Caesars Entertainment, Inc.

Q2 2021 Earnings Conference Call

8/3/2021

spk01: Ladies and gentlemen, thank you for standing by, and welcome to CSARS Entertainment Incorporated 2021 Second Quarter Earnings Conference Call. At this time, all participants' lines are 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 would now like to hand the call over to your speaker today, Mr. Brian Anger, Senior Vice President, Corporate Finance, Treasury, and Investor Relations. Please go ahead.
spk14: Thank you, Buena, and good afternoon to everyone on the call. Welcome to our conference call to discuss our second quarter 2021 earnings. This afternoon, we issued a press release announcing our financial results for the period ended June 30, 2021. 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 Anthony, 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 measure is most directly comparable to each non-GAAP financial measure discussed. And the reconciliation of the differences between each non-GAAP financial measure and 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 2021 second quarter financial results. Starting with our earnings press release today, we are now breaking out sports and iGaming into our new Caesars digital segment. This segment includes sports betting, iGaming, and poker. And finally, as we mentioned in our press release today, we have divested London clubs. So starting in the third quarter of this year, our former managed and international segment will just reflect our managed operations on a pro forma basis.
spk15: I will now turn the call over to Anthony. Thank you, Brian, and good afternoon to everyone on the call. The second quarter of 2021 represented a consolidated EBITDA and EBITDA margin record for the company. Starting with Las Vegas, demand trends accelerated meaningfully versus Q1. We generated $425 million of adjusted EBITDA in the quarter and $436 million of property-level EBITDA, excluding real rent payments. EBITDA improved 162% on a quarterly sequential basis. EBITDA margins were 50.9% excluding the real rent payment, up 1,200 basis points versus Q2 of 2019. Total occupancy for Q1 was 89% with weekend occupancy 99% and midweek occupancy 85%. We delivered these outstanding Las Vegas segment results despite operating with capacity and social distancing restrictions for the first two plus months of the quarter. In addition, we had minimal group business and weak table hold in the quarter. Looking ahead, we remain encouraged by booking trends for the second half of 21 and into 2022. We're expecting groups to start returning to Vegas with each month getting better as we progress throughout the second half of the year. Group and convention revenues on the books for the second half of 21 versus 19 are currently pacing up approximately 18%. 2022 group revenues on the books are pacing up approximately 15%. Caesars Forum continues to exceed the original underwriting expectations with over 176 events booked currently representing 1.7 million room nights and 657 million of revenues for all future periods. 76% of this business is brand new to Caesars. Turning to our regional markets, operating results improved significantly versus Q2 of 2019. with EBITDA growth of 56%, excluding Lake Charles, which remains closed. EBITDA margins in our regional segment were 40.4%, excluding Lake Charles, and expanded 1,280 basis points versus Q2 of 19. On a same-store sales basis, we achieved the highest EBITDA and EBITDA margin in the regional segment in the history of the company. 26 regional properties set all-time quarterly EBITDA records, with 31 properties setting all-time EBITDA margin records during the quarter. In our newly disclosed seizures digital segment, we generated revenues of $117 million in Q2 of 21. We currently operate sports betting in 17 states plus Washington, D.C., 13 of which offer mobile sports betting. Our apps are now rebranded to Caesar Sportsbook, and our new marketing campaign launched August 2nd. We have now integrated our digital offerings with Caesar's Rewards, and our customers can interact with us both online and in our physical casinos while earning loyalty rewards. On the development front, construction is well underway on our new land-based facility in Lake Charles. The significantly upgraded property should be completed and ready for business in the second half of 22. In New Orleans, construction work has started on our new hotel tower and property upgrades. In Las Vegas, the remodeling of the entrance to Caesar's Palace has begun, and we look forward to a dramatically improved arrival experience later in the year. In Indiana, we are well underway with our casino expansion at Indiana Grand, which should be finished by January of 2022. We have come a long way in a short time. Our operating teams are collaborating and sharing best practices across the enterprise. This is leading to continued efficiencies. We believe our margin gains are sustainable and we'll continue to look for incremental cost savings opportunities. I'm extremely proud of our operating teams, their execution, and their exceptional guest service during the second quarter. With that, I'll now turn the call over to Tom for some additional insights on the second quarter.
spk12: Thanks, Anthony. Good afternoon, everyone. When I spoke last quarter, and threw out that I'd expect us to hit a billion dollars in EBITDA in a quarter in 2021. I wasn't thinking it was going to be a second quarter. I was actually thinking it would be this quarter. So we're a little bit ahead of schedule. As you look at the quarter, Anthony touched on some of this, but remember that particularly with mask mandates coming back in Nevada. Remember, the Las Vegas numbers that you're looking at included a little over two months of social distancing, restricted occupancy, and masks, restricted occupancy in restaurants and on the casino floor, plus masks. And we were able to put up the numbers that we put up in the quarter. If you think about Drags in the quarter, we held poorly in Las Vegas. The loss from the London clubs business flowed through in the quarter because we didn't close the transaction until the middle of July. And Lake Charles was closed for rebuilding post the hurricane. The drags that I look at in the quarter were about $40 million in aggregate versus what you would expect to see normally. We were 89% occupied in Las Vegas. If you look forward, if you start in May, May was the best month in the history of Las Vegas for Caesars from an EBITDA perspective. June was better than May, and then July was better than June. And I would expect that third quarter occupancy will finish significantly ahead of second quarter's 89%. Brian touched on the way that we're presenting our financials. Now you can see Caesars Digital on its own. You'll be able to measure our progress. I'll talk more about that. In a moment, you'll be able to see the bricks and mortar business. And now you can see the managed business, which was in that jumble that the historical Caesars used to have of managed international and other. But you can see that that business generates a little over $100 million of annual EBITDA. And that will grow when the Southern Indiana transaction closes because we'll get a management fee and licensing stream from the Cherokee tribe at that property. If you look at the bricks and mortar business I touched on, Las Vegas, if you look at it on a consolidated basis, as we sit here today, we are run rating well north of $10 a share in free cash flow. Significant ramp from June to July. Obviously, we see the same public health situation that you see. And there could be bumps along the way in terms of masks and protocols that we need to follow, but the demand is exceedingly strong and has continued to build. So we feel very good about where we are in the bricks and mortar business. Yesterday morning, we launched Caesar Sportsbook. We closed the William Hill transaction a little over 100 days ago, and that was kind of a standing start. Because of the rules in the UK, we really could not do much in terms of preparing for when we would close the transaction, and we wanted to be in position to launch ahead of football season. So what you're going to see is us leaning the entire organization into this vertical. You see the ad campaign with J.B. Smoove, Patton Oswalt, our first national commercial will air during the USA men's basketball game Thursday night in the Olympics. We are activating the entire enterprise, so connecting to Caesars Awards, more than 60 million people, tiered levels of service, ability to earn and use points on or offline. We're activating our player development teams across the organization to sign up new accounts. We're activating our entire workforce. Our frontline labor force will each have their own individual QR code, and we'll be able to sign up customers and be incentivized to help us do that. So this is really a true lean-in by this organization that has not happened before. The numbers that you see and that we've generated before have been in this kind of lame duck universe where we had bought Caesars, we had the partnership that needed to be restructured, and then we had the time between announcing the William Hill deal and closing it where the business that we were doing was kind of just incidental, not enough real focus. This is truly leaning the whole organization in. And in terms of how I think about it, I look at this like I'd look at any business opportunity within the business. I think that we can generate cash-on-cash returns in this business at maturity well in excess of 50% of what we'll invest. But we realize that we operate in a world that is competitive and that we've got to jump in and compete. So you should expect us to spend over a billion dollars in the next year two and a half years to build our customer base. I can't give you a more precise number because a lot of the acquisition spend is success-based, but I would expect it to be over a billion dollars, and I'd expect to, at maturity, be generating at least 50%, possibly approaching 100% of that in EBITDA. And the difference in terms of a bricks and mortar investment that, you know, if I could find a brick and mortar investment like that, we would do that, you know, every day of the week. The difference is you're going to see that flow through our income statement, which is why it's important that we're able to separate this and show you what does the brick and mortar business look like versus what does the digital business look like. But with us free cash flowing in excess of $10 a share, we think we have plenty of capital to invest in this business. We know this is not going to be just a straight line up. We expect that... We will make mistakes. We'll have to continue to evolve both from a marketing strategy and a technology strategy. But the tools that we have in our portfolio to prosecute this opportunity, I'm really excited to play this hand, and we're just getting started as of yesterday. And with that, I'm going to turn it to Brett to talk about liquidity. Okay.
spk13: Thanks, Tom. Our record-setting operating performance in the second quarter generated over $500 million of free cash flow, which in turn we applied to retire our remaining convertible debt and make a one-time payment to acquire the license rights for Planet Hollywood in Las Vegas in perpetuity. This combination of debt repayment and license fee buyout results in over $40 million of annualized free cash flow, and set the table for further free cash flow benefits from deleveraging and refinancing activity. With investment plans for Caesars Digital now formalized, our 2021 calendar year CapEx moves to $500 to $550 million, which includes approximately $100 million for Caesars Digital and acceleration of spend in New Orleans. Net of growth CapEx, our annual core CapEx, remains approximately $400 million. We commence the sale process for William Hill's non-U.S. assets in the second quarter and expect to announce a transaction no later than early Q4 of this year. With that, I'll turn it back to Tom.
spk12: Thanks, Brad. Bueno, with that, we'll turn it back to you for question and answers.
spk01: Thank you. If you would like to ask a question, please press star 1 on your telephone. Your first question is from Joe Riff of JP Morgan. Your line is now open.
spk02: Good afternoon, guys. Congratulations on the strong results. First question, Tom, is for all of you. Going back to Las Vegas, if you look at sequential flow through in Las Vegas, it was about 75%, which is remarkable in just seeing, you know, 50% margins on a page. is also sort of remarkable. Can you talk about it? Is there an operating expense lag relative to revenue recovery? And if there is, is there, with respect to labor, is there a way to quantify that?
spk12: The answer to your first question, Joe, is no, not really. I mean, we're having challenges across the country in terms of filling available positions. But To the extent that we fill them, we're also seeing revenue lift. As I said, July was stronger than June, which was stronger than May. So I tell you, Vegas margins in July were stronger than they were in the second quarter. So I think you should expect us to be in that 50% neighborhood for the foreseeable future.
spk02: Great. And then, okay, one thing that stood out to us in the quarter as well, Tom, was, you know, digital, you know, was positive, you know, EBITDA, even with the investment. Is there a way that you can sort of think about, you know, how to, you know, the next, you know, few quarters? You know, I know you're trying to build a business, and I heard the level of investment over the next two and a half years. Do you think you could, you know, successfully invest and still be EBITDA positive each and every quarter? Or do you really look at it, you know, starting, you know, now with the new launch, you know, before you reap the benefits of incremental EBITDA that you'll see a little bit of an EBITDA loss before you kind of get to, you know, those great returns that you're targeting?
spk12: You should expect digital to be a material EBITDA loser starting early. This quarter, we're launching, in addition to all the customer acquisition activity that we intend to do, we're launching a new brand. So you're talking about a nationwide advertising campaign in addition to everything you do in social. So you're talking about... TV, both national and local, in some expensive markets, I would expect to be, you should expect that billion-plus of spend to run through that EBITDA line over the next two and a half years or so, and it should be front-end leading.
spk02: That's helpful. Thank you.
spk01: Your next question is from Carlos Santorelli of Deutsche Bank. Your line is now open.
spk03: Hey, thank you. Tom, kind of a bigger picture question and really just playing on the success you guys are having right now. Obviously, you know, 90% occupancy in July, 89% in the quarter. The EBITDA numbers you're putting out, the margins you're putting out – I guess Las Vegas as a market has migrated more towards group convention business and whatnot. Has this period made you guys at all think about the go-forward strategy and the use of kind of group and convention-type elements to fill rooms, just given how strong it is at this point? I mean, you talk about some of the tailwinds, obviously, that you still expect to see coming out of the business. Have you guys... thought about at all, maybe the way the model is configured in terms of room-night mix on a go-forward basis?
spk12: Yeah, Carla, that's a good question. I would say, you know, as you know, we're a company that kind of lets the math dictate what's the correct path to go down. I fully expect that that convention customer coming back is going to help us in terms of rate compression. And when you see what's missing, even running 89% versus what was two years ago, 97, 98%, it's an extraordinary amount of EBITDA that's left on the table. So I think there's absolutely a significant addition as that group business comes back. It is heartening to see what we can do without that business, though, because in this second quarter, you know, we had very little group business to speak of, you know, nothing that's even statistically significant, and we're still able to post the best quarter that Caesars had ever posted from an EBITDA perspective.
spk03: Understood. Thank you. And then if I could just follow up, you talked a little bit about, you know, kind of what I think, the way I interpreted your comments was a stabilized Caesars digital business that was doing $500 million to a billion of EBITDA at some point in the future. Just holistically, as you think about those numbers, what do you kind of envision as the mix between kind of the iCasino piece versus the sports piece, and how do you think about the two?
spk12: I mean, I think that if I'm looking at the current landscape – I think that they, in the timeframe that I'm thinking of, I think they end up fairly evenly split because there's fewer iCasino states available than there are sports. On a per-state basis, I think iCasino is considerably more profitable than sports.
spk03: Great. Thank you very much. That's helpful.
spk01: Your next question is from Barry Jonas of Tourist Securities. Your line is now open.
spk06: Thank you. Tom, your comments on July sound incredibly strong, but I just want to be very clear around the increasing cases for COVID and specifically the new Nevada mask mandate. Any impact to the outlook or timing for a Vegas recovery, whether that's group, international, Just want to get any color there.
spk12: Yeah, Barry, this is all real time, right? The mask mandate came into being less than a week ago. You know, what's going on now with the mask mandate is far less onerous in terms of restrictions than we have dealt with in the last decade. quarter. You know, I don't know what impact that will have ultimately on groups coming back. You know, we had the widely leaked internal memo last week on cancellation rate, which I should hit on, that, you know, what that measures is a week's worth of reservations. If I get 10,000 reservation and 4,700 cancellations, that's a 47% cancel rate versus what's typically 27%. It's not we went from 98% occupancy to 50% occupancy. So we fully expect to remain in the low to mid-90s of occupancy in Vegas through this current situation with the Delta variant.
spk06: Got it. And then just, how are you thinking about land-based expansion here, whether that's Florida, Chicago's always out there, and I know you're starting to do something in Nebraska.
spk12: So I've got no interest in Chicago. Florida, we already operate in Pompano. We've got a significant joint venture development that's still churning at that site. Nebraska was a unique opportunity in that we have significant operations in Council Bluffs right on the Nebraska border that would be impacted by Nebraska legalization and doing the Columbus track allows us to participate in sports and online to the extent that we're able to in that state. for a modest investment and entry into a state where we think we can get a good return on that investment. That was a very easy decision.
spk06: Perfect. All right, thanks so much, and congrats on hitting the billion.
spk12: Thanks, Barry.
spk01: Your next question is from David Katz of Jefferies. Your line is now open.
spk11: Hi, afternoon, everyone. Thanks for taking my question. I appreciate it. Look, we've been walking around with a, you know, $10 share free cash flow, you know, bogey for, you know, seemingly quite some time. How do we think about, you know, given the pieces and the way the table is set now, where it could go, you know, from there in some qualitative way, you know, not necessarily asking for a guide?
spk12: So we're still missing group business in Las Vegas. We still see plenty of opportunity in the portfolio in terms of areas where we could tighten up. So, you know, if you think about it in broad terms, I've got to do about $4.5 billion of EBITDA out of the bricks and mortar business to be $10 a share in free cash flow. I told you that we're significantly in excess of that at the current run rate, and we see further upside from there.
spk11: Did I lose you, David? You did for a moment, and it's much more likely on my side. If I may, just work from home. So, look, if I may follow up, please, with respect to labor, it's been an area we've all been hearing quite a bit about and reading quite a bit about in hospitality and the challenges of engaging people and the cost thereof. Not sure if you've talked much about that, but how do you see that? And we've heard less of a problem in Vegas than other places, but how much of an issue is that in the course of your day?
spk12: I don't think it's less of an issue in Vegas. I think it's an issue everywhere, and I'm sure everywhere. our friends at MGM will concur tomorrow or later this week. It's difficult to find enough frontline employees, and it does impact what you're able to do, and we're behaving as if there isn't some magic date where it's all going to be better. We're hopeful that as supplemental unemployment rolls off, that the picture will get better, but we're doing incentives, we're raising wages, we're doing job fairs, we're doing referral bonuses, we're doing everything we can to find as many employees as we possibly can. In a regional property, it tends to be easier because you're not hotel dependent. So whether I have 300 hotel rooms open in a regional property versus 175 really doesn't make a huge difference in materiality to my EBITDA. In Las Vegas, that's an entirely different animal. So our teams in Las Vegas are doing a fantastic job of managing through this, but it's there's a lot of stress in the system, and there's times where we've got to pull back on the throttle to make sure that the customer experience endures.
spk11: Perfect. Thank you.
spk01: Your next question is from Steve of Stifle. Your line is now open.
spk07: Yeah, hey, good afternoon, guys. Tom, so if I start with the digital side of things, obviously we've seen all these sports betting companies out there, and they're spending like crazy to try and gain market share, and now they're going to have you guys out there throwing around a decent amount of money as well. So I guess the question is, what gives you the confidence that the billion-dollar spend will eventually turn into $2 billion or some higher number if the competitive environment stays pretty cutthroat at this point?
spk12: Steve, if it turns into $2 billion, we're having a very good experience in terms of gathering customers because away from this initial brand launch, most of what you're doing ends up being success-based as you bring new depositors into the system. And look, my view is that This is a unique situation in that you got a bit of the Wild West where things opened up quickly and everybody's looking for where the customers are. If you look at the companies that have very large databases coming into this or even look at the ones that have been successful converting smaller databases, it's because they know where the customers are. We've got over 60 million people in our database We have the wherewithal to serve the highest level customer down to the lowest level customer. We have a well-developed rewards program in place that treats customers to increasing levels of service as their value to us increases. That mousetrap has already been built. It's never really been used in the sports business anywhere. A, because you have companies that are off to quick starts here that just don't have that kind of database and that kind of system. And you've got others like us that are kind of just getting our ducks in a row. But I look at it like we can create, if we lean into this appropriately, We've got 54,000 salespeople in our company that work with customers every day, can open accounts. We have dedicated player development executives that deal with building relationships and expanding those relationships every day and have for decades. We have physical experiences that we can offer customers and tie into that business that I think position us well ultimately for success. And that's not to say that others are not going to succeed or that our path will be, as I said, just straight up. But I think we've got everything we need to be a success in this space. And we really kicked it off yesterday.
spk07: Okay, gotcha. Thank you for that. And then If we go back to the margin side of things, it seems like you think current margins are pretty sustainable even down the road as the world hopefully goes back to normal. But what's the biggest delta that you guys are seeing today to drive those margins so much higher relative to pre-pandemic times? Is it one or two things, or is it 100 different things? Or is it just as the businesses were closed down, it gave you guys a chance to look at every single thing under the roofs? Or is it the previous management teams were just So inept.
spk12: Well, I'll leave the inept comment alone. But everything else that you laid out there is a piece of it. We operate with less labor than the historical company operated with, both at the property and the corporate level. But it's really... the attention to detail, the focus on every P&L. I'll give you an example. This quarter, we were cash operating income positive in food and beverage for the first time in the history of Caesars. So just on a quarter over quarter basis, that's over a $60 million cash swing. So that's a quarter of a billion dollars a year. And that's How are you pricing your product? How are you yielding it? How are you managing your labor? How are you managing your marketing and what are you giving away? It's all sorts of different areas that roll up into big numbers. We're a big company now. So 53 properties, if everybody finds 5 million bucks, it's a quarter of a billion dollars. And We have historically been a good company at $5 million.
spk07: Okay, great. Thanks, Tom. Appreciate it.
spk01: Your next question is from Thomas Allen of Morgan Stanley. Your line is now open.
spk08: Thanks. So as we think about the digital business, as the market matures, customer acquisition – is becoming less of a driver and product picks up some of it. You launched your new sportsbook yesterday, the new app. Can you just talk about some of the key features with it? Thanks.
spk12: What do you want to do now?
spk13: Well, yeah, we encourage you to download and experience it yourself, but it has very deep betting markets. It's very fast. The UX is great. Again, it's going to tie into Caesars Rewards here, and we think it's a best-in-class app looking at funding and withdrawal and the clarity for any sports better. And then you layer on top JV Smooth and a great marketing campaign and tie that together not only online but across our brick-and-mortar portfolio, and we like our digital mousetrap. Perfect.
spk08: Thanks, Brett. And then just a numbers question. So when you announced the William Hill deal in 2020, you said you expected Sportsman and I Gaming to deliver $600 to $700 million in revenue in 2021. Is that still a good baseline, or how are you thinking about it?
spk14: Thomas, with the rollout of the Caesar Sportsbook yesterday and our new strategy for marketing and investment, I think promos – So net revenue could be below that $600 million to $700 million as we invest in the business, but it doesn't diminish from the long-term growth opportunity at all. But relative to that initial $600 million to $700 million, our attempt to increase and be more competitive in the market could impact that net revenue line this year.
spk12: Yeah, that was the business in the world where it was kind of just wandering in the wilderness without the... the weight of the business behind it, which changed yesterday.
spk14: I will say we're 260 year-to-date. Obviously, we're coming into the seasonally strongest period, so you should see those revenues start to accelerate into the all-important Q3. Perfect.
spk08: Thank you all.
spk01: Your next question is from John DeCree of CBRE. Your line is now open.
spk10: Hi, everyone. Thank you for taking my questions. To stick on the digital theme, perhaps a two-part question, Tom. A lot of the discussion so far today has been on the vast and probably underappreciated opportunity of mining your database and brand, but you also have a lot of other customer acquisition channels that were assembled over the last couple of years between you and your predecessor, William Hill. like ESPN, CBS agreements, you know, it's daily fantasy stuff. I was wondering if you could talk a little bit about how those kind of fit into the strategy going forward and as a tag-along to that, if there's other media partnerships, channels, customer channels that you could look at to bolt on going forward or if you think you've got everything you need.
spk12: No, you're right, John. We have numerous league and team partnerships partnerships plus the ESPN and CBS partnerships that give us access to databases that are, you know, certainly extremely interested in whatever team or sport they're following and likely sports bettors. And part of what we're doing here in addition to Caesars Rewards, you know, all channels into our own database, into the databases of partners that we have transactions with, and then out into that wild west for people that we don't have a relationship with yet. We are looking to build a leader in this space, and we think tying it to everything that we've described should make it an attractive option for players.
spk10: And kind of the second part, is there other things that you're looking at or potential tuck-in M&A, whether it's additional technology or other avenues that you'll continue to look at going forward?
spk12: The technology will continue to evolve for as long as we're doing this. So if there are areas where a tuck-in acquisition makes sense, to advance the ball on the technology side, you should expect we would look at that. If there's some brand or M&A opportunity that allows us to improve our position in customer acquisition, you should expect us to look at that. You've known us a long time. We're looking for how do we drive the most value for our stakeholders, and the answer can change over time. But as we sit here today, we think we've got everything we need to launch with strength and then to add to that over time as we build the business.
spk10: Very good. Thanks, Tom, and good luck on the rollout.
spk12: Thanks, John.
spk01: Your next question. is from Chad Bannon of Macquarie. Your line is now open.
spk05: Hi, good afternoon. Thanks for taking my question. Tom, given your Las Vegas margin success in the quarter of running over 20,000 rooms and a much higher EBITDA result than any of us were expecting, I'm wondering if anything has changed in terms of your thinking of divesting an asset out there and the timing around that. Thanks.
spk12: I'd say nothing has changed there. We still expect to sell a Vegas Strip asset, a single asset, and I would expect that sale to take place in 2022.
spk05: Great. And then with that cash, or I guess the near-term cash of selling the UK William Hill business, what are your plans with the the cash that you'll have on the balance sheet. You've talked about what the digital vision will cost, but you'll still have some excess cash, particularly given the $10 free cash flow projection. What will you do with that?
spk12: You should expect this to be deleveraging. We want to drive our leverage below four times on a gross lease adjusted basis. I see that in the relatively near future for us. And I look at it like if you think about something north of a billion of investment into sports and online, I think between just the proceeds out of the assets that we're going to sell that came with William Hill, I think that's going to match up pretty nicely with what we need to spend in sports and online to build that business in the U.S.,
spk05: Great. Thank you very much.
spk01: Your next question is from Daniel Adam of Fluid Capital Markets. Your line is now open.
spk16: Hi. Good afternoon, everyone. Thanks for taking the questions. For Caesars Digital, it sounds like that segment includes both your retail sports betting business and online. Is that correct? That's correct. Okay. Okay. So can you break out what online-only revenue and EBITDA was in the quarter?
spk12: No.
spk16: In that segment?
spk12: No, I can't.
spk16: Okay. And then, Tom, I'll take another stab at this, but I'm wondering if you have a long-term target online sports betting and iGaming market share number in mind that you'd be willing to share with us.
spk12: Also, no. I would expect us to be a leader in mobile market share, certainly among the leaders in both sports and online.
spk14: And, Daniel, given that we operate in 13 states mobile and now we've rebranded to Caesar Sportsbook, the bulk of the growth, obviously, for the sports business is going to come online over time and as new states legalize.
spk16: Okay. That makes sense. Fair enough. All right. Thanks, guys.
spk01: Your next question is from Sean Kelly of Bank of America. Your line is now open.
spk09: Hey, good afternoon, everyone. I just wanted to go back to the Vegas environment. Tom, you gave some really great color on sort of your occupancy thoughts, and I was wondering if you could sort of give us a little bit of color on what you're seeing on the rate side of the equation in the past. You know, there's been some volatility there, and it's been competitive, but obviously the you know, what you're seeing now is really different from the consumer. So I was just kind of curious on, you know, what you're able to see out in the future and maybe how that trended across the quarter as well.
spk12: Yeah, for the past few months, we've seen higher rates occupancy that climb to equal prior year level. We would expect that to grow further and faster as group business comes back. You know, we're fairly comparable from a rate standpoint over the last, call it two and a half months to prior year, a little bit ahead.
spk09: And historically, we have seen some seasonality in Vegas, but obviously that's been driven a bit by the group business. I know the booking windows can be short, especially now, but just any thoughts on sort of let's call it the fall progression as some people may head back to work and schools may be more back in session. That tradeoff in August relative to sort of the upside opportunity as you probably see the group calendar fill in post-Labor Day. Yeah.
spk12: Yeah, I'm expecting to be back toward more normal seasonality in Vegas through the rest of the year. I'd expect you'd see the same holiday softness that you typically see on a relative basis. And we'll see what happens in terms of group cadence coming back. But I'd expect we'd be certainly in 22. I'd expect kind of a normal year of seasonality in Vegas.
spk09: Great, thank you very much.
spk01: Your next question is from Steven Gambling of Goldman Sachs. Your line is now open.
spk04: Hi, thanks. I've got a couple of follow-up questions on the digital side. I guess starting with the database, how do you think about the overlap of sports betting customers versus iGaming versus kind of the existing total awards database? Do you have any sense for how much of your total awards customer base may be overlapping with peers? where you may be fishing for a customer who perhaps has even already been caught?
spk12: I don't have any real insight into what's in others' databases, but I tell you, with the amount of people in ours, that database has been built over 20 years and mined. I would expect that A substantial amount of the gambling customers that everybody is searching for is in our database and has a relationship with us. So giving them an ability to stay home and not look elsewhere is a key piece of what we're doing here.
spk04: And then perhaps on the regulatory front, I know you mentioned you always follow the map. I guess what's your strategy and willingness to pursue states where taxes and or license fees are material higher? Do you need to be in those markets to get national scale, or are there other ways to create value?
spk12: Yeah, you're going to look at each state on its own. I can envision scenarios where there will be states where it's just not economic to participate. I haven't seen one of those yet. yet, so you should expect us to be active everywhere we can be. There are states that you could miss or if it's impossible to make money, but the reality is if you look at the history of the business in states where the initial tax structure was difficult, there is history where those have been adjusted, you can't participate in that if you're not involved on the front end.
spk04: Helpful.
spk12: Thanks so much. Thank you. All right. Thanks, everybody. We'll talk to you again after third quarter.
spk01: And this concludes today's conference call. Thank you for participating. You may now disconnect.
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