.Looking ahead, our outlook in Las Vegas remains positive based on future demand indicators and results we've seen to-date. In the third quarter visitor volumes to Las Vegas increased 0.6%, convention attendance increased 8.3% and deplane passengers increased 3.9%.

In the fourth quarter we expect continued low single digit revenue growth in line with year-to-date hold normalized growth trends and we expect margins to improve slightly year-over-year.We view the overall demand environment as stable and modestly growing, led by non-gaming segments.

Recall that we faced lower leisure demand in the latter half of last year and tapped our database to stabilize occupancy. This year in the fourth quarter we are seeing stronger demand from cash paying customers, which will increase hotel cast revenues year-over-year.

We’re also seeing a strong quarter in group bookings and we expect double digit growth in room nights and high single digit growth in group revenues for the fourth quarter.Sure, we anticipate an acceleration in Las Vegas led by our Caesars Forum Convention Center which is scheduled to open in March.

Caesars Forum already has over 1.1 million room nights booked and $390 million in revenues through 2026, 75% of which are in the first three years of operations. Total bookings for the forum in 2020 are currently over $90 million, well ahead of our expectations.In the other U.S.

segment, we anticipate net revenues to grow low single digits and margins to improve slightly year-over-year in the fourth quarter, with Centaur remaining a strong overall growth driver, despite annualizing the acquisition in the third quarter.We expect to continue to extract additional synergies and expect a positive lift in the fourth quarter from the recent legalization of sports betting in Indiana.

Additionally we expected December completion of the Southern Indiana boat to land project marks the end of an 18 month renovation rebranding effort to transform the property into a premier Caesars asset.In the all other segment we expect to generate a larger operating loss for the full year compared to 2018 due to investments in technology infrastructure, our sports sponsorships, and weakness in our international business.

In the fourth quarter we expect sports investments to increase, which will be partially offset by labor savings.From a liquidity perspective, we ended the quarter with approximately $1.3 billion in cash. As of September 30 our total revolver capacity was $1.2 billion with zero drawn.

In the third quarter we spent $106 million in same store CapEx and $78 million in development CapEx.During the quarter we also used excess cash to voluntarily repay $250 million of the CEOC term loan, bringing the balance down to $1.2 billion and our enterprise wide gross lease adjusted leverage down to 5.8x.

Excluding the convertible notes and capitalizing our lease payments at 8x, our net leverage standard 5.3x.For cash CapEx in 2019, we now expect a range of $400 million to $420 million in maintenance, which includes room renovations at Harrah's Las Vegas.

We expect to spend approximately $275 million to $295 million for development related CapEx, mostly for the Caesars Forum project and our investments in sports books across the U.S.

This range excludes spends for the Korea projects which we are currently evaluating.Before we open the call for questions, please note that the purpose of today's call is to discuss our third quarter performance.

While we look forward to answering any questions you have about Caesars, for more information regarding the proposed merger of Eldorado, please refer to our filings with the SEC.Operator, we’ll open the calls for questions..

[Operator Instructions]. Thank you. Your first question comes from Carlo Santarelli from Deutsche Bank. Please go ahead, your line is open..

Hey, thanks everyone and nice performance in the quarter. Tony, if I could, you obviously talked a lot on the last call about some of the efforts that you guys have collectively made in terms of cost reduction and obviously based on the performance in the quarter, it seems that some of that stuff is flowing through.

To the extent you can kind of talk about where you are in that process and what you are kind of targeting at this stage and a timeline for it, I think that would be very helpful..

Okay, thanks Carl. Yeah, on the last quarterly call I think I had mentioned that it was my goal to take $25 million to $50 million worth of cost out of business by the time we got to the closing of the transaction.

I'm happy to say today that I would now make that estimate somewhere between $75 million to $100 million and I think it's going to be on the higher end of that, and it comes in a variety of buckets.From a property standpoint we've eliminated a number of slot participation games across the whole portfolio.

We've also reduce consultants and outside contractors and professional services. We’ve suspended our international efforts and pursuits for licenses in Japan and other jurisdictions, and then just natural attrition particularly here at corporate as people have left. We take a very cautious approach about filling those positions.

We don't want to hire people into harm’s way, if it's a position that may be part of a larger synergy down the road.And then lastly, few weeks ago we launched a voluntary severance program which we had approximately 50 people raise their hand here at corporate, which again allows us to eliminate the cost between now and the closing, but we were able to allow them to take the benefits they would have gotten if they had stayed through closing.

So I think it was a win-win for everybody.So again, I would say now it's about $75 million to $100 million.

And we are beginning to see it flow through, but I think you'll see more of the flow though as we get into the first quarter, because a lot of those voluntary severances, they will be allowed to accept them over the course of the next couple of months..

Great! Thank you and then something a little bit more detailed, I guess probably best for Eric. You talked about it a little bit in the prepared remarks.

When you – based on kind of prior experience and I know you guys have done this before, but with respect to the Southern Indiana boat, obviously you know during the disruptive period here, we’ve certainly seen from a gross revenue perspective some decline.

Can you talk a little bit about, the impact that you foresee on a year-over-year basis, maybe to the extent you can EBITDA, even if it’s on a percentage basis, just in terms of the uplift you foresee from the cost saves, as well as what you would have expected to be, a stronger revenue performance..

Yeah, it is a great question, and we do have experience as we’ve moved other properties from the boat to land.

There are two real drivers; one is on the cost side, you no longer have to maintain the boat, which includes sometimes captains and dredging expenses and so forth, and so the downside of the project from a return standpoint is really limited and you can get about a 6% to 8% return simply by looking at the costs that you're pulling out of the business by moving from both the land.Then on the other side you create a much better environment for your customers, both from the field perspective and also in the gambling perspective of the casino, and what we’ll typically see there is a ultimately another kind of 5% to 10% change.

So we target around a 15% return on these projects and that I have no reason to expect that we wouldn’t be able to get that..

And the only color I would add to that as well, there is a little bit of noise in that market given the competitive effect of Derby, Kentucky BLT. Thank you..

Great! Thank you very much guys..

Thanks..

Your next question is from Thomas Allen from Morgan Stanley. Your line is open, please go ahead..

Hey, so big news in the quarter as you sign The Rio. Can you just talk about what kind of loss EBITDA you think that that's going to generate for Caesars? Thanks..

Well, I mean I think we anticipate being able to maintain the vast majority of that.

I don’t know Eric if you have an exact number in terms of what our forecasts were, but the ability to retain World Series of Poker, being able to retain our Caesars Rewards customers, and still managing the property for the next two years, we think that a lot of that business is just going to be transferred over to our other eight properties in Las Vegas..

Okay, and then on Atlantic City, you mentioned in your prepared remarks. I believe you said that hold adjusted EBITDA was flat in the quarter. How did that compare to expectations and kind of what’s the outlook for your AC segment going forward? Thanks..

Well, my expectation is that we begin to turn that around. I mean Atlantic City certainly from the last number of quarters and since the new competition opened has been going in the wrong direction, and before you can turn something around and move it in the right direction, first you have to stop the decline and I think we've accomplished that.

We are testing some new marketing initiatives that are more targeted towards specific customers, decliners and inactive and customers that we feel we've lost market share to our competitors. So I'd like to think that we're going to be able to show improved trends there over the balance of the fourth quarter, and more importantly into 2020..

Helpful, thank you..

Thanks..

Your next question is from Shaun Kelley from Bank of America. Your line is open, please go ahead..

Hi, good afternoon everyone. You guys some great color on just the overall Las Vegas operating environment and maybe some of the core or future KPIs. I was wondering if you do a little bit of the same, just sort of the regional markets.

You know I think Eric you mentioned or maybe it was you Tony, a little bit about Centaur and some of the progress there. Is that and kind of Southern Indi going to be the primary drivers for growth in 2020, any other pluses and minuses and just what are you seeing broadly speaking in terms of the – call it the core regional consumer at this point..

Number one, the upside at the two Indi properties as a result of the phase 1 of tables coming online and we do think that we'll see growth there in a couple of phases, because we're not going to be able to fit many table games in to either of those businesses as we would like, so in the second phase we’ll have to include an expansion of the buildings, but certainly upside at the Indi properties in 2020.The boat to land as you mentioned is also going to be a driver.

We think that we're going to continue to upside as sports betting continues to spread across the country and then probably not in 2020, but in New Orleans we view as a lot of upside with the extension of our lease and the $325 million that we're going to deploy there, that we have to deploy by 2024.Additional rooms there, we run at 100% occupancy.

We buy 30,000 to 50,000 rooms from non-gaming hotels in the market and we have somewhere in the vicinity of 100,000 with [inaudible] every year, so we have a lot of upside at New Orleans, but again that probably won't be 2020.As far as the headwinds, there are definitely some competitive headwinds, totally live as expected to open.

Not for the latter part of 2020, but that'll affect both Philly and AC. We've got gaming expansion in Arkansas and Oklahoma and then the VGT expansion continues in Illinois, as well as the historical rating games in Kentucky..

Great, thank you very much. And then, you know sort of your latest update on the direct marketing side and some other reductions you’ve been able to deploy there.

Just kind of where are we in your – kind of in your general strategy there? You know is that going to be sort of modest incremental improvement from here or sort of any kind of new programs or initiatives that you’re excited about, understanding that it's a bit of a transitional period to roll out anything too new..

Yeah, I think that it's more continuing to do business as usual.

I think the guys here, the marketing team have done a fantastic job with you know – there's always some exceptions are allies and again, I would reference Atlantic City as one of those, where I think that we kind of weren’t as aggressive as we should be in the face of the new competition.

So by and large across the other regional markets and here in Las Vegas, we are continuing to test new programs. We're even doing some testing here in Las Vegas, but there's not going to be a wholesale dramatic change to our marketing approach from a direct marketing standpoint..

Thank you for taking the questions..

Your next question is from Harry Curtis from Nomura Instinet. Your line is open, please go ahead..

Hi, good afternoon. You guys have mentioned favorable hold in the other sector of about $11 million.

So does that imply that the favorable hold impact in Vegas was around $26 million?.

No, it was the other way Harry. Sorry, we had a negative of about 11, that's on a year-over-year basis in the regions and then positive of 37 in Vegas, so net positive of around 25 for the company..

I see, I misunderstood..

And if I could just add some color onto the Las Vegas results, because I don't – we definitely had a favorable hold, but I don't want that to minimize the tremendous results we had across the whole portfolio in Las Vegas.As Eric mentioned in his comments, for the third straight quarter we had record hotel cash revenue, and you would think that would come at the expense of gaming volumes, because we're putting more cash customers in the room, but we were able to grow our slot volume and our table volumes by 2%.

Our baccarat volume 18%, food and beverage revenues continue to escalate and we continue to do very well from an entertainment standpoint.Overall because of the closure of the Colosseum for two months, it wasn't quarter-over-quarter up, but on event-by-event basis its certainly up and we just had for example Guns N’ Roses in the Colosseum and with the changes that we made to the facility, it's a great customer experience.

We're able to do more throughput in terms of beverage sales and you know the bookings for next year are very exciting to look forward to from an entertainment standpoint. So I think overall Las Vegas is just – I think we're doing extremely well..

Yeah, we agree with that. I did want to sneak in another follow-up question, particularly as it pertains to the 18% lift in baccarat, which is kind of an outlier. Do you think that you guys were taking share or do you sense that there is a stabilization in the baccarat market.

What do you think accounts for the outperformance other than brilliant management?.

Well, I agree with that, but it's not from my standpoint. The first and foremost I wanted to give credit to the management team here at Caesar's palace. They've done a great job, them and their Asian marketing team, cultivating and creating relationships with that business.

As a matter of fact we’re just coming back from a business trip over there to do just that very thing.I think also the capital dollars that we’ve deployed with our villas, those experiences I think are second to none. I don't know what the exact numbers are.

I’d have to believe that that 18% is a bit of a steal of share, as well as growth, but I think it comes mostly from the senior management team here at Caesar's palace and the Asian marketing team..

And last question, just turning to sports betting. So far in the 29 books that you've got operating and then the mobile live in New Jersey and Nevada, how much accretion if any or how close are you to EBITDA creation as a result of sports betting and maybe you could delineate between those states that have mobile and those who don't, which don't..

Like sports betting in and of itself, its certainly driving incremental EBIDA, but I think that that's the smallest component of what we're benefiting from as a result of the sports betting legislation.If you look at a property like Hammond, leading up to us, opening the sports book revenues for the few quarters before that had been down a point or two.

In the two months since we've opened the sports book, our revenues are up around 4%. We're seeing significant lift in our food and beverage sales; we're seeing a significant lift in foot traffic, our gaming volumes are up as a result.

So yeah, we're making money one sports betting by itself, but we're making even more money because of all the traffic it's creating..

Yeah, and we're seeing it across the board.

If you look at the books that we opened in Iowa, if you look at the ones in Mississippi and in Indiana, they're all having similar effect, some larger magnitude than others, but there's no question that they are definitely influencing customer visitation trends and have a direct impact on the amount of food and beverage that we’re selling..

Got it! Very helpful, thank you..

Your next question comes from David Katz from Jefferies. Your line is open, please go ahead.David Katz, your line is open..

I think we lost David..

We’ll move on. Barry Jonas from SunTrust; your line is open, please go ahead..

Hey guys, this is Jeff Stantial on for Barry. Just curious, you mentioned some puts and takes earlier for 2020. I just wanted to get your thoughts on the competition coming online later in the year in Indiana with the Gary project, and then thinking through into later next year, into 2020 and beyond, some of the new builds in Illinois.

Just curious of your thoughts on those..

Well, certainly I think that those are also headwinds as well. I mean I think the good thing is it appears to be some political uncertainty about the gaming property and the license in downtown Chicago, which I think would have the greatest impact.

I don't know if we’ve forecasted the impact from Gary, but it certainly is going to be a little bit of a headwind and the expansion of adding – going from 5 to 6 VGT’s in Illinois is going to impact our businesses beyond Gary – I mean, Hammond, Joliet, as well as Metropolis.I think the bigger impact on the VGT isn’t the six unit.

I think the bigger impact is that customers can wager more and win more. I think it makes it a more compelling and enticing product for people who just want a convenient gaming option..

The only think I’d add to that is broadly speaking when we look across the entire portfolio and we're in the middle of our plan process for next year, we do see less competitive disruption this coming year than what we've experienced this year and the prior year.

It just happens to be concentrated in the markets that you called out, but broadly speaking it's less than in prior years..

Okay, great, thanks. That’s all from me. I appreciate the color guys..

Thank you..

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