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Date
Tuesday, July 29, 2025 at 9:00 p.m. ET
Call participants
Chief Executive Officer — Tom Reeg
President and Chief Operating Officer — Anthony Carano
Chief Financial Officer — Bret Yunker
President, Caesars Sports and Online Gaming — Eric Hession
Senior Vice President, Corporate Finance Treasury and Investor Relations — Brian Agnew
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Risks
Chief Executive Officer Reeg stated, "The summer is soft in Vegas. I would expect something in Q3 2025 that looks like Q2 2025 on a comparative basis," citing ongoing near-term weakness in Las Vegas.
The regional segment encountered "$30 million worth" of negative one-time impacts, including lost room nights in Lake Tahoe and additional disruptions in Metropolis and Baltimore, which management directly linked to adjusted EBITDAR pressure in Q2 2025.
Takeaways
Consolidated net revenues— $2.9 billion in consolidated net revenues for Q2 2025.
Adjusted EBITDA— Adjusted EBITDA was $955 million for Q2 2025.
Las Vegas adjusted EBITDA— Same-store adjusted EBITDA in Las Vegas was $469 million for Q2 2025, driven by 97% occupancy in Las Vegas, down from 99% in the prior year, with average daily rates remaining flat.
Group room night mix (Las Vegas)— Group room nights accounted for 15% of the total mix in Q2 2025, supporting management's projection of a "record EBITDA year" for the segment.
World Series of Poker prizes— Over $500 million in prizes were awarded during the World Series of Poker event spanning Q2 2025 and into July, confirming the event's continued scale and brand significance.
Regional adjusted EBITDAR— Adjusted EBITDAR for the regional segment was $439 million in Q2 2025, including one-time costs totaling $30 million. Excluding these negative one-time items, adjusted EBITDA would have been flat year over year.
Caesars Digital net revenues— Net revenues for Caesars Digital were $343 million, a 24% increase year over year.
Caesars Digital adjusted EBITDA— Adjusted EBITDA reached $80 million, up 100% year over year in Q2 2025, described by President Hession as "an all-time quarterly adjusted EBITDA record."
Digital adjusted EBITDA margins— Adjusted EBITDA margin (non-GAAP) was 23.3%, up 880 basis points in Q2 2025.
Sportsbook hold— Sportsbook hold increased by 170 basis points to 8.9% in Q2 2025, with overall handle flat year over year and parlay mix up by 280 basis points year over year.
iCasino net revenue growth— Caesars Digital casino net revenues grew 51% year over year in Q2 2025, driven by advancements in product and customer engagement.
Asset rebranding— Harvey's Lake Tahoe completed rebranding to Caesars Republic Lake Tahoe on July 1, with management pointing to "encouraging guest feedback" and ongoing upgrades.
Largest individual CapEx initiatives— Las Vegas upgrades at Flamingo, introduction of new branded venues, and specific room remodel projects at Caesars Palace mentioned as current focus points.
Debt redemption— All high-cost debt was fully redeemed early in Q3 2025, leading to over $40 million in expected annual free cash flow savings.
Cash taxes— The reduction in estimated cash taxes as a percentage of EBITDA from 5% to 3%-4%, due to favorable law changes, is based on pro forma estimates discussed during the Q2 2025 earnings call, providing incremental cash flow benefit.
Share repurchase activity— Approximately $100 million of share repurchases were made in April; no further repurchases in the quarter, as capital was directed toward high-coupon debt reduction.
Summary
Caesars(CZR -1.76%) Chief Executive Officer Reeg explicitly forecasted continued softness in the Las Vegas market into Q3 2025, while emphasizing that group bookings stabilize and strengthen the outlook from Q4 into 2026. Regional performance in Q2 2025 was negatively affected by $30 million in identified one-time items, but is expected to return to flat or positive EBITDA performance for the full year 2025 as July trends exclude such disruptions. Caesars Digital achieved a record quarter, posting $80 million in adjusted EBITDA and 51% iCasino net revenue growth in Q2 2025, with management reiterating confidence in attaining $500 million-plus EBITDA (non-GAAP basis) for digital by 2026. Both room revenue weakness and promotional activity adjustments were linked directly to transient market dynamics and strategic reinvestment, not to persistent consumer demand issues. The full redemption of high-cost debt will result in over $40 million in annual free cash flow savings, while recent changes to tax law will further ease cash tax outflows, offsetting operational challenges in certain segments.
President Hession highlighted the launch of a universal digital wallet player account management system in Nevada in July 2025, with full rollout to all jurisdictions by early 2026 targeted to enhance customer experience and acquisition.
Management disclosed over $70 million in partnership expenses within the digital segment will roll off by the end of 2027, with over half of these partnership expenses eliminated by early 2026, directly benefiting future EBITDA.
The company confirmed continued portfolio investment via room remodels, new branded venues, and regional asset upgrades, while signaling no imminent large-scale capital cycle is planned.
Caesars outlined achievement of asset-light management agreements expected to deliver approximately $50 million in incremental annual EBITDA as new projects come online through 2026.
CEO Reeg indicated any potential digital separation transaction will be considered if it "would drive significant value to shareholders," with preparations aligning to the achievement of financial targets in the first half of 2026.
Industry glossary
Hold: The percentage of total sports wagering handle retained by the bookmaker as revenue after paying out winnings.
Handle: The aggregate dollar amount wagered by customers on sports or gaming offerings.
Parlay mix: The proportion of total sports bets consisting of parlay wagers, which involve multiple selections combined into a single bet.
GGR (Gross Gaming Revenue): Net revenue retained by operators from gaming activities after winnings paid to players.
Adjusted EBITDAR: Earnings before interest, taxes, depreciation, amortization, and rent, commonly used as a segment profitability metric in gaming and hospitality.
Same-store adjusted EBITDA: Adjusted EBITDA from properties owned and operated in both the current and prior-year periods, isolating the impact of new acquisitions or divestitures.
MAUs (Monthly Active Users): Unique users engaged with an online platform during a given month, used as a digital engagement metric.
Asset-light: Operating structures emphasizing management contracts or licensing without significant ownership of physical assets.
Full Conference Call Transcript
Operator: Good day, and thank you for standing by. Welcome to the Caesars Entertainment, Inc. 2025 second quarter earnings call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one again. Please be advised that this conference is being recorded. Now, I would like to hand the conference over to your speaker today, Brian Agnew, Senior Vice President of Corporate Finance Treasury and Investor Relations. Please go ahead.
Brian Agnew: Thank you, Kevin, and good afternoon to everyone on the call. Welcome to our conference call to discuss our second quarter 2025 earnings. This afternoon, we issued a press release announcing our financial results for the period ended June 30, 2025. 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 Reeg, our Chief Executive Officer; Anthony Carano, our President and Chief Operating Officer; Bret Yunker, our Chief Financial Officer; Eric Hession, President, Caesars Sports and Online Gaming; and Charisse Crumbley, Investor Relations.
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 under Safe Harbor Federal Securities Laws, and these statements may or may not come true. Also, during today's call, the company may discuss certain non-GAAP financial measures as defined by SEC Regulation G. Please visit our press releases located on our Investor Relations website for a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure. Also, I just wanted to mention our Q2 investor presentation has been posted to our website, and I did just look in our 10-Q. It's now been posted as well.
I'm going to pass the call over to Anthony.
Anthony Carano: Thank you, Brian, and good afternoon to everyone on the call. We delivered second quarter consolidated net revenues of $2.9 billion and adjusted EBITDA of $955 million. During the second quarter, our digital segment delivered its best quarter ever, producing $80 million of adjusted EBITDA. Our digital momentum continues to build for the financial goals we originally laid out in 2021. Our Las Vegas segment posted solid results in the face of softer market demand in our hospitality vertical, but we remain encouraged by forward group pace in Q4 and the first half of 2026.
Regional revenues were up year over year, driven by the addition of two new properties and same-store GGR growth resulting from strategic reinvestment in our Caesars Rewards customer database. Starting with our Las Vegas segment, we reported same-store adjusted EBITDA of $469 million. Results were driven by 97% occupancy, versus 99% last year, and essentially flat rates. Our gaming vertical faced a difficult comparison last year and drove lower year-over-year table games volume and hold. During the quarter, the group room night mix was 15%, and the segment is on track to deliver a record EBITDA year in 2025 due to our strong Q4 booking pace.
Recent capex investments at Flamingo in Las Vegas, including a brand new pool experience, Pinkies by Lisa Vanderpump, Gordon Ramsay Burger, and Havana 57, are generating strong returns. During the second quarter and into July, the World Series of Poker hosted another very successful event and remains the largest poker tournament in the world, with over $500 million in prizes. Turning to our regional segment, we reported adjusted EBITDAR of $439 million. Tom will add additional insights during his remarks, but our regional segment was negatively impacted by several one-time items during the quarter. Excluding these negative one-time items, Q2 adjusted EBITDA would have been flat year over year. During the quarter, Danville and New Orleans generated strong returns.
We have strategically reinvested in our Caesars Rewards database, which drove higher gaming revenues during the period. Early results from our strategic customer reinvestments are promising, driven by strong rated play trends in the quarter. We will continue to refine our marketing approach as we remain focused on harvesting strong returns on these investments. In addition to our strategic customer reinvestment, we have made additional investments in new slot capital that is driving higher year-over-year gaming revenues. On July 1st, we rebranded Harvey's Lake Tahoe to Caesars Republic Lake Tahoe. We received encouraging guest feedback during the opening weekend and during Celebrity Golf, regarding the new elevated property amenities.
Tahoe experienced significant construction disruption during the second quarter, a result of rooms being offline. We'll start construction at phase two in Tahoe in the fall, and complete the project by the summer of 2026. I want to thank all of our team members for their hard work during this first half of 2025. The hard work, resilience, and unwavering dedication to exceptional guest service have been the driving force behind our accomplishments this year. With that, I'll now turn the call over to Eric for some insights in digital.
Eric Hession: Thanks, Anthony. During the second quarter, Caesars Digital delivered net revenues of $343 million, up 24% versus the prior year, and set an all-time quarterly adjusted EBITDA record of $80 million, up 100% from last year. On an LTM basis, Caesars Digital has delivered approximately $200 million of adjusted EBITDA. Our results in the quarter keep us firmly on track to achieve the financial targets we laid out in 2021. Q2 results were driven by growth in sports and casino, with net revenues increasing 28% and 51% year over year, respectively. Adjusted EBITDA margins grew by 880 basis points to 23.3%. In our sportsbook, we continue to achieve strong year-over-year performance.
Hold increased 170 basis points to a record 8.9%, and handle was roughly flat versus the prior year period. Total parlay mix improved by approximately 280 basis points year over year, and we saw growth in average life per parlay and a higher cash-out mix versus the prior year as well. From a tech perspective, we announced the launch of our universal digital wallet proprietary player account management system in Nevada earlier this month. That enhancement gives our customers a significant upgrade to their wagering experience within the state and now across 19 jurisdictions. We expect to complete the rollout across all of our jurisdictions by early 2026.
In iCasino, we saw continued strength again in volume, hold, and average MAUs, which combined to grow net revenues an impressive 51%. We continue to elevate our product offering during the quarter to include new bonus capabilities, the launch of a Caesars-branded live gaming studio in Michigan, and the introduction of our remote real live slot studio on the property floor of Tropicana Atlantic City. Our in-house development studio continues to make progress with two proprietary games now in the market, a third planned for launch in early August, and our first slot game on target for the middle of September. The games have all been well received by our customers.
As we head into the back half of 2025, I'm becoming more and more optimistic as I see how customers are reacting to the improvements we have made in our application. The continuous progress made in all areas is showing up in our top-line results, and our focus on spending efficiency is driving solid flow through to EBITDA. I will now pass the call over to Bret for some comments on the balance sheet.
Bret Yunker: Thanks, Eric. Q3 is off to a great start on the balance sheet front. We fully redeemed our most expensive debt earlier this month using a mix of asset sale proceeds and our revolver. Annual free cash flow savings from the redemption will exceed $40 million, and we continue to be optimistic about further interest expense reductions through rate decreases and/or debt reduction. Our relationship bank facility is our next maturity in 2028, and our nearest capital markets maturity is in 2029.
On the tax side, the BBB brought us good news in the form of increased interest and depreciation expense deductions that move our pro forma estimate for cash taxes as a percentage of EBITDA down from 5% to 3% to 4%, which you'll see reflected in our investor presentation. I'll turn it over to Tom.
Tom Reeg: Thanks, Bret. Thanks, everybody, for joining. To unpack the quarter by segment, Vegas for us was, as Anthony talked about, softer than last year. We started with a strong April, May, and June started to decline. The booking window contracted. The booking window in Vegas is about as short as I've seen it at this point. And we saw we had in our own portfolio, Anthony talked about high-end that we are missing in gaming. Recall we had both Adele and Garth Brooks in last year's second quarter, didn't have them this year. Missed out on some high-end trips that tend to resurface at other points during the year.
But Vegas started leaking as a market, kind of end of May, that leak accelerated into June. I'd expect the third quarter to be soft, but in the last three weeks or so as we monitor forward bookings, bookings have stabilized. And as we look to the fourth quarter, first quarter, and second quarter of the fourth quarter of this year, first and second quarter of 2026, a very strong group calendar for us. So we think this is a temporary phenomenon in Vegas, but make no mistake. The summer is soft in Vegas. I would expect something in the third quarter that looks like the second quarter on a comparative basis. Regionals, we talk about one-time impacts.
We had about $30 million worth. The biggest of which was construction at Lake Tahoe Caesars Republic, the former Harvey's. We lost between that and Bowling and Reading, we Reno, we lost almost 50,000 room nights versus last year. We reopened the first phase of Caesars Republic before July 1st, and it has performed as we've been very pleased with the performance, the strength in that performance. There's a second phase that happens this off-season that will not be nearly as disruptive as the first phase was that casino was effectively closed for the second quarter. We also lost a couple of weeks in Metropolis due to flooding. And had some a significant lawsuit settlement in Baltimore almost $2 million.
Those were the chief culprits that were in the $30 million of one-time events. You know, as we look at it as it was happening, we looked at these as one-time events. As we get into the third quarter in July, we can see that without those occurring in July, regional both revenue and EBITDA are up for July. So even inclusive of what happened in the second quarter with the one-time items, we remain comfortable that regional for the full year will be flat to up in EBITDA. I've had a number of conversations with many of you during the quarter about revenues.
You know, we've told you in the past that you know, GGR monthly performance is not in their indicative of what's happening under the hood. If you'll recall, we talked on prior calls about how in competitive markets in particular, as we wade back into new battlegrounds with new competitors, we market into those areas, increase the marketing, and you saw some of that flow through or flow to GGR. Some of you thought that was some harbinger of significant strength in regional. It's really reflecting what we're doing from a promotional standpoint. Those promotions you roll them out you decide which ones are working, which ones aren't, and you pull back the ones that aren't working.
That doesn't always neatly fit in the ninety-day quarters that were reporting. So if you look at regional on a full-year basis, you should assume that we were investing in the second quarter. We're bearing the fruits of that as we get into the third quarter, which is why EBITDA is increasing, but we are pruning programs that were designed to generate volume but may have done so unprofitably. Our rated gaming trends, our rated gaming feel was up 8.5% in the quarter. Which is the best performance we've had in three years.
But I would tell you part of that is artificial based on what we were doing marketing to customers, but it is considerably stronger than it's been the last couple of years. Which bodes well for a particular regional space over the next year or two. Digital had a fantastic quarter. As you know, we laid out financial milestones in this quarter of 2021, right, before we launched Caesars Sports, we remain on track to deliver half a billion plus of EBITDA in 2026. The momentum in digital is extraordinary both from a volume and an EBITDA perspective. We're now increasing handle year over year.
We Garrett talked about how what you saw over the last four quarters was our ability to refine our marketing targeted to consumer to customers that led to a reduction in handle. We've now we anniversaried that during the quarter. Handle grew. Handle's growing. In July on the sports side mid-single digits. The casino we continue to grow in iCasino about 2x the rate of our peers. Extraordinarily pleased with the way that is coming together. If you look at versus the prior year quarter, the $40 million we did in the prior year, had about $8 million worth of World Series of Poker EBITDA that we sold. So the true comp is verse $32 million of EBITDA last year.
We did $80 million. There's another $8 million of that World Series headwind in the third quarter EBITDA number, but we would expect to top the fully loaded number by a significant amount. If you look at we've talked about partnership expenses. Rolling off. If you look at now through the end of 2027, we've got north of $70 million worth of partnership expenses that we are dragging in our business right now. That will roll off by the end of 2027, and more than half of those will be gone in the first four months of 2026. And all of that flows straight to EBITDA. So that business is ramping quickly toward that $500 million number.
We certainly expect that's not an end game for us that we're going to continue growing well past that as we move forward. Bret touched on the tax bill's impacts on us. If you think about that in a dollar amount, the reduction in cash taxes this year should offset the EBITDA for shortfall in Vegas for the second and third quarter. So that free cash flow is not materially impacted in 2025. And 2026 and 2027, you should be thinking of something like $80 to $100 million less in cash taxes than what we were anticipating before the bill was passed.
So in short, we've got you know, we are we've battened down the hatches in Vegas for a soft summer. We see a strong fourth quarter first quarter, and second quarter. On the other side of that, as we look at the group calendar that's coming into town, regional remains on track for flat to little bit of growth this year and growth in 2026. And digital continues its strong growth and momentum. And with that, I'll open it up to questions.
Operator: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star one on your telephone. We'll pause for a moment while we compile our Q and A roster. Our first question comes from Dan Politzer with JP Morgan. Your line is open.
Dan Politzer: Good afternoon, everyone. Thanks for taking my question. First one on Las Vegas. Tom, you mentioned you've seen a little bit of stabilization in the past few weeks. Can you maybe kind of unpack that? And as you think about that, path to growth in the fourth quarter and first quarter, and the first half of next year, you know, is there something tangible that we can lock on to given that group calendar? Are there any kind of specifics you could put around that?
Tom Reeg: Yeah. So what you know, we see you know, pretty clearly the next ninety days forecasted cash occupancy. We were down 27,000 room nights in the second quarter, and what we saw was every week as those forecasts came out, each of the next three months would show a decline week over week in forecasted cash revenue. That kind of started middle of May, accelerated into middle of June. And kind of in July, what we're seeing is that those ninety-day numbers next three months are stable. You're basically looking at the same forecast you were looking at a week ago. So I'm not suggesting that this is some huge bullish turn.
It was as if your tire had a leak and you've patched it at this point. And if you look into the fourth quarter, first quarter, second quarter, we're we project a record group year in Vegas in 2025 for us. At the end of the third quarter. On a year-over-year basis, our group business will be down. Year over year, we knew that was going to be the case. But we have an extremely robust fourth quarter group calendar, first quarter, you add you know, CONAG to the citywide convention calendar. We have another robust group.
And then in the second early second quarter, we get State Farm, which is a substantial conference that is Caesars specific and recurs once every three years or three every three years. That's in the 2026 number. And so if you think about you know, as you're in the summer, your leisure dominated. So leisure is softer has been softer. When you get that strong group calendar that allows you that gives you leverage in rate, and that's you've seen that for quite some time historically. It's really get out of the group light third quarter and into the group heavier fourth quarter, first quarter, second quarter when we have significant business booked.
So but 2025 should be a group room night record for us, and 2026 should be another one.
Dan Politzer: Got it. Thanks. And just to clarify, your comment on third quarter Las Vegas being, you know, a comparative basis versus the second quarter. Should we interpret that as, you know, third quarter EBITDA down high singles or somewhere in that range?
Tom Reeg: Yes.
Dan Politzer: Thanks so much.
Operator: One moment for our next question. Our next question comes from Brandt Montour with Barclays. Your line is open.
Brandt Montour: Good morning, good afternoon, good evening, everybody. Thanks for taking my question. So curious, Tom, on the promotional stuff that you guys talked about. When you think about that effort, maybe talk about, you know, what you I mean, you only give me so much, but you're doing differently now versus prior promotional campaigns or efforts that you've done if there's any sort of omnichannel bent to it, as well as sort of the hub and spoke model that we know you well for historically, is that something that it sort of coincided with the Las Vegas slowdown.
I'm just wondering if there's sort of like a system-wide effort that you can tie that you're tying that into to sort of help everything.
Tom Reeg: Yeah. So, Brad, what you're seeing is in you know, this started as a response to the competitive openings in regional that impacted us last year. Going back into drawing your new battleground markets and marketing to those customers, and it's really just you know, how rich is the offer that you're giving them and what's the response to that, and does it flow profitably at the same time with what's going on in leisure demand in Vegas. As Anthony says, you're opening your casino database to lower segments of customers to fill your room. So they're getting a better offer. And then at the same time, we're wrapping digital and brick and mortar in more you know, every quarter.
And it's the combination of that and that provides a lot of data for us, but it's not immediate. Right? So you're making marketing decisions. You're sending those out there. Those go out through mail and email, and then you're going to see what the response is and there's some that flow well across the enterprise. There's some that work in certain markets. There's some that don't work across the enterprise, and there's some that don't work in certain markets, and that's the tweaking that we started doing kind of late in the second quarter and into July that we're bearing the fruits of.
But like I said, this doesn't necessarily fit into the quarter you the sync quarter that we report, you've got a little bit of kind of rollout in the second quarter and very little of the pairing back, and now you've got July you're you're you're driving back to what's possible. At the same time, we increased our slot spend in 2025 in the capex numbers that we've provided for you. And we've deployed those machines in a lot of markets, we're seeing returns from those as well. We're always tweaking lease units and how much they're driving. And I would say, generally speaking, leased units have been climbing a bit portfolio-wide.
So all of that's going on at once, and your analytics group is measuring what's working, what's not working, and you know, that's kind of what we've done is we've typically, as we've bought companies as you pull back what's not working and you lean into what is. So it is a lot of test and control.
Brandt Montour: Okay. That's really helpful. Thanks for that. And then another one, Tom, if you could just give us some thoughts on what you think's going on in Vegas right now with the summer leisure demand. You know, how much of I mean, we all know it's a seasonally slow period. How much of its weather? How much of it is a hangover from tariffs? Is there anything structural whereby, you know, Las Vegas has been flying high and perhaps there's some fatigue on pricing and maybe the value proposition isn't quite as good as it was in the past. What do you think?
Tom Reeg: That's a tough one. It's tough to put your finger on that. You know, we had seen you know, we've talked with our peers I'd seen anecdotally that the ends of the strip called the north and south end of the strip started to weaken you know, maybe March and April, and we really hadn't seen anything. And, you know, you're you're looking at again, you're for us, you're looking at a quarter where you're at 99% occupied. 27,000 room nights for us is gonna flow through non-gaming, for us. You know, the gaming piece of where we were light versus last year was all high-end at Caesars Palace.
So gaming has held in our portfolio center strip non-highest end very well and that high end as I said, is really a timing issue based on when our entertainment acts were here. But losing 27,000 room nights, you're losing that cash room revenue, you're losing some F and B revenue, our team did a great job of keeping operating expenses in check, keeping our margins in check, but that the period of softness when we are leisure dominated you know, has extended into this quarter. And I look at this as know, I've been around Vegas a very long time as a lot of you have been.
This is kind of normal seasonality that we haven't seen in a while here. It's nothing that leaves me concerned about the customers. But, you know, the only thing I could point to that is back to your comments is the international business, particularly Canadian is softer. So if you look at our missing room nights this year, Canadians are a significant piece of that even though you know, they're only 3% of the total three or four percent of the total pie for us. But you know, I don't really see anything, particularly when we look at the business as a whole, Vegas, regional, and digital, that suggests there's anything particularly concerning about the consumer.
And as I said, we'd expect as groups fill in here this looks very different end of the year and into early next.
Brandt Montour: Thanks, everybody.
Operator: One moment for our next question. Our next question comes from David Katz with Jefferies. Afternoon, everyone.
David Katz: Thanks for taking my question. I just wanted to go back to digital which you know, seems to have you know, has really accelerated. And I think what we've talked about in the past is getting to a run rate of $500 million by the fourth quarter. If you could help us just unpack that a little bit more, and you know, point to some of the key drivers for that. Can we you know, what does a 2026 look like or the new ASPR maybe discussing even in general terms?
Tom Reeg: So I'd say, David, you know, as you get into football season, obviously, volatility of sports outcomes becomes paramount. But if you look at a typical second quarter versus fourth quarter, something like fourth quarter being 2x second quarter is a reasonable expectation. Which should obviously put us well above the run rate that you're talking about. You know, we've had a strong July post a strong second quarter, so the momentum is continuing. I've talked about the partnership expenses that roll off. So, you know, for us, the $500 million, much debated $500 million target looks like it's gonna arrive, you know, right on the schedule that we put out there four years ago.
And you know, as you look forward and think about you know, into 2026, 2027, 2028 where you may have new iGaming jurisdictions where I would expect our share of a new jurisdiction given our product and the momentum in that business. Would probably be something like 2x what our share is in the legacy markets. You know, you can start to talk yourself into some pretty bullish outcomes in digital, and we see no indication that anything slowing down. You know, for us, the rollout of single wallet in Nevada is a wonderful customer acquisition tool.
If you recall before that, all the customers that would come to our properties in Nevada, and open a Caesars Sports account so they could bet they were in Vegas, would go home and have to open a separate account, which is obviously less than ideal. So we think from a customer acquisition standpoint outside of Nevada, that's going to be a powerful tool. And add to the momentum that we've got going in this space.
So I don't wanna know, I've taken so much grief over the $500 million target that we're right on the precipice of, I'm hesitant to immediately put another target out there, but I'd say we're gonna generate substantially more than $500 million of EBITDA from digital if you're if you're looking out a few years here.
David Katz: Thank you. Appreciate it.
Operator: One moment for our next question. Our next question comes from Lizzie Dove with Goldman Sachs. Your line is open.
Lizzie Dove: Hi there. Thanks for taking the question. Just going back to Vegas, you know, you mentioned some of the investments that have been making great returns at Flamingo. I'm curious, you know, beyond what you've already kinda talked about, if you think there's opportunity or need for any further incremental investment in other Vegas properties.
Tom Reeg: Yeah. We've got just our room remodels that we have coming up. We've got a tower at Caesars Palace, we've got a partnership with Tao on a day club where contributing the capital for an amazing day club out front of Caesars Palace. Got some more room remodels throughout the city, but Vanderpump. Yeah. And then Vanderpump Hotel, at Cromwell kicks off design as we speak toward a model room there the other day, and it is it is definitely amazing. We'll be at a wonderful new hotel in a great location. Beyond that, the rest of our properties are in pretty dang good shape right now, and we continue to keep them in good shape.
Lizzie Dove: Got it. And then going back to digital for a second. So there's a really nice uptick on the OSB hold this quarter, you know, tracking pretty close to 9% at this point. Curious how you think about sustainability of this uptick. I know you mentioned, you know, sports variability of outcomes, but just, you know, in light of the long-term target that you have out there and whether there was any kind of one-time factors in this quarter.
Eric Hession: Yeah. Sure. This is so that we definitely had favorable sporting outcomes this quarter. I would say that the actual hold surpassed our know, theoretical hold. From the sportsbook perspective. You know, that said, I wouldn't change our target long-term target of getting to 10% hold at this point. We are really optimistic. I mentioned how our parlay percentage continues to rise. Our same game parlay percentage is rising. And our cash-out percentage is rising. All three of those contribute significantly towards increased hold. So there is very much an upward trend in our structural hold. But, you know, that said, achieving the almost 9% hold this quarter was inflated by good sports outcome.
Now I would say though, as we head into football, football tends to have a higher parlay mix just in general. And so we do anticipate surpassing that 9% later in the year. But I think there's some natural effects just associated with sporting outcome that's gonna drive that as well.
Lizzie Dove: Got it. Thanks.
Operator: One moment for our next question. Our next question comes from Steve Wieczynski with Deutsche Bank. Your line is open.
Steve Wieczynski: Hi, Good afternoon, and thank you for taking our questions. Can you just talk about what you are seeing from an OpEx and labor standpoint in Las Vegas and regionals? How we should think about that moving forward?
Tom Reeg: Yeah. So we've got union contract increases in Vegas. That you've seen us lean into expenses so that our expenses were flat even though we have increased labor increased union rates. Nothing to speak of in digital that's I'm sorry, in regional that's worth mentioning. You know, we're kind of inflation-type increases across the board. Not nearly as impactful as the last couple of years on the whole.
Steve Wieczynski: Okay. Great. Thanks. And then just wanted to follow-up on what you were seeing in New Orleans. I believe you noted a $16 million EBITDAR run rate per month coming out of the 1Q that still the case?
Tom Reeg: New Orleans had another very strong quarter and has picked up the pace in July. Danville continues to perform extraordinarily well also. So the additions to the portfolio are driving very strong results in regional.
Steve Wieczynski: Okay. Appreciate it. Thank you.
Operator: One moment for our next question. Our next question comes from Stephen Muszynski with Stifel. Your line is open.
Stephen Muszynski: Yeah. Hey, guys. Good afternoon. So, Tom, wondering if we can start with the regionals. I'm trying to square this up a little bit. So stick with me here a sec. So there were $30 million of headwinds. You know, if we go back, we add those add those in, the flow through still would have been a little bit lower year over year. Then there's this uptick in spending across the database, which seems like that was kinda heavily with heavily weighted toward the second quarter.
So I guess what I'm trying to figure out is you know, what those regional margins would have looked like on a more on a like-for-like basis, meaning up down, flattish, and I'm guessing moving forward, you know, those margins should now accelerate a little bit more given the bulk of that heavy spending across the databases is essentially finished?
Tom Reeg: Yeah. I'd say, obviously, if you were not doing the marketing that we were doing, margins would have been higher than they were. And as we pull back on as we pull back on the unprofitable marketing that as we call profitable from unprofitable, those margins should improve from here. So that's accurate.
Stephen Muszynski: Okay. Gotcha. Second question, Tom, going to Vegas. You know, as you think about that FIT cohort, you know, sounds like you think that customer base has, you know, has stabilized yet it's still early on and fully under it. You know, fully understanding that booking window, you know, is, you know, is compressed. But guess my question is, did you guys essentially do anything to stabilize that customer? Meaning, you know, did you get more aggressive on whether it's promotions or room discounting or anything like that? Just trying to understand that a little bit more.
Tom Reeg: No. What I'm describing is a cash room revenue number. Most of our rooms in Vegas are cash. And so what stabilized was forward cash room expectations, which had been leaking for better part of a month and a half. That stabilized, you know, beginning of July for us.
Stephen Muszynski: Okay. Perfect. Thanks, Tom. Appreciate it.
Operator: One moment for our next question. Our next question comes from Barry Jonas with Truist. Your line is open.
Barry Jonas: Hey, guys. You're coming off your initial meeting in New City with the CAC. How do you feel your chances are in that race? Thanks.
Tom Reeg: Yeah. We're proud of the submission that we have put forward. We've got a strong partnership with a lot of local support. We are mindful that Manhattan may be an underdog for a license if there is a casino awarded in Manhattan, we are confident we would be the.
Barry Jonas: Got it. And then just as a follow-up, a lot of good color on digital and outlook there. I'm just curious if any updated thoughts on a spin maybe timing or puts and takes from your perspective. Thank you.
Tom Reeg: Yeah. You know, we have talked about job one is to deliver on the numbers that we've laid out. We're well on our way to that.
There is internal plumbing that needs to happen to be in position to separate that foot's well with kind of when we hit our numbers for our initial targets and we'll take a look at what we think of value at that point, whether it's we're getting it reflected, but you know, we will we would absolutely pursue a separation if we believe that it would drive significant value to our shareholders, and we think you know, we'll be in position where we're at our targets at some point in the first half of 2026. So that's what you should be thinking about in terms of time frame.
Barry Jonas: Great. Thanks for that.
Operator: One moment for our next question. Our next question comes from John DeCree with CBRE. Your line is open.
John DeCree: Hi. Good afternoon, everyone. Wanted to ask a question about some asset-light opportunities that have come up I think, OLG and Windsor and then some extension of the Caesars Republic brand. And when we think about regionals, kinda flat. To up. Seems like some of these things might move the needle a little bit. So you know, how much more opportunity is there for you to kind of continue to utilize the brand in that way?
Tom Reeg: Yeah. So, John, we've got a couple of Indian management contracts that have raised their financing one in Oklahoma one in Sonoma County, California, that we would expect you know, when they're up and operating should be something on the order of $20 million of annual management fees. Between the two of them. To Caesars as you've noted, we bring in Windsor first end of first quarter of 2026, so that will remove EBITDA from the managed line but it's replaced by regional EBITDA that is well in excess of what it was bringing in managed.
So we have between all three of those, you're almost $50 million of incremental EBITDA that's flowing through asset-light deals for us, and we continue to pursue more both in the US and in some of the larger international markets as well. That's a bit of elephant hunting, you know, where maybe something comes together more likely it doesn't, but we're active out there with our brand and our management expertise.
John DeCree: And Tom, just to clarify that, incremental EBITDA become an asset-like capacity, is high free cash flow conversion. Right? There wouldn't be any you know, expected kind of That's straight free cash flow.
Tom Reeg: Got it. Thanks. If I could ask Juan about group room mix, big picture, as we kinda look at you know, the stability that 4Q, 1Q, and 2Q present and all safing us either specific event. So what's the right group room mix? It's probably something you and Anthony and team calibrate all the time. But is there an opportunity or you're actively looking to kind of hunt for some more of those large events that can kind of really provide meaningful growth.
I think Allstate is set once every three years, so it's kinda wondering if there's a focus on getting more of those or if the group room mix is kind of you know, where it needs to be.
Tom Reeg: Yeah. We love to increase our group room mix. We have increased it since the merger. We, you know, we should be you well into the high teens this year and next, but we are constantly looking for groups like State Farm that we can bring to Las Vegas and our group sales team led by Mike Mazzari does a fantastic job has done a fantastic job and continues in terms of building that business. But, you know, we're not we're not stopping in the high teens. We'd like to take that to twenty and beyond.
John DeCree: Got it. Thanks, Tom.
Operator: Moment for our next question. Next question comes from Shaun Kelley with Bank of America. Your line is open.
Shaun Kelley: Hi. Good afternoon, everyone. Thank you for taking my questions. Tom or whoever is the right person, just one in Las Vegas and then one sort of big picture strategy question. But to start with Las Vegas, if we just kinda do the balance, it seems like there are a lot of shifts that are also impacting Q4 group. You know, you've got the sort of the timing of the Jewish holidays, which I think has an impact here as well. Kinda when you line up all the pieces and you think about your own, you know, company level comps, you know, can Q4, you know, be up year over year?
And is that sort of the baseline expect that we should have?
Tom Reeg: Q4 can be up year over year. For Caesars.
Shaun Kelley: Perfect. Thank you. And then big picture, just zooming out, you know, the OpEx investment or sort of what you're doing on the promotional side is interesting. Kind of the test and learn piece. You know, what we see across the industry is a lot more on the capital front, you know, a lot of land-based conversions, you know, some capital renovations, that sort of thing. So kind of as you start to turn the page or think about 2026 and beyond, are there things in the portfolio you start to look at, you know, from a capital side and say, hey. Maybe we ramp a little bit here.
We look at given some of the ROIs that have been delivered out there. Kinda how do you think about that maybe with some of the cash freed up by the big beautiful bell? Thanks.
Tom Reeg: Yeah. Shaun, if you think about our regional portfolio and the large drivers of EBITDA in there, the bulk of them have seen significant capital. In the last certainly, since the merger. If you think about Atlantic City and New Orleans and Danville, Virginia, Lake Charles, Indianapolis, now Tahoe, Reno, those are our biggest cash flow producers in regional. All of those that I've named have had you know, nine-figure investments in them in the last three plus years. So there's not a there's not around the corner another big capital cycle for Caesars. It's really harvesting what we've invested in since the merger. There are pieces that we will add.
You should expect that we will add hotel product to assets that don't have hotels that know, could be our money, but more likely, it's a partnership with a third-party developer. We've got we have a small amount of potential boat to land-based conversions available to us that are high return investments, but you're you know, you're not talking about a burst of capital activity around the quarter.
Operator: One moment for our next question. Our next question comes from Chad Beynon with Macquarie. Your line is open.
Chad Beynon: Afternoon. Tom and Bret, you guys spent about $100 million of share repurchases in April and you mentioned that you'll continue to be opportunistic here. You just talk about you know, why you decided to not spend anymore in the quarter? Was that just you know, the trends that you were seeing in the business and you wanted to make sure you had a handle on it.
And then going forward, given that you spent $100 million in one month, if the stock remains depressed and now that you're past some of these CapEx needs, is that a potential number that you could hit again in certain months, or is there a bogey that we should think about from a quarterly basis? Thanks.
Tom Reeg: Yeah. I'd say this quarter, the focus was taking out the eight and eight, our highest coupon debt. That's why you didn't see share repurchase during the quarter. You know, I would tell you should expect a balance of share repurchase and debt repayment.
But, you know, given what we see happening in digital in terms of scaling and momentum and where the shares are trading and the fact that we're likely to generate something on the order of 50% of our market cap and free cash flow over the next two and a half years, I think our stock is looking particularly attractive and I'd like to own more of it ahead of digital being digital value being recognized, whether that's within Caesars current equity or its part of a separation transaction. So we like our stock. You should expect us to be a buyer.
Chad Beynon: Thanks, Tom. Eric, on the prediction markets, we've seen some digital companies at least at least peak about dipping their toe into that. Obviously, a lot of questions in terms of how the CFTC will categorize this, but any updated views on your end, how you see that?
Eric Hession: Yeah. I would say, at this point, no updated views. You know, we're actively watching the situation. Know, and we'll make sure that we're not caught flat-footed. On that. But yeah, the I think from change from the last quarter, there really hasn't been anything material. A lot more people objecting to it, but really nothing's real moved through the court system at this point.
Chad Beynon: Thank you. Appreciate it.
Operator: One moment for our next question. Next question comes from Jordan Bender with Citizens. Your line is open.
Jordan Bender: Hey, everyone. Good afternoon. Tom, you spoke to the earnings power and scale of the online business and out years curious if your eventual size and scale opens up any ambitions of expanding your footprint into international markets outside of North America?
Tom Reeg: We're always open to what will drive shareholder value. If we're looking at where do we spend our time and effort, there is not an international market that is anywhere close to the opportunity that's what is here domestically. So you know, while I wouldn't shut the door, I would I it would surprise me if we saw something internationally that looked anywhere close to the opportunity that we're prosecuting here.
Eric Hession: Yeah. If I just add, when you look through the list of projects that we have and we're planning starting to plan, you know, midpoint next year. The road map is really robust, and all of the projects that we have are great. The risk is relatively low in terms of the execution. And so we think that, you know, risk-reward basis for where we put our resources is really high on the domestic side still.
And you could see it, you know, this quarter when we grew 29% revenues, that's a great business and just don't see it at this point looking internationally because of the full road map and just the opportunities we see in front of us for the existing business.
Jordan Bender: Understood. And I want to follow-up in New Orleans. Believe the first $75 million of gaming revenue or so wasn't subject to any incremental tax. So how much of that upside might be left, and how does that tie into EBITDAR flat to up in totality for the whole year?
Tom Reeg: There is still opportunity there, and obviously, the EBITDA growth in New Orleans is a piece of the entire regional puzzle and will help drive us to growth this year and next. You know, New Orleans for us is we're tied to the city of New Orleans. So group business, group recovery, in the city is extremely important to our property there, and momentum has been built into the Super Bowl continues to build so we like the picture we see going forward in New Orleans.
Jordan Bender: Thank you very much.
Operator: One moment for our next question. Our next question comes from Daniel Guglielmo with Capital One Securities. Your line is open.
Daniel Guglielmo: Hi, everyone. Thank you for taking my question. Just one from me. Tom, last call, you had said that you're feeling better about the business this year. Versus any point last year. Do you still feel that way today? And is there something about the business this year that you don't think folks fully appreciate?
Tom Reeg: You know, I'd tell you this is the reason we put the company together is the diversification of the business and the way that business could complement complements each segment complements the other. And right now, I tell you as I've said, we expect a soft summer in Vegas, so I felt better about Vegas last year, but I feel great about Vegas after the third quarter given what's going on in the group calendar. I feel the same confidence we in regional that we've been talking about.
For both this year and next, and I you know, my confidence in digital every ninety days I talk on one of these calls, I'm more confident than I was ninety days ago. The momentum that we've got there is tremendous. And I think that's the you know, that's the piece that's underappreciated. In terms of the momentum there. The fact of how it's scaling and where it's headed and I don't think we're gonna have to wait much longer to be at the numbers that we laid out four years ago.
Daniel Guglielmo: Great. Thank you.
Operator: And I'm not showing any further questions at this time. I'd like to turn the call back over to Tom Reeg for any closing remarks.
Tom Reeg: Thanks, everybody. We will see you next time.
Operator: Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.