Caesars Entertainment, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Caesars Entertainment Incorporated 2020 Fourth Quarter and Full Year Earnings Conference Call. At this time, all participants line in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. I will now turn the call over to speaker today, Mr. Brian Agnew, Senior Vice President of Finance, Treasury, and Investor Relations. Sarah, the floor is yours.

Thank you, Sarah, and good afternoon to everyone on the call. Welcome to our conference call today to discuss our fourth quarter 2020 earnings. This afternoon, we issued a press release announcing our fourth quarter financial results for the period ended December 31, 2020. A copy of the press release is available in the investor relations section of our website at investor.caesars.com. Joining me on the call today are Tom Reed, our Chief Executive Officer, Anthony Carano, our President and Chief Operating Officer, and Brett Yunker, our Chief Financial Officer. Before I turn the call over to Tom, I would like to remind you that during today's conference call, we may make certain forward-looking statements about the company's performance. Such forward-looking statements are not guarantees of future performance, and therefore, one should not place undue reliance on them. Forward-looking statements are also subject to the inherent risks and uncertainties that could cause actual results to differ materially from those expressed. For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements, you should refer to the cautionary statements contained in our press release, as well as the risk factors contained in the company's filings with the Securities and Exchange Commission. Caesars Entertainment undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after today's call. Also, during today's call, the company may discuss certain non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and in the comparable GAAP financial measure can be found on the company's website at investor.caesars.com by selecting the press release regarding the company's 2020 fourth quarter financial results. I will now turn the call over to Tom.

Thanks, Brian. Good afternoon, everyone. We are thrilled to close the book on 2020. It was, by any measure, the most challenging year that we've had operationally and personally to date. The fourth quarter was no exception to that. I want to start the call by recognizing all of our frontline employees. They lived through the vast majority of our employees being furloughed, then coming back into an environment where they were fearful for health and safety, fearful for what was happening at home with children or parents or grandparents or all of the above, and they came back and delivered the exceptional service that our customers are accustomed to at Caesars and operated through some extraordinary contact tracing, changes in regulations, reopenings, closings throughout the year, and we couldn't be prouder of them. For the fourth quarter, we did $346 million of EBITDA. We've listened and read others' calls. Our cadence was similar. Almost half of our EBITDA happened in October. And then as restrictions tightened across the country, November and December were sequentially less than October, and we think the bottom for the business. And we'll talk about what we've seen in January and February and going forward that makes us highly confident of that. In Las Vegas, we did... $100 million of EBITDA, adding back the Rio rent payment, which we're proud of on a relative basis, but we know on an absolute basis we've got a lot of wood to chop in Vegas as it reopens. We're seeing some encouraging signs there that I'll discuss. In the regional markets in the quarter, we had significant restrictions on in Nevada, New Jersey, Colorado, Ohio that related to operating hours. We had closures in Illinois, Pennsylvania, and the Lake Charles property from the prior hurricane. If you exclude just the closed properties, you include everything that had the operating restrictions. Our regional EBITDA margins were up about 400 basis points for the quarter. So still seeing through the noise, strong evidence on the cost side that those, that that progress is continuing. If you look at, you know, when I'm speaking to investors, you know, I'm often asked, you know, what am I missing? What is the market missing? And What I think the market is missing now is similar to what I talked about in the last quarterly call. The demand that is coming as the world reopens and the flow through that you should expect to see in this business post reopening is wildly underestimated by the markets. I see kind of across the board in the sector, a view and numbers estimates out there that suggests we get back to 2019 numbers, you know, kind of sometime in 23. I'm firmly convinced that, you know, we'll be at least run rating those numbers the first quarter that Vegas group business is back in earnest. and that could be as early as the second half of this year. So I think there should be a dramatic pull forward of expectations of the turn. And I'll give you a few examples of why I believe this to be the case. Currently in Las Vegas, we are at our highest level of bookings since reopening. January and February have ramped up. It's almost like a switch was flipped sometime late January, early February. Our bookings are up 20% on a month-over-month basis in the FIT and casino segment. We measure gross and net pickup. So gross pickup is how many Aggregate rooms are booked in a day or a week or whatever period you're looking at. Net pickup is bookings, less cancellations. And if you look at our gross and net bookings, nine of our top ten days since the pandemic reopening in Las Vegas happened in February, with Monday being the highest that we have seen to date. Importantly, the booking window is extending as well. If you look back from reopening until the end of 20, it seemed like you had a lot of impulse trips, very short booking windows. What we're seeing now is almost half of our bookings are for trips that are at least 30 days out, which is about double the pace that we had in the fourth quarter. We're extremely encouraged by that. If you look at our actual performance January and February, January was well in excess of November and December, approached October in terms of EBITDA. February has been strong as well, obviously with fewer days in the month ultimately. But as we look forward at our forward-looking forecasts, By mid-March, we're well into the 50s in terms of percentage occupancy midweek on the strip, and we're 95% plus on weekends. If you look at our group business, for the second half of the year, we've got 32% more room nights on the books for the second half of 21 than we had for the second half of 19 on the same date. Now, I'll grant you that we didn't have Forum Convention Center in the fourth quarter of 19, but you're talking about almost $200 million of room night revenue on the books for the second half of the year for group business. And remember, when we talk about group business, those are the rooms that are booked for the actual event. So as those groups come and your guests decide to come early and bring their wife, bring their family, stay a little longer. Those rooms are not included in that group room night business. So we know that there's a lot of discussion and debate and prognostication about when the world will reopen. We're certainly heartened by all of the recent data, the vaccine advances in terms of coming supply, We're heartened by Governor Sisolak in Nevada providing a path that has us in position where we could be hosting group business by the middle of this year in earnest. And so we think there's light at the end of the tunnel there. And when you look at what we're messaging to our internal operators is let's make sure that all of the cost discipline that we have found over the last year or so remains in place as business comes back. And we had kind of an anomaly in the fourth quarter in the Tahoe market where California's regulations were far more stringent than Nevada, so you kind of got an early burst of demand. that would sort of simulate what will happen in a reopening. And our team up there, John Koster and his team, did a fantastic job of maintaining discipline on the cost side so that Tahoe was up 7% in gaming revenue in the fourth quarter, was up almost 60% in EBITDA with a EBITDA margins growing by over 1,100 basis points. And it's that type of view that, admittedly, you don't get to see that gives me optimism. If you look anecdotally at this past Saturday night in Las Vegas, nothing particularly interesting about it. We were 95% occupied, so you get to see what we look like you know, virtually full. We were 99% last year at higher rates. There was nothing particularly notable about hold or high-end play on that night. And our EBITDA margins currently are running several hundred basis points ahead of last year, same day. So as this business comes back, you're talking about filling rooms, room revenue that's extremely high margin. You're talking about high-end cash restaurant business coming back. You're talking about entertainment coming back. I think the recovery that's going to happen, the pace of it is going to be, the magnitude of it is going to be far more dramatic than I see modeled, and the pace, in my mind, is certainly going to be much, much quicker than And we're now, what, seven, eight months post-closing the Caesars transaction. So we have done, obviously, quite a bit of integration post-transaction. And I tell you that we have already well exceeded all of the synergy targets that we have out there and expect that to remain to be the case even after the world reopens and some of the costs come back. You know, we think we'll be well in excess of both our pre-pandemic targets and the targets we added to during the pandemic. And then finally, in terms of my opening remarks, William Hill, I'm still limited in what we can say about that, given that the transaction has not closed yet. but we have two remaining kind of full regulatory meetings, one in Nevada, which is actually a two-parter, and then one in Indiana. We anticipate both happening in March. Then we have a final court date in the U.K., which is set for March 30th. Once we clear those, we will have cleared everything that we need to do to get closed, so you should expect us to be closing sometime post that court hearing. We are working through all of the integration of William Hill, particularly on the tech side. We think we will be well positioned to have one of the best apps in the industry integrated into Caesars Rewards. on both the sports side and the casino side by the beginning of the football season in 2021. And with that, I'll flip to Anson.