czr-20240930
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended September 30, 2024
OR
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from to
Commission File No. 001-36629
CAESARS ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
|
Delaware
|
46-3657681
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
100 West Liberty Street, 12th Floor, Reno, Nevada89501
(Address and zip code of principal executive offices)
(775) 328-0100
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock, $0.00001 par value
|
CZR
|
NASDAQ Stock Market
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer
|
☒
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
☐
|
Emerging growth company
|
☐
|
Ifan emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐No ☒
Thenumber of shares of the Registrant's Common Stock, $0.00001 par value per share, outstanding as of October 24, 2024 was 212,480,370.
CAESARS ENTERTAINMENT, INC.
TABLE OF CONTENTS
|
Page
|
PART I. FINANCIAL INFORMATION
|
2
|
Item 1.
|
Unaudited Financial Statements
|
2
|
|
Consolidated Condensed Balance Sheets
|
2
|
|
Consolidated Condensed Statements of Operations
|
3
|
|
Consolidated Condensed Statements of Comprehensive Income (Loss)
|
4
|
|
Consolidated Condensed Statements of Stockholders' Equity
|
5
|
|
Consolidated Condensed Statements of Cash Flows
|
7
|
Notes to Consolidated Condensed Financial Statements
|
9
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
29
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
44
|
Item 4.
|
Controls and Procedures
|
45
|
|
PART II. OTHER INFORMATION
|
46
|
Item 1.
|
Legal Proceedings
|
46
|
Item 1A.
|
Risk Factors
|
48
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
48
|
Item 3.
|
Defaults Upon Senior Securities
|
48
|
Item 4.
|
Mine Safety Disclosures
|
48
|
Item 5.
|
Other Information
|
48
|
Item 6.
|
Exhibits
|
49
|
|
Signatures
|
50
|
PART I - FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
CAESARS ENTERTAINMENT, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
|
(In millions)
|
September 30, 2024
|
December 31, 2023
|
ASSETS
|
CURRENT ASSETS:
|
Cash and cash equivalents
|
$
|
802
|
$
|
1,005
|
Restricted cash
|
101
|
122
|
Accounts receivable, net
|
469
|
608
|
Inventories
|
43
|
46
|
Prepayments and other current assets
|
485
|
264
|
Total current assets
|
1,900
|
2,045
|
Investments in and advances to unconsolidated affiliates
|
131
|
157
|
Property and equipment, net
|
14,895
|
14,756
|
Goodwill
|
10,949
|
10,990
|
Intangible assets other than goodwill
|
4,211
|
4,523
|
Deferred tax asset
|
56
|
47
|
Other long-term assets, net
|
827
|
848
|
Total assets
|
$
|
32,969
|
$
|
33,366
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
CURRENT LIABILITIES:
|
Accounts payable
|
$
|
268
|
$
|
408
|
Accrued interest
|
195
|
369
|
Accrued other liabilities
|
1,702
|
1,848
|
Current portion of long-term debt
|
102
|
65
|
Total current liabilities
|
2,267
|
2,690
|
Long-term financing obligations
|
12,864
|
12,759
|
Long-term debt
|
12,434
|
12,224
|
Deferred tax liability
|
141
|
102
|
Other long-term liabilities
|
879
|
871
|
Total liabilities
|
28,585
|
28,646
|
Commitments and contingencies (Note 5)
|
|
|
STOCKHOLDERS' EQUITY:
|
Caesars stockholders' equity
|
4,178
|
4,552
|
Noncontrolling interests
|
206
|
168
|
Total stockholders' equity
|
4,384
|
4,720
|
Total liabilities and stockholders' equity
|
$
|
32,969
|
$
|
33,366
|
The accompanying notes are an integral part of these consolidated condensed financial statements.
CAESARS ENTERTAINMENT, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
(In millions, except per share data)
|
2024
|
2023
|
2024
|
2023
|
NET REVENUES:
|
Casino
|
$
|
1,599
|
$
|
1,620
|
$
|
4,691
|
$
|
4,789
|
Food and beverage
|
438
|
443
|
1,295
|
1,305
|
Hotel
|
515
|
553
|
1,522
|
1,581
|
Other
|
322
|
378
|
938
|
1,028
|
Net revenues
|
2,874
|
2,994
|
8,446
|
8,703
|
OPERATING EXPENSES:
|
Casino
|
828
|
831
|
2,497
|
2,476
|
Food and beverage
|
271
|
266
|
800
|
775
|
Hotel
|
152
|
146
|
428
|
426
|
Other
|
104
|
118
|
298
|
336
|
General and administrative
|
478
|
528
|
1,443
|
1,536
|
Corporate
|
76
|
74
|
234
|
239
|
Impairment charges
|
-
|
-
|
118
|
-
|
Depreciation and amortization
|
326
|
320
|
979
|
943
|
Transaction and other costs, net
|
(5)
|
(13)
|
14
|
36
|
Total operating expenses
|
2,230
|
2,270
|
6,811
|
6,767
|
Operating income
|
644
|
724
|
1,635
|
1,936
|
OTHER EXPENSE:
|
Interest expense, net
|
(596)
|
(581)
|
(1,780)
|
(1,761)
|
Loss on extinguishment of debt
|
-
|
(3)
|
(51)
|
(200)
|
Other income (loss)
|
4
|
(1)
|
29
|
5
|
Total other expense
|
(592)
|
(585)
|
(1,802)
|
(1,956)
|
Income (loss) before income taxes
|
52
|
139
|
(167)
|
(20)
|
Benefit (provision) for income taxes
|
(43)
|
(47)
|
(68)
|
904
|
Net income (loss)
|
9
|
92
|
(235)
|
884
|
Net income attributable to noncontrolling interests
|
(18)
|
(18)
|
(54)
|
(26)
|
Net income (loss) attributable to Caesars
|
$
|
(9)
|
$
|
74
|
$
|
(289)
|
$
|
858
|
|
Net income (loss) per share - basic and diluted:
|
Basic income (loss) per share
|
$
|
(0.04)
|
$
|
0.34
|
$
|
(1.34)
|
$
|
3.99
|
Diluted income (loss) per share
|
$
|
(0.04)
|
$
|
0.34
|
$
|
(1.34)
|
$
|
3.97
|
Weighted average basic shares outstanding
|
215
|
215
|
216
|
215
|
Weighted average diluted shares outstanding
|
215
|
216
|
216
|
216
|
The accompanying notes are an integral part of these consolidated condensed financial statements.
CAESARS ENTERTAINMENT, INC.
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
(In millions)
|
2024
|
2023
|
2024
|
2023
|
Net income (loss)
|
$
|
9
|
$
|
92
|
$
|
(235)
|
$
|
884
|
Foreign currency translation adjustments
|
-
|
-
|
-
|
1
|
Other
|
1
|
(1)
|
-
|
4
|
Other comprehensive income (loss), net of tax
|
1
|
(1)
|
-
|
5
|
Comprehensive income (loss)
|
10
|
91
|
(235)
|
889
|
Comprehensive income attributable to noncontrolling interests
|
(18)
|
(18)
|
(54)
|
(26)
|
Comprehensive income (loss) attributable to Caesars
|
$
|
(8)
|
$
|
73
|
$
|
(289)
|
$
|
863
|
The accompanying notes are an integral part of these consolidated condensed financial statements.
CAESARS ENTERTAINMENT, INC.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
|
Caesars Stockholders' Equity
|
Preferred Stock
|
Common Stock
|
Treasury Stock
|
(In millions)
|
Shares
|
Amount
|
Shares
|
Amount
|
Paid-in Capital
|
Accumulated Deficit
|
Accumulated Other Comprehensive Income (Loss)
|
Amount
|
Noncontrolling Interests
|
Total Stockholders' Equity
|
Balance, December 31, 2023
|
-
|
$
|
-
|
216
|
$
|
-
|
$
|
7,001
|
$
|
(2,523)
|
$
|
97
|
$
|
(23)
|
$
|
168
|
$
|
4,720
|
Stock-based compensation
|
-
|
-
|
-
|
-
|
25
|
-
|
-
|
-
|
-
|
25
|
Net income (loss)
|
-
|
-
|
-
|
-
|
-
|
(158)
|
-
|
-
|
16
|
(142)
|
Other comprehensive loss, net of tax
|
-
|
-
|
-
|
-
|
-
|
-
|
(1)
|
-
|
-
|
(1)
|
Shares withheld related to net share settlement of stock awards
|
-
|
-
|
-
|
-
|
(14)
|
-
|
-
|
-
|
-
|
(14)
|
Balance, March 31, 2024
|
-
|
$
|
-
|
216
|
$
|
-
|
$
|
7,012
|
$
|
(2,681)
|
$
|
96
|
$
|
(23)
|
$
|
184
|
$
|
4,588
|
Stock-based compensation
|
-
|
-
|
-
|
-
|
24
|
-
|
-
|
-
|
-
|
24
|
Net income (loss)
|
-
|
-
|
-
|
-
|
-
|
(122)
|
-
|
-
|
20
|
(102)
|
Shares withheld related to net share settlement of stock awards
|
-
|
-
|
-
|
-
|
(1)
|
-
|
-
|
-
|
-
|
(1)
|
Cancellation of shares issued
|
-
|
-
|
-
|
-
|
(14)
|
-
|
-
|
14
|
-
|
-
|
Transactions with noncontrolling interests
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(14)
|
(14)
|
Balance, June 30, 2024
|
-
|
$
|
-
|
216
|
$
|
-
|
$
|
7,021
|
$
|
(2,803)
|
$
|
96
|
$
|
(9)
|
$
|
190
|
$
|
4,495
|
Stock-based compensation
|
-
|
-
|
-
|
-
|
24
|
-
|
-
|
-
|
-
|
24
|
Net income (loss)
|
-
|
-
|
-
|
-
|
-
|
(9)
|
-
|
-
|
18
|
9
|
Other comprehensive income, net of tax
|
-
|
-
|
-
|
-
|
-
|
-
|
1
|
-
|
-
|
1
|
Shares withheld related to net share settlement of stock awards
|
-
|
-
|
-
|
-
|
(1)
|
-
|
-
|
-
|
-
|
(1)
|
Repurchase of common stock
|
-
|
-
|
(4)
|
-
|
(151)
|
-
|
-
|
9
|
-
|
(142)
|
Transactions with noncontrolling interests
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(2)
|
(2)
|
Balance, September 30, 2024
|
-
|
$
|
-
|
212
|
$
|
-
|
$
|
6,893
|
$
|
(2,812)
|
$
|
97
|
$
|
-
|
$
|
206
|
$
|
4,384
|
|
|
Caesars Stockholders' Equity
|
Preferred Stock
|
Common Stock
|
Treasury Stock
|
(In millions)
|
Shares
|
Amount
|
Shares
|
Amount
|
Paid-in Capital
|
Accumulated Deficit
|
Accumulated Other Comprehensive Income (Loss)
|
Amount
|
Noncontrolling Interests
|
Total Stockholders' Equity
|
Balance, December 31, 2022
|
-
|
$
|
-
|
215
|
$
|
-
|
$
|
6,953
|
$
|
(3,309)
|
$
|
92
|
$
|
(23)
|
$
|
38
|
$
|
3,751
|
Stock-based compensation
|
-
|
-
|
-
|
-
|
27
|
-
|
-
|
-
|
-
|
27
|
Net loss
|
-
|
-
|
-
|
-
|
-
|
(136)
|
-
|
-
|
-
|
(136)
|
Other comprehensive income, net of tax
|
-
|
-
|
-
|
-
|
-
|
-
|
6
|
-
|
-
|
6
|
Shares withheld related to net share settlement of stock awards
|
-
|
-
|
-
|
-
|
(13)
|
-
|
-
|
-
|
-
|
(13)
|
Balance, March 31, 2023
|
-
|
$
|
-
|
215
|
$
|
-
|
$
|
6,967
|
$
|
(3,445)
|
$
|
98
|
$
|
(23)
|
$
|
38
|
$
|
3,635
|
Stock-based compensation
|
-
|
-
|
-
|
-
|
29
|
-
|
-
|
-
|
-
|
29
|
Net income
|
-
|
-
|
-
|
-
|
-
|
920
|
-
|
-
|
8
|
928
|
Shares withheld related to net share settlement of stock awards
|
-
|
-
|
-
|
-
|
(1)
|
-
|
-
|
-
|
-
|
(1)
|
Transactions with noncontrolling interests
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
76
|
76
|
Balance, June 30, 2023
|
-
|
$
|
-
|
215
|
$
|
-
|
$
|
6,995
|
$
|
(2,525)
|
$
|
98
|
$
|
(23)
|
$
|
122
|
$
|
4,667
|
Stock-based compensation
|
-
|
-
|
1
|
-
|
26
|
-
|
-
|
-
|
-
|
26
|
Net income
|
-
|
-
|
-
|
-
|
-
|
74
|
-
|
-
|
18
|
92
|
Other comprehensive loss, net of tax
|
-
|
-
|
-
|
-
|
-
|
-
|
(1)
|
-
|
-
|
(1)
|
Shares withheld related to net share settlement of stock awards
|
-
|
-
|
-
|
-
|
(11)
|
-
|
-
|
-
|
-
|
(11)
|
Transactions with noncontrolling interests
|
-
|
-
|
-
|
-
|
(29)
|
-
|
-
|
-
|
(2)
|
(31)
|
Balance, September 30, 2023
|
-
|
$
|
-
|
216
|
$
|
-
|
$
|
6,981
|
$
|
(2,451)
|
$
|
97
|
$
|
(23)
|
$
|
138
|
$
|
4,742
|
The accompanying notes are an integral part of these consolidated condensed financial statements.
CAESARS ENTERTAINMENT, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
Nine Months Ended September 30,
|
(In millions)
|
2024
|
2023
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
Net income (loss)
|
$
|
(235)
|
$
|
884
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
Depreciation and amortization
|
979
|
943
|
Amortization of deferred financing costs and discounts
|
134
|
155
|
Provision for doubtful accounts
|
28
|
29
|
Loss on extinguishment of debt
|
51
|
200
|
Non-cash lease amortization
|
15
|
45
|
Gain on investments
|
(8)
|
(2)
|
Stock compensation expense
|
73
|
82
|
Loss on sale and disposal of property and equipment
|
9
|
12
|
Impairment charges
|
118
|
-
|
Deferred income taxes
|
68
|
(904)
|
Other non-cash adjustments to net income (loss)
|
(35)
|
22
|
Change in operating assets and liabilities:
|
Accounts receivable
|
109
|
(17)
|
Prepaid expenses and other assets
|
(35)
|
11
|
Income taxes receivable and payable, net
|
(37)
|
(24)
|
Accounts payable, accrued expenses and other liabilities
|
(468)
|
(135)
|
Net cash provided by operating activities
|
766
|
1,301
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
Purchase of property and equipment
|
(1,017)
|
(895)
|
Acquisition of gaming rights and developed technology
|
(15)
|
(30)
|
Proceeds from sale of property and equipment
|
-
|
1
|
Proceeds from the sale of investments
|
14
|
3
|
Distribution from unconsolidated affiliate
|
39
|
-
|
Other
|
-
|
40
|
Net cash used in investing activities
|
(979)
|
(881)
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
Proceeds from long-term debt and revolving credit facilities
|
6,090
|
5,300
|
Repayments of long-term debt and revolving credit facilities
|
(5,831)
|
(5,930)
|
Repurchase of common stock
|
(141)
|
-
|
Financing obligation payments
|
(6)
|
(7)
|
Debt issuance and extinguishment costs
|
(84)
|
(79)
|
Payments to acquire ownership interest in subsidiary
|
-
|
(66)
|
Contributions from noncontrolling interest owners
|
-
|
100
|
Distributions to noncontrolling interest owners
|
(16)
|
(1)
|
Taxes paid related to net share settlement of equity awards
|
(16)
|
(25)
|
Net cash used in financing activities
|
(4)
|
(708)
|
|
Decrease in cash, cash equivalents and restricted cash
|
(217)
|
(288)
|
Cash, cash equivalents and restricted cash, beginning of period
|
1,143
|
1,303
|
Cash, cash equivalents and restricted cash, end of period
|
$
|
926
|
$
|
1,015
|
|
|
Nine Months Ended September 30,
|
(In millions)
|
2024
|
2023
|
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO AMOUNTS REPORTED WITHIN THE CONSOLIDATED CONDENSED BALANCE SHEETS:
|
Cash and cash equivalents
|
$
|
802
|
$
|
841
|
Restricted cash
|
101
|
130
|
Restricted and escrow cash included in other long-term assets, net
|
23
|
44
|
Total cash, cash equivalents and restricted cash
|
$
|
926
|
$
|
1,015
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
Cash interest paid for debt
|
$
|
879
|
$
|
749
|
Cash interest paid for rent related to financing obligations
|
990
|
959
|
Income taxes paid, net
|
37
|
23
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
Payables for capital expenditures
|
180
|
193
|
Acquisition of intangible assets
|
32
|
-
|
The accompanying notes are an integral part of these consolidated condensed financial statements.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying consolidated condensed financial statements include the accounts of Caesars Entertainment, Inc., a Delaware corporation, and its consolidated subsidiaries which may be referred to as the "Company," "CEI," "Caesars," "we," "our," or "us" within these financial statements.
This Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Annual Report"). Capitalized terms used but not defined in this Form 10-Q have the same meanings as in the 2023 Annual Report.
We also refer to (i) our Consolidated Condensed Financial Statements as our "Financial Statements," (ii) our Consolidated Condensed Balance Sheets as our "Balance Sheets," (iii) our Consolidated Condensed Statements of Operations and Consolidated Condensed Statements of Comprehensive Income (Loss) as our "Statements of Operations," and (iv) our Consolidated Condensed Statements of Cash Flows as our "Statements of Cash Flows."
Note 1. Organization and Description of Business
Organization
The Company is a geographically diversified gaming and hospitality company that was founded in 1973 by the Carano family with the opening of the Eldorado Hotel Casino in Reno, Nevada. Beginning in 2005, the Company grew through a series of acquisitions, including the acquisition of MTR Gaming Group, Inc. in 2014, Isle of Capri Casinos, Inc. in 2017, Tropicana Entertainment, Inc. in 2018, Caesars Entertainment Corporation in 2020 and William Hill PLC in 2021. The Company's ticker symbol on the NASDAQ Stock Market is "CZR."
Description of Business
The Company owns, leases, brands or manages an aggregate of 53 domestic properties in 18 states with approximately 50,900 slot machines, video lottery terminals and e-tables, approximately 2,700 table games and approximately 44,900 hotel rooms as of September 30, 2024. In addition, the Company has other properties in North America that are authorized to use the brands and marks of Caesars Entertainment, Inc., as well as other non-gaming properties. The Company's primary source of revenue is generated by its gaming operations, retail and online sports betting and online gaming. Additionally, the Company utilizes its hotels, restaurants, bars, entertainment, racing, retail shops and other services to attract customers to its properties.
The Company's operations for retail and online sports betting, iGaming, horse racing and online poker are included under the Caesars Digital segment. The Company operates retail and online sports wagering in 32 jurisdictions in North America, 26 of which offer online sports betting, and operates iGaming in five jurisdictions in North America as of September 30, 2024. The Company operates the Caesars Sportsbook app, the Caesars Racebook app, the Caesars Palace Online Casino app and the new Horseshoe Online Casino app which initially launched in October 2024 in Michigan, with plans to expand into other jurisdictions where Caesars Digital iGaming platforms are live. The Company also expects to continue to grow its operations in the Caesars Digital segment as new jurisdictions legalize retail and online sports betting and iGaming.
Note 2. Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The accompanying unaudited Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited Financial Statements contain all adjustments, all of which are normal and recurring, considered necessary for a fair presentation. The results of operations for these interim periods are not necessarily indicative of the operating results for other quarters, for the full year or any future period.
The presentation of financial information herein for the periods after our completed divestiture of Rio All-Suite Hotel & Casino at the end of the third quarter of 2023 is not fully comparable to the periods prior to such divestiture.
Consolidation of Subsidiaries and Variable Interest Entities
Our Financial Statements include the accounts of Caesars Entertainment, Inc. and its subsidiaries after elimination of all intercompany accounts and transactions.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
We consolidate all subsidiaries in which we have a controlling financial interest and variable interest entities ("VIEs") for which we or one of our consolidated subsidiaries is the primary beneficiary. Control generally equates to ownership percentage, whereby (i) affiliates that are more than 50% owned are consolidated; (ii) investments in affiliates of 50% or less but greater than 20% are generally accounted for using the equity method where we have determined that we have significant influence over the entities; and (iii) investments in affiliates of 20% or less are generally accounted for as investments in equity securities.
We consider ourselves the primary beneficiary of a VIE when we have both the power to direct the activities that most significantly affect the results of the VIE and the right to receive benefits or the obligation to absorb losses of the entity that could be potentially significant to the VIE. We review investments for VIE consideration if a reconsideration event occurs to determine if the investment qualifies, or continues to qualify, as a VIE. If we determine an investment qualifies, or no longer qualifies, as a VIE, there may be a material effect to our Financial Statements.
Fair Value Measurements
The Company measures certain of its financial assets and liabilities at fair value, on a recurring basis, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Levels of the hierarchy prioritize the inputs used to measure fair value and include:
•Level 1: Observable inputs such as quoted prices in active markets.
•Level 2: Inputs other than quoted prices in active markets that are either directly or indirectly observable.
•Level 3: Unobservable inputs that reflect the Company's own assumptions, as there is little, if any, related market activity.
Cash and Cash Equivalents
Cash equivalents include investments in money market funds that can be redeemed immediately at the current net asset value per share. A money market fund is a mutual fund whose investments are primarily in short-term debt securities designed to maximize current income with liquidity and capital preservation, usually maintaining per share net asset value at a constant amount, such as one dollar. The carrying amounts approximate the fair value because of the short maturity of those instruments (Level 1). Cash and cash equivalents also include cash maintained for gaming operations.
Restricted Cash
Restricted cash includes cash or cash equivalents held in certificates of deposit accounts or money market type funds, that are not subject to remeasurement on a recurring basis, which are restricted under certain operating agreements or restricted for future capital expenditures in the normal course of business.
Marketable Securities
Marketable securities consist primarily of trading securities held by the Company's deferred compensation plans. The estimated fair values of the Company's marketable securities are determined on an individual asset basis based upon quoted prices of identical assets available in active markets (Level 1) and represent the amounts the Company would expect to receive if the Company sold these marketable securities. As of both September 30, 2024 and December 31, 2023, the Company held $2 million in Level 1 securities.
Derivative Instruments
The Company may enter into derivative instruments to hedge the risk of fluctuations in interest rates, foreign exchange rates or pricing for other commodities. These agreements are designated as cash flow hedges. As of September 30, 2024 and December 31, 2023, the Company did not hold any cash flow hedges or any derivative financial instruments for trading purposes.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Assets Held for Sale
The Company periodically divests assets that it does not consider core to its business to raise capital or, in some cases, to comply with conditions, terms, obligations or restrictions imposed by antitrust, gaming and other regulatory entities. The carrying value of assets that meet the criteria for assets held for sale are compared to the expected selling price and any expected losses are recorded immediately. Gains or losses associated with the disposal of assets held for sale are recorded within other operating costs, unless the assets represent a discontinued operation.
On August 1, 2024, the Company entered into a definitive agreement to sell the World Series of Poker ("WSOP") assets to NSUS Group Inc ("NSUS"). Under the terms of the agreement, NSUS will pay $250 million in cash at closing and enter into a term loan with the Company for an additional $250 million for a total purchase price of $500 million. The term loan will bear interest at a market rate plus an applicable margin, which resets quarterly. Interest and principal are due quarterly through its maturity date, the fifth anniversary of the closing date. WSOP met the requirements for presentation as assets held for sale as of September 30, 2024. Trademarks totaling $180 million are held for sale and classified within Prepayments and other current assets on the Balance Sheets as of September 30, 2024. On October 29, 2024 we closed the sale to NSUS.
Concurrent with signing the sale agreement, the Company entered into licensing agreements with NSUS that allows the Company to continue its current operations within the United States, including the WSOP's live tournament series in Las Vegas for the next 20 years.
Advertising
Advertising costs are expensed in the period the advertising first occurs. Advertising costs for the three months ended September 30, 2024 and 2023 were $52 million and $65 million, respectively, and for the nine months ended September 30, 2024 and 2023 totaled $164 million and $185 million, respectively, and are included within operating expenses. Advertising costs related to the Caesars Digital segment are primarily recorded in Casino expense.
Interest Expense, Net
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
(In millions)
|
2024
|
2023
|
2024
|
2023
|
Interest expense
|
$
|
616
|
$
|
597
|
$
|
1,837
|
$
|
1,798
|
Capitalized interest
|
(18)
|
(13)
|
(51)
|
(27)
|
Interest income
|
(2)
|
(3)
|
(6)
|
(10)
|
Total interest expense, net
|
$
|
596
|
$
|
581
|
$
|
1,780
|
$
|
1,761
|
Recently Issued Accounting Pronouncements
Pronouncements to Be Implemented in Future Periods
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, "Income Taxes: Improvements to Income Tax Disclosures," which requires disaggregated information about an entity's effective tax rate reconciliation as well as information on income taxes paid. These updates apply to all entities subject to income taxes and will be effective for annual periods beginning after December 15, 2024. Early adoption is permitted. Updates will be applied on a prospective basis with the option to apply the standard retrospectively. We do not expect the amendments in this update to have a material impact on our Financial Statements.
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting: Improvements to Reportable Segment Disclosures," which requires public entities to disclose information about their reportable segments' significant expenses on an interim and annual basis. This guidance is effective for years beginning after December 15, 2023, and interim periods within years beginning after December 15, 2024. Early adoption is permitted. Amendments in this update should be applied retrospectively to all prior periods presented in the financial statements. We do not expect the amendments in this update to have a material impact on our Financial Statements and expect any impact would be limited to additional disclosures in the notes to our Financial Statements.
In October 2023, the FASB issued ASU 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative,"to clarify or improve disclosure and presentation requirements on a variety of topics and align the requirements in the FASB accounting standard codification with the Securities and Exchange Commission regulations. This guidance is effective for the Company no later than June 30, 2027. We do not expect the amendments in this update to have a material impact on our Financial Statements.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 3. Property and Equipment
|
(In millions)
|
September 30, 2024
|
December 31, 2023
|
Land
|
$
|
2,087
|
$
|
2,088
|
Buildings, riverboats, and leasehold and land improvements
|
13,928
|
13,543
|
Furniture, fixtures, and equipment
|
2,731
|
2,409
|
Construction in progress
|
1,031
|
762
|
Total property and equipment
|
19,777
|
18,802
|
Less: accumulated depreciation
|
(4,882)
|
(4,046)
|
Total property and equipment, net
|
$
|
14,895
|
$
|
14,756
|
A portion of our property and equipment is subject to various operating leases for which we are the lessor. Leased property includes our hotel rooms, convention space and retail space through various short-term and long-term operating leases.
|
Depreciation Expense
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
(In millions)
|
2024
|
2023
|
2024
|
2023
|
Depreciation expense
|
$
|
293
|
$
|
284
|
$
|
877
|
$
|
835
|
Depreciation is calculated using the straight-line method over the shorter of the estimated useful life of the asset or the related lease.
Note 4. Goodwill and Intangible Assets, net
The Company performs its annual impairment tests as of October 1 of each fiscal year, or more frequently whenever indicators of impairment exist. When indicators are noted, the Company then compares estimated future discounted cash flows to the carrying value of the asset. If the discounted cash flows exceed the carrying value, no impairment is recorded. Impairment charges are presented on the statements of operations.
Based on the negative performance indicators at certain regional properties identified during the second quarter of 2024, the Company performed an interim impairment test as of June 30, 2024 and recognized impairment charges in our Regional segment. These impairments were due to a decrease in projected future cash flows at certain regional properties primarily due to localized competition within certain markets. The Company identified three reporting units with estimated fair values associated with trademarks, gaming rights and goodwill below their respective carrying values and recorded impairments.
During the nine months ended September 30, 2024, the Company recognized impairment charges in our Regional segment related to trademarks, gaming rights and goodwill totaling $118 million. During the nine months ended September 30, 2023, the Company did not recognize an impairment.
|
Changes in Carrying Value of Goodwill and Other Intangible Assets
|
Non-Amortizing Intangible Assets
|
(In millions)
|
Amortizing Intangible Assets
|
Goodwill
|
Other
|
Balances as of December 31, 2023
|
$
|
946
|
$
|
10,990
|
$
|
3,577
|
Impairment
|
-
|
(41)
|
(77)
|
Amortization expense
|
(102)
|
-
|
-
|
Classified as assets held for sale
|
-
|
-
|
(180)
|
Acquisition of developed technology
|
21
|
-
|
-
|
Acquisition of gaming rights and customer relationships
|
26
|
-
|
-
|
Balances as of September 30, 2024
|
$
|
891
|
$
|
10,949
|
$
|
3,320
|
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
|
Gross Carrying Value and Accumulated Amortization of Intangible Assets Other Than Goodwill
|
September 30, 2024
|
December 31, 2023
|
(Dollars in millions)
|
Useful Life
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
Gross Carrying Amount
|
Accumulated Amortization
|
Net Carrying Amount
|
Amortizing intangible assets
|
Customer relationships
|
3 - 7 years
|
$
|
593
|
$
|
(416)
|
$
|
177
|
$
|
587
|
$
|
(360)
|
$
|
227
|
Gaming rights and other
|
10 - 34 years
|
262
|
(38)
|
224
|
242
|
(28)
|
214
|
Trademarks
|
15 years
|
313
|
(105)
|
208
|
313
|
(91)
|
222
|
Reacquired rights
|
24 years
|
250
|
(36)
|
214
|
250
|
(28)
|
222
|
Technology
|
3 - 6 years
|
131
|
(63)
|
68
|
110
|
(49)
|
61
|
$
|
1,549
|
$
|
(658)
|
891
|
$
|
1,502
|
$
|
(556)
|
946
|
|
Non-amortizing intangible assets other than Goodwill
|
Trademarks
|
1,814
|
1,998
|
Gaming rights
|
983
|
1,056
|
Caesars Rewards
|
523
|
523
|
3,320
|
3,577
|
Total amortizing and non-amortizing intangible assets other than Goodwill, net
|
$
|
4,211
|
$
|
4,523
|
Amortization expense with respect to intangible assets for the three months ended September 30, 2024 and 2023 totaled $33 million and $36 million, respectively, and for the nine months ended September 30, 2024 and 2023 totaled $102 million and $108 million, respectively, which is included in Depreciation and amortization in the Statements of Operations.
|
Estimated Five-Year Amortization
|
Remaining 2024
|
Years Ended December 31,
|
(In millions)
|
2025
|
2026
|
2027
|
2028
|
2029
|
Estimated annual amortization expense
|
$
|
33
|
$
|
133
|
$
|
133
|
$
|
86
|
$
|
45
|
$
|
11
|
Note 5. Litigation, Commitments and Contingencies
Litigation
General
We are party to various legal proceedings, which have arisen in the normal course of our business. Such proceedings can be costly, time consuming and unpredictable and, therefore, no assurance can be given that the final outcome of such proceedings will not materially impact our consolidated financial condition or results of operations. Estimated losses are accrued for these proceedings when the loss is probable and can be estimated. While we maintain insurance coverage that we believe is adequate to mitigate the risks of such proceedings, no assurance can be given that the amount or scope of existing insurance coverage will be sufficient to cover losses arising from such matters. The current liability for the estimated losses associated with these proceedings is not material to our consolidated financial condition and those estimated losses are not expected to have a material impact on our results of operations.
COVID-19 Insurance Claims Update
As previously disclosed, on March 19, 2021, the Company filed a lawsuit against its insurance carriers in state court in Clark County, Nevada, seeking to recover for losses incurred as a result of the COVID-19 public health emergency. Based on rulings from the highest courts in relevant jurisdictions wherein those courts rejected such claims and ruled in favor of the insurance carriers, the Company has decided to discontinue pursuing its business interruption claims. Potential recoveries on any remaining claims are not expected to be material.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Contractual Commitments
Capital Commitments
Caesars New Orleans
In April 2020, the Company and the State of Louisiana, by and through the Louisiana Gaming Control Board, entered into an Amended and Restated Casino Operating Contract. Additionally, the Company, New Orleans Building Corporation and the City entered into a Second Amended and Restated Lease Agreement. Based on these amendments related to Caesars New Orleans, formerly Harrah's New Orleans, the Company was required to make a capital investment of at least $325 million on or around Caesars New Orleans. The capital investment involves the rebranding of the property to Caesars New Orleans which includes a renovation and full interior and exterior redesign, updated casino floor, new culinary experiences and a new 340-room hotel tower. As of September 30, 2024, the Company has met the capital investment requirements, and the project is expected to be completed in the fourth quarter of 2024.
Sports Sponsorship/Partnership Obligations
The Company has agreements with certain professional sports leagues and teams, sporting event facilities and media companies for tickets, suites, advertising, marketing, promotional and sponsorship opportunities including communication with partner customer databases. Some of the agreements provide Caesars with exclusivity to access the aforementioned rights within the casino and/or sports betting category. As of September 30, 2024 and December 31, 2023, obligations related to these agreements were $455 million and $605 million, respectively, with contracts extending through 2040. These obligations include various third-party agreements which have been entered into by the Company for certain of our Las Vegas and Regional properties, or our Caesars Digital segment. The agreements include leasing of event suites that are generally considered short-term leases for which the Company does not record a right of use asset or lease liability. The Company recognizes expenses in the period services are received in accordance with the various agreements. In addition, assets or liabilities may be recorded related to the timing of payments as required by the respective agreement.
Self-Insurance
The Company is self-insured for workers compensation and other risk insurance, as well as health insurance and general liability. The Company's total estimated self-insurance liability as of September 30, 2024 and December 31, 2023, was $208 million and $200 million, respectively, which is included in Accrued other liabilities in our Balance Sheets.
The assumptions utilized by our actuaries are subject to significant uncertainty and if outcomes differ from these assumptions or events develop or progress in a negative manner, the Company could experience a material adverse effect and additional liabilities may be recorded in the future.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 6. Long-Term Debt
|
September 30, 2024
|
December 31, 2023
|
(Dollars in millions)
|
Final Maturity
|
Rates
|
Face Value
|
Book Value
|
Book Value
|
Secured Debt
|
CEI Revolving Credit Facility
|
2028
|
variable
|
$
|
200
|
$
|
200
|
$
|
-
|
CEI Term Loan A
|
2028
|
variable
|
684
|
683
|
710
|
CVA Revolving Credit Facility
|
2029
|
variable
|
-
|
-
|
-
|
CVA Delayed Draw Term Loan
|
2029
|
variable
|
210
|
203
|
-
|
CEI Term Loan B
|
2030
|
variable
|
2,363
|
2,320
|
2,432
|
CEI Term Loan B-1
|
2031
|
variable
|
2,886
|
2,849
|
-
|
CEI Senior Secured Notes due 2030
|
2030
|
7.00%
|
2,000
|
1,981
|
1,978
|
CEI Senior Secured Notes due 2032
|
2032
|
6.50%
|
1,500
|
1,483
|
-
|
CEI Senior Secured Notes due 2025
|
N/A
|
N/A
|
-
|
-
|
3,374
|
CRC Senior Secured Notes
|
N/A
|
N/A
|
-
|
-
|
983
|
Unsecured Debt
|
CEI Senior Notes due 2027
|
2027
|
8.125%
|
1,611
|
1,597
|
1,593
|
CEI Senior Notes due 2029
|
2029
|
4.625%
|
1,200
|
1,189
|
1,188
|
Special Improvement District Bonds
|
2037
|
4.30%
|
42
|
42
|
45
|
Long-term notes and other payables
|
2
|
2
|
2
|
Total debt
|
12,698
|
12,549
|
12,305
|
Current portion of long-term debt
|
(102)
|
(102)
|
(65)
|
Deferred finance charges associated with the CEI Revolving Credit Facility
|
-
|
(13)
|
(16)
|
Long-term debt
|
$
|
12,596
|
$
|
12,434
|
$
|
12,224
|
|
Unamortized discounts and deferred finance charges
|
$
|
162
|
$
|
150
|
Fair value
|
$
|
12,821
|
|
Annual Estimated Debt Service Requirements as of September 30, 2024
|
Remaining
|
Years Ended December 31,
|
(In millions)
|
2024
|
2025
|
2026
|
2027 (a)
|
2028
|
Thereafter
|
Total
|
Annual maturities of long-term debt
|
$
|
25
|
$
|
105
|
$
|
105
|
$
|
1,716
|
$
|
832
|
$
|
9,915
|
$
|
12,698
|
Estimated interest payments
|
150
|
820
|
790
|
780
|
610
|
1,110
|
4,260
|
Total debt service obligation (b)
|
$
|
175
|
$
|
925
|
$
|
895
|
$
|
2,496
|
$
|
1,442
|
$
|
11,025
|
$
|
16,958
|
____________________
(a)Maturities of approximately $1.1 billion in 2027 were repaid with the net proceeds of the $1.1 billion CEI Senior Notes due 2032. See "Subsequent issuance of new CEI Senior Notes due 2032" below.
(b)Debt principal payments are estimated amounts based on contractual maturity and scheduled repayment dates. Interest payments are estimated based on the forward-looking SOFR curve, where applicable. Actual payments may differ from these estimates.
Current Portion of Long-Term Debt
The current portion of long-term debt as of September 30, 2024 includes the principal payments on the term loans, other unsecured borrowings, and special improvement district bonds that are contractually due within 12 months. The Company may, from time to time, seek to repurchase or prepay its outstanding indebtedness. Any such purchases or repayments may be funded by existing cash balances or the incurrence of debt. The amount and timing of any repurchase will be based on business and market conditions, capital availability, compliance with debt covenants and other considerations.
Debt Discounts or Premiums and Deferred Finance Charges
Debt discounts or premiums and deferred finance charges incurred in connection with the issuance of debt are amortized to interest expense based on the related debt agreements primarily using the effective interest method. Unamortized discounts are written off and included in our gain or loss calculations to the extent we extinguish debt prior to the original maturity or scheduled payment dates.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Fair Value
The fair value of debt has been calculated primarily based on the borrowing rates available as of September 30, 2024 and based on market quotes of our publicly traded debt. We classify the fair value of debt within Level 1 and Level 2 in the fair value hierarchy.
Terms of Outstanding Debt
CEI Term Loans and CEI Revolving Credit Facility
CEI is party to a credit agreement, dated as of July 20, 2020, with JPMorgan Chase Bank, N.A., as administrative agent, U.S. Bank National Association, as collateral agent, and certain banks and other financial institutions and lenders party thereto (the "CEI Credit Agreement"), which, as amended, provides for the CEI Revolving Credit Facility in an aggregate principal amount of $2.25 billion (the "CEI Revolving Credit Facility") and will mature on January 31, 2028, subject to a springing maturity in the event certain other long-term debt of Caesars is not extended or repaid. The CEI Revolving Credit Facility includes a letter of credit sub-facility of $388 million and contains reserves of $40 million which are available only for certain permitted uses.
On October 5, 2022, Caesars entered into an amendment to the CEI Credit Agreement pursuant to which the Company incurred a senior secured term loan in an aggregate principal amount of $750 million (the "CEI Term Loan A") as a new term loan under the credit agreement and made certain other amendments to the CEI Credit Agreement. The CEI Term Loan A will mature on January 31, 2028, subject to a springing maturity in the event certain other long-term debt of Caesars is not extended or repaid. The CEI Term Loan A requires scheduled quarterly payments in amounts equal to 1.25% of the original aggregate principal amount of the CEI Term Loan A, with the balance payable at maturity.
Borrowings under the CEI Revolving Credit Facility and the CEI Term Loan A bear interest, paid at least quarterly, at a rate equal to, at the Company's option, either (a) a forward-looking term rate based on Secured Overnight Financing Rate ("Term SOFR") for the applicable interest period plus an adjustment of 0.10% per annum ("Adjusted Term SOFR"), subject to a floor of 0% or (b) a base rate (the "Base Rate") determined by reference to the highest of (i) the rate of interest per annum last quoted by The Wall Street Journal as the "Prime Rate" in the United States, (ii) the federal funds rate plus 0.50% per annum and (iii) the one-month Adjusted Term SOFR plus 1.00% per annum, in each case, plus an applicable margin. Such applicable margin is 2.25% per annum in the case of any Adjusted Term SOFR loan and 1.25% per annum in the case of any Base Rate loan, subject to three0.25% step-downs based on the Company's net total leverage ratio. In addition, on a quarterly basis, the Company is required to pay each lender under the CEI Revolving Credit Facility a commitment fee in respect of any unused commitments under the CEI Revolving Credit Facility in the amount of 0.35% per annum of the principal amount of the unused commitments of such lender, subject to three0.05% step-downs based on the Company's net total leverage ratio.
On February 6, 2023, Caesars entered into an Incremental Assumption Agreement No. 2 pursuant to which the Company incurred a new senior secured term loan facility in an aggregate principal amount of $2.5 billion (the "CEI Term Loan B") as a new term loan under the CEI Credit Agreement. The CEI Term Loan B requires scheduled quarterly principal payments in amounts equal to 0.25% of the original aggregate principal amount of the CEI Term Loan B, with the balance payable at maturity. Borrowings under the CEI Term Loan B, as amended in May 2024, bear interest, paid at least quarterly, at a rate equal to, at the Company's option, either (a) Term SOFR, subject to a floor of 0.50% or (b) the Base Rate, in each case, plus an applicable margin. Such applicable margin is 2.75% per annum in the case of any Term SOFR loan and 1.75% per annum in the case of any Base Rate loan. The CEI Term Loan B was issued at a price of 99.0% of the principal amount and will mature on February 6, 2030. On June 28, 2024, the Company made a voluntary repayment of $100 million in aggregate principal amount of the CEI Term Loan B with cash on hand.
On February 6, 2024, the Company entered into an Incremental Assumption Agreement No. 3 pursuant to which the Company incurred a new senior secured incremental term loan in an aggregate principal amount of $2.9 billion (the "CEI Term Loan B-1") under the CEI Credit Agreement. The CEI Term Loan B-1 requires quarterly principal payments in amounts equal to 0.25% of the original aggregate principal amount of the CEI Term Loan B-1, with the balance payable at maturity. Borrowings under the CEI Term Loan B-1 bear interest, paid at least quarterly,at a rate equal to, at the Company's option, either (a) Term SOFR, subject to a floor of 0.50% or (b) the Base Rate, in each case, plus an applicable margin. Such applicable margin is 2.75% per annum in the case of any Term SOFR loan and 1.75% per annum in the case of any Base Rate loan. The CEI Term Loan B-1 was issued at a price of 99.75% of the principal amount and will mature on February 6, 2031.
The net proceeds from the CEI Term Loan B-1 and the net proceeds from the issuance of the CEI Senior Secured Notes due 2032 (as described below), together with borrowings under the CEI Revolving Credit Facility, were used to tender, redeem, repurchase, defease, and/or satisfy and discharge any and all of the principal amounts, including accrued and unpaid interest, related expenses and fees of both the 5.75% Senior Secured Notes due 2025 (the "CRC Senior Secured Notes") and the 6.25%
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Senior Secured Notes due 2025 (the "CEI Senior Secured Notes due 2025"). As a result of these transactions, the Company recognized $48 million of loss on early extinguishment of debt.
As of September 30, 2024, the Company had $1.9 billion of available borrowing capacity under the CEI Revolving Credit Facility, after consideration of $84 million in outstanding letters of credit, $46 million committed for regulatory purposes, the outstanding amount, and the reserves described above.
Caesars Virginia Senior Revolving and Delayed Draw Term Loan Credit Facility due 2029
On April 26, 2024, Caesars Virginia, LLC entered into a credit agreement with Wells Fargo Bank, N.A., as administrative agent and collateral agent, and certain banks and other financial institutions and lenders party thereto, which provides for a senior secured first lien multi-draw term loan facility in an aggregate principal amount of $400 million (the "CVA Delayed Draw Term Loan") and a senior secured first lien revolving credit facility in an aggregate principal amount of $25 million (the "CVA Revolving Credit Facility"), both maturing on April 26, 2029.
The CVA Delayed Draw Term Loan requires quarterly principal payments commencing on the last day of the first full fiscal quarter following the opening date of the permanent facility of Caesars Virginia. The CVA Revolving Credit Facility and the CVA Delayed Draw Term Loan are subject to a variable rate of interest based onTerm SOFR plus an applicable margin. The CVA Revolving Credit Facility includes a $10 million letter of credit sub-facility. As of September 30, 2024, there was $210 million utilized under the CVA Delayed Draw Term Loanand $25 million of available borrowing capacity under the CVA Revolving Credit Facility.
CEI Senior Secured Notes due 2030
On February 6, 2023, the Company issued $2.0 billion in aggregate principal amount of 7.00% senior secured notes (the "CEI Senior Secured Notes due 2030") pursuant to an indenture by and among the Company, the subsidiary guarantors party thereto from time to time, U.S. Bank Trust Company, National Association, as trustee, and U.S. Bank National Association, as collateral agent. The CEI Senior Secured Notes due 2030 rank equally with all existing and future first-priority lien obligations of the Company and the subsidiary guarantors. The CEI Senior Secured Notes due 2030 will mature on February 15, 2030, with interest payable semi-annually on February 15 and August 15 of each year.
CEI Senior Secured Notes due 2032
On February 6, 2024, the Company issued $1.5 billion in aggregate principal amount of 6.50% senior secured notes due 2032 (the "CEI Senior Secured Notes due 2032") pursuant to an indenture by and among the Company, the subsidiary guarantors party thereto, U.S. Bank Trust Company, National Association, as trustee, and U.S. Bank National Association, as collateral agent. The CEI Senior Secured Notes due 2032 rank equally with all existing and future first-priority lien obligations of the Company and the subsidiary guarantors. The CEI Senior Secured Notes due 2032 will mature on February 15, 2032, with interest payable semi-annually on February 15 and August 15 of each year, commencing August 15, 2024.
CEI Senior Secured Notes due 2025
On July 6, 2020, Colt Merger Sub, Inc. (the "Escrow Issuer") issued $3.4 billion in aggregate principal amount of the CEI Senior Secured Notes due 2025 pursuant to an indenture dated July 6, 2020, by and among the Escrow Issuer, U.S. Bank National Association, as trustee, and U.S. Bank National Association, as collateral agent. The CEI Senior Secured Notes due 2025 ranked equally with all existing and future first-priority lien obligations of the Company and the subsidiary guarantors. The CEI Senior Secured Notes due 2025 were scheduled to mature on July 1, 2025, with interest payable semi-annually on January 1 and July 1 of each year. On April 5, 2023, the Company purchased $1 million in principal amount of the CEI Senior Secured Notes due 2025. On February 6, 2024, the Company fully tendered, redeemed, repurchased, defeased, and/or satisfied and discharged any and all of the principal amounts, including accrued and unpaid interest, related expenses and fees.
CRC Senior Secured Notes due 2025
On July 6, 2020, the Escrow Issuer issued $1.0 billion in aggregate principal amount of the CRC Senior Secured Notes due 2025 pursuant to an indenture, dated July 6, 2020, by and among the Escrow Issuer, U.S. Bank National Association, as trustee and Credit Suisse AG, Cayman Islands Branch, as collateral agent. The CRC Senior Secured Notes ranked equally with all existing and future first priority lien obligations of Caesars Resort Collection ("CRC"), CRC Finco, Inc. and the subsidiary guarantors. The CRC Senior Secured Notes were scheduled to mature on July 1, 2025, with interest payable semi-annually on January 1 and July 1 of each year. On February 6, 2024, the Company fully tendered, redeemed, repurchased, defeased, and/or satisfied and discharged any and all of the principal amounts, including accrued and unpaid interest, related expenses and fees.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CEI Senior Notes due 2027
On July 6, 2020, the Escrow Issuer issued $1.8 billion in aggregate principal amount of 8.125% Senior Notes due 2027 pursuant to an indenture, dated July 6, 2020 (the "CEI Senior Notes due 2027"), by and between the Escrow Issuer and U.S. Bank National Association, as trustee. The CEI Senior Notes due 2027 rank equally with all existing and future senior unsecured indebtedness of the Company and the subsidiary guarantors. The CEI Senior Notes due 2027 will mature on July 1, 2027, with interest payable semi-annually on January 1 and July 1 of each year. On October 17, 2024, the Company repaid approximately $1.1 billionof the CEI Senior Notes due 2027 from the net proceeds from the issuance of the new CEI Senior Notes due 2032. See "Subsequent issuance of new CEI Senior Notes due 2032" below.
CEI Senior Notes due 2029
On September 24, 2021, the Company issued $1.2 billion in aggregate principal amount of 4.625% Senior Notes due 2029 (the "CEI Senior Notes due 2029") pursuant to an indenture dated as of September 24, 2021, between the Company and U.S. Bank National Association, as trustee. The CEI Senior Notes due 2029 rank equally with all existing and future senior unsecured indebtedness of the Company and the subsidiary guarantors. The CEI Senior Notes due 2029 will mature on October 15, 2029, with interest payable semi-annually on April 15 and October 15 of each year.
Subsequent issuance of new CEI Senior Notes due 2032
On October 17, 2024, the Company issued $1.1 billion in aggregate principal amount of 6.00% Senior Notes due 2032 (the "CEI Senior Notes due 2032"). The net proceeds from the issuance of the CEI Senior Notes due 2032 were used toredeem approximately $1.1 billion of the principal amount, including accrued and unpaid interest, related expenses and fees of the CEI Senior Notes due 2027. As a result of the early repayment, the Company estimates to incur approximately $31 million of loss on extinguishment of debt in the fourth quarter of 2024.
Debt Covenant Compliance
The CEI Revolving Credit Facility, the CEI Term Loan A, the CEI Term Loan B, the CEI Term Loan B-1 and the indentures governing the CEI Senior Secured Notes due 2030, the CEI Senior Secured Notes due 2032, the CEI Senior Notes due 2027, and the CEI Senior Notes due 2029 contain covenants which are standard and customary for these types of agreements. These include negative covenants, which, subject to certain exceptions and baskets, limit the Company's and its subsidiaries' ability to (among other items) incur additional indebtedness, make investments, make restricted payments, including dividends, grant liens, sell assets and make acquisitions.
The CEI Revolving Credit Facility and the CEI Term Loan A include a maximum net total leverage ratio financial covenant of 7.25:1 until December 31, 2024 and 6.50:1 from and after December 31, 2024. In addition, the CEI Revolving Credit Facility and the CEI Term Loan A include a minimum fixed charge coverage ratio financial covenant of 1.75:1 until December 31, 2024 and 2.0:1 from and after December 31, 2024. From and after the repayment of the CEI Term Loan A, the financial covenants applicable to the CEI Revolving Credit Facility will be tested solely to the extent that certain testing conditions are satisfied. Failure to comply with such covenants could result in an acceleration of the maturity of indebtedness outstanding under the relevant debt document.
As of September 30, 2024, the Company was in compliance with all of the applicable financial covenants described above.
The CVA Revolving Credit Facility and the CVA Delayed Draw Term Loan contain covenants which are standard and customary for this type of agreement, including a maximum net total leverage ratio financial covenant of 4:1 and a minimum fixed charge coverage ratio financial covenant of 1.05:1. Caesars Virginia LLC's compliance requirements commence after the first full quarter following the opening of the permanent facility of Caesars Virginia.
Guarantees
The CEI Revolving Credit Facility, the CEI Term Loan A, the CEI Term Loan B, the CEI Term Loan B-1, the CEI Senior Secured Notes due 2030 and the CEI Senior Secured Notes due 2032 are guaranteed on a senior secured basis by each existing and future material wholly-owned domestic subsidiary of the Company and are secured by substantially all of the existing and future property and assets of the Company and its subsidiary guarantors (subject to certain exceptions). The CEI Senior Notes due 2027 and the CEI Senior Notes due 2029 are guaranteed on a senior unsecured basis by such subsidiaries.
The CVA Revolving Credit Facility and the CVA Delayed Draw Term Loan are secured by substantially all material assets of Caesars Virginia, LLC and any newly formed wholly-owned subsidiary of Caesars Virginia, LLC. CEI does not provide a guarantee of these facilities.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 7. Revenue Recognition
The Company's Statements of Operations present net revenue disaggregated by type or nature of the good or service. A summary of net revenues disaggregated by type of revenue and reportable segment is presented below. Refer to Note 12for additional information on the Company's reportable segments.
|
Three Months Ended September 30, 2024
|
(In millions)
|
Las Vegas
|
Regional
|
Caesars Digital
|
Managed and Branded
|
Corporate and Other
|
Total
|
Casino
|
$
|
294
|
$
|
1,024
|
$
|
282
|
$
|
-
|
$
|
(1)
|
$
|
1,599
|
Food and beverage
|
283
|
155
|
-
|
-
|
-
|
438
|
Hotel
|
330
|
185
|
-
|
-
|
-
|
515
|
Other
|
155
|
82
|
21
|
68
|
(4)
|
322
|
Net revenues
|
$
|
1,062
|
$
|
1,446
|
$
|
303
|
$
|
68
|
$
|
(5)
|
$
|
2,874
|
|
Three Months Ended September 30, 2023
|
(In millions)
|
Las Vegas
|
Regional
|
Caesars Digital
|
Managed and Branded
|
Corporate and Other
|
Total
|
Casino
|
$
|
323
|
$
|
1,111
|
$
|
186
|
$
|
-
|
$
|
-
|
$
|
1,620
|
Food and beverage
|
285
|
158
|
-
|
-
|
-
|
443
|
Hotel
|
341
|
212
|
-
|
-
|
-
|
553
|
Other
|
171
|
84
|
29
|
98
|
(4)
|
378
|
Net revenues
|
$
|
1,120
|
$
|
1,565
|
$
|
215
|
$
|
98
|
$
|
(4)
|
$
|
2,994
|
|
Nine Months Ended September 30, 2024
|
(In millions)
|
Las Vegas
|
Regional
|
Caesars Digital
|
Managed and Branded
|
Corporate and Other
|
Total
|
Casino
|
$
|
829
|
$
|
3,072
|
$
|
794
|
$
|
-
|
$
|
(4)
|
$
|
4,691
|
Food and beverage
|
866
|
429
|
-
|
-
|
-
|
1,295
|
Hotel
|
1,049
|
473
|
-
|
-
|
-
|
1,522
|
Other
|
447
|
222
|
67
|
206
|
(4)
|
938
|
Net revenues
|
$
|
3,191
|
$
|
4,196
|
$
|
861
|
$
|
206
|
$
|
(8)
|
$
|
8,446
|
|
Nine Months Ended September 30, 2023
|
(In millions)
|
Las Vegas
|
Regional
|
Caesars Digital
|
Managed and Branded
|
Corporate and Other
|
Total
|
Casino
|
$
|
945
|
$
|
3,247
|
$
|
599
|
$
|
-
|
$
|
(2)
|
$
|
4,789
|
Food and beverage
|
868
|
437
|
-
|
-
|
-
|
1,305
|
Hotel
|
1,067
|
514
|
-
|
-
|
-
|
1,581
|
Other
|
499
|
217
|
70
|
239
|
3
|
1,028
|
Net revenues
|
$
|
3,379
|
$
|
4,415
|
$
|
669
|
$
|
239
|
$
|
1
|
$
|
8,703
|
|
Accounts Receivable, Net
|
(In millions)
|
September 30, 2024
|
December 31, 2023
|
Casino
|
$
|
191
|
$
|
274
|
Food and beverage and hotel
|
121
|
118
|
Other
|
157
|
216
|
Accounts receivable, net
|
$
|
469
|
$
|
608
|
Contract and Contract-Related Liabilities
The Company records contract or contract-related liabilities related to differences between the timing of cash receipts from the customer and the recognition of revenue. The Company generally has three types of liabilities related to contracts with customers: (1) outstanding chip liability, which represents the amounts owed in exchange for gaming chips held by customers, (2) Caesars Rewards player loyalty program obligations, which represent the deferred allocation of revenue relating to reward credits granted to Caesars Rewards members based on certain types of customer spend, including online and retail gaming,
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
hotel, dining, retail shopping, and player loyalty program incentives earned, and (3) customer deposits and other deferred revenue, which primarily represents funds deposited by customers related to gaming play and advance payments received for goods and services yet to be provided (such as advance ticket sales, deposits on rooms and convention space, unpaid wagers, iGaming deposits, or future sports bets). These liabilities are generally expected to be recognized as revenue within one year of being purchased, earned, or deposited and are recorded within Accrued other liabilities on the Company's Balance Sheets. Liabilities expected to be recognized as revenue beyond one year of being purchased, earned, or deposited are recorded within Other long-term liabilities on the Company's Balance Sheets.
The following table summarizes the activity related to contract and contract-related liabilities:
|
Outstanding Chip Liability
|
Caesars Rewards
|
Customer Deposits and Other Deferred Revenue
|
(In millions)
|
2024
|
2023
|
2024
|
2023
|
2024
|
2023
|
Balance at January 1
|
$
|
42
|
$
|
45
|
$
|
86
|
$
|
87
|
$
|
693
|
$
|
693
|
Balance at September 30
|
35
|
38
|
85
|
93
|
573
|
661
|
Increase / (decrease)
|
$
|
(7)
|
$
|
(7)
|
$
|
(1)
|
$
|
6
|
$
|
(120)
|
$
|
(32)
|
Customer deposits and other deferred revenues decreased in 2024 primarily due to a reduction in both advanced ticket sales and gaming deposits.
Lease Revenue
Lodging Arrangements
Lodging arrangements are considered short-term and generally consist of lease and nonlease components. The lease component is the predominant component of the arrangement and consists of the fees charged for lodging. The nonlease components primarily consist of resort fees and other miscellaneous items. As the timing and pattern of transfer of both the lease and nonlease components are over the course of the lease term, we have elected to combine the revenue generated from lease and nonlease components into a single lease component based on the predominant component in the arrangement. During the three months ended September 30, 2024 and 2023, we recognized lease revenue of approximately $515 million and $553 million, respectively, and during the nine months ended September 30, 2024 and 2023, we recognized approximately $1.5 billion and $1.6 billion, respectively, which is included in Hotel revenues in the Statements of Operations.
Conventions
Convention arrangements are considered short-term and generally consist of lease and nonlease components. The lease component is the predominant component of the arrangement and consists of fees charged for the use of meeting space. The nonlease components primarily consist of food and beverage and audio/visual services. Revenue from conventions is included in Food and beverage revenue in the Statements of Operations and during the three months ended September 30, 2024 and 2023, lease revenue related to conventions was approximately $14 million and $5 million, respectively, and during the nine months ended September 30, 2024 and 2023, lease revenue related to conventions was approximately $39 million and $31 million, respectively.
Real Estate Operating Leases
Real estate lease revenue is included in Other revenue in the Statements of Operations. During the three months ended September 30, 2024 and 2023, we recognized approximately $38 million and $42 million, respectively, and during the nine months ended September 30, 2024 and 2023, we recognized approximately $110 million and $122 million, respectively, of real estate lease revenue.
Real estate lease revenue includes $17 million and $14 million of variable rental income for the three months ended September 30, 2024 and 2023, respectively, and $45 million and $44 million for the nine months ended September 30, 2024 and 2023, respectively.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 8. Earnings per Share
The following table illustrates the reconciliation of the numerators and denominators of the basic and diluted net income (loss) per share computations for the three and nine months ended September 30, 2024 and 2023:
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
(In millions, except per share data)
|
2024
|
2023
|
2024
|
2023
|
Net income (loss) attributable to Caesars
|
$
|
(9)
|
$
|
74
|
$
|
(289)
|
$
|
858
|
Shares outstanding:
|
Weighted average shares outstanding - basic
|
215
|
215
|
216
|
215
|
Effect of dilutive securities:
|
Stock-based compensation awards
|
-
|
1
|
-
|
1
|
Weighted average shares outstanding - diluted
|
215
|
216
|
216
|
216
|
|
Net income (loss) per common share attributable to common stockholders - basic:
|
$
|
(0.04)
|
$
|
0.34
|
$
|
(1.34)
|
$
|
3.99
|
Net income (loss) per common share attributable to common stockholders - diluted:
|
$
|
(0.04)
|
$
|
0.34
|
$
|
(1.34)
|
$
|
3.97
|
For a period in which the Company generated a net loss attributable to Caesars, the Weighted average shares outstanding - basic was used in calculating Diluted loss per share because using diluted shares would have been anti-dilutive to loss per share.
|
Weighted-Average Number of Anti-Dilutive Shares Excluded from the Calculation of Earnings per Share
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
(In millions)
|
2024
|
2023
|
2024
|
2023
|
Stock-based compensation awards
|
4
|
1
|
4
|
1
|
Total anti-dilutive common stock
|
4
|
1
|
4
|
1
|
Note 9. Stock-Based Compensation and Stockholders' Equity
Stock-Based Awards
The Company maintains long-term incentive plans which allow for granting stock-based compensation awards to directors, employees, officers, and consultants or advisers who render services to the Company or its subsidiaries, based on Company Common Stock, including stock options, restricted stock, restricted stock units ("RSUs"), performance stock units ("PSUs"), market-based performance stock units ("MSUs"), stock appreciation rights, and other stock-based awards or dividend equivalents. Forfeitures are recognized in the period in which they occur.
The Board of Directors ("Board") adopted, and the Company's stockholders approved, the 2015 Equity Incentive Plan, as amended and restated in 2019 (the "2015 Plan"), which allows for shares to be granted as part of the Company's long-term incentive plan. On April 24, 2024, the Board approved an amendment to the 2015 Plan and the Company's stockholders subsequently approved the adoption of the amended and restated 2015 Plan on June 11, 2024. The amendment to the 2015 Plan allows for, among other things, an increase in the number of shares available for future grants to 8 million shares, plus the number of shares available for issuance under the 2015 Plan on the date the Company's stockholders approved the amendment.
Total stock-based compensation expense in the accompanying Statements of Operations totaled $24 million and $26 million during the three months ended September 30, 2024 and 2023, respectively, and $73 million and $82 million during the nine months ended September 30, 2024 and 2023, respectively. These amounts are included in Corporate expense in the Company's Statements of Operations.
2015 Equity Incentive Plan
During the nine months ended September 30, 2024, as part of the annual incentive program, the Company granted 2.0 million RSUs to eligible participants with an aggregate fair value of $87 million and a ratable vesting period of oneto three years. Each RSU represents the right to receive payment in respect of one share of the Company's Common Stock.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
During the nine months ended September 30, 2024, the Company also granted 160 thousand PSUs that are primarily scheduled to cliff vest after three years from date of grant. On the vesting date, recipients will receive between 0% and 200% of the target number of PSUs granted, in the form of Company Common Stock, based on the achievement of specified performance and service conditions and terms of the underlying award granted. The fair value of the PSUs is based on the market price of our common stock when a mutual understanding of the key terms and conditions of the awards between the Company and recipient is achieved. The awards are remeasured each period until such an understanding is reached. The aggregate value of PSUs granted during the year was $7 million as of September 30, 2024.
In addition, during the nine months ended September 30, 2024, the Company granted 430 thousand MSUs that are primarily scheduled to cliff vest after three years from date of grant. On the vesting date, recipients will receive between 0% and 200% of the target number of MSUs granted, in the form of Company Common Stock, based on the achievement of specified market and service conditions. The grant date fair value of the MSUs was determined using a Monte-Carlo simulation model. Key assumptions for the Monte-Carlo simulation model are the risk-free interest rate, expected volatility, expected dividends and correlation coefficient. The effect of market conditions is considered in determining the grant date fair value, which is not subsequently revised based on actual performance. The aggregate value of MSUs granted during the nine months ended September 30, 2024 was $25 million.
During the nine months ended September 30, 2024, 916 thousand, 99 thousand and 19 thousand of RSUs, PSUs and MSUs, respectively, vested under the 2015 Plan.
Outstanding at End of Period
|
September 30, 2024
|
December 31, 2023
|
Quantity
|
Wtd-Avg (a)
|
Quantity
|
Wtd-Avg (a)
|
Restricted stock units
|
2,811,274
|
$
|
49.17
|
1,922,419
|
$
|
60.11
|
Performance stock units
|
400,110
|
41.74
|
328,230
|
46.88
|
Market-based stock units
|
1,090,407
|
73.22
|
872,019
|
85.11
|
____________________
(a)Represents the weighted-average grant date fair value for RSUs, weighted-average grant date fair value for PSUs where the grant date has been achieved, the price of CEI common stock as of the balance sheet date for PSUs where a grant date has not been achieved, and the grant date fair value of the MSUs determined using the Monte-Carlo simulation model.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Accumulated Other Comprehensive Income (Loss)
The changes in Accumulated other comprehensive income (loss) by component, net of tax, for the periods through September 30, 2024 and 2023 are shown below.
|
(In millions)
|
Unrealized Net Gains on Derivative Instruments
|
Foreign Currency Translation Adjustments
|
Other
|
Total
|
Balances as of December 31, 2022
|
$
|
94
|
$
|
(1)
|
$
|
(1)
|
$
|
92
|
Other comprehensive income before reclassifications
|
-
|
2
|
4
|
6
|
Total other comprehensive income, net of tax
|
-
|
2
|
4
|
6
|
Balances as of March 31, 2023
|
$
|
94
|
$
|
1
|
$
|
3
|
$
|
98
|
Other comprehensive income (loss) before reclassifications
|
-
|
(1)
|
1
|
-
|
Total other comprehensive income (loss), net of tax
|
-
|
(1)
|
1
|
-
|
Balances as of June 30, 2023
|
$
|
94
|
$
|
-
|
$
|
4
|
$
|
98
|
Other comprehensive loss before reclassifications
|
-
|
-
|
(1)
|
(1)
|
Total other comprehensive loss, net of tax
|
-
|
-
|
(1)
|
(1)
|
Balances as of September 30, 2023
|
$
|
94
|
$
|
-
|
$
|
3
|
$
|
97
|
|
Balances as of December 31, 2023
|
$
|
94
|
$
|
-
|
$
|
3
|
$
|
97
|
Other comprehensive loss before reclassifications
|
-
|
-
|
(1)
|
(1)
|
Total other comprehensive loss, net of tax
|
-
|
-
|
(1)
|
(1)
|
Balances as of March 31, 2024
|
$
|
94
|
$
|
-
|
$
|
2
|
$
|
96
|
Other comprehensive income (loss) before reclassifications
|
-
|
-
|
-
|
-
|
Total other comprehensive income (loss), net of tax
|
-
|
-
|
-
|
-
|
Balances as of June 30, 2024
|
$
|
94
|
$
|
-
|
$
|
2
|
$
|
96
|
Other comprehensive income before reclassifications
|
-
|
-
|
1
|
1
|
Total other comprehensive income, net of tax
|
-
|
-
|
1
|
1
|
Balances as of September 30, 2024
|
$
|
94
|
$
|
-
|
$
|
3
|
$
|
97
|
Share Repurchase Program
On November 8, 2018, the Company announced that its Board of Directors authorized a $150 million common stock repurchase program (the "2018 Share Repurchase Program"). During the nine months ended September 30, 2024, the Company has acquired 3,872,478 shares of common stock under the 2018 Share Repurchase Program at an aggregate value of $141 million, excluding any applicable excise taxes, and an average of $36.38 per share. In connection with these repurchases, including repurchases of $9 million in 2018, the 2018 Share Repurchase Program was completed and all shares repurchased under the 2018 Share Repurchase Program were retired. No shares were repurchased during the nine months ended September 30, 2023.
On October 2, 2024, the Company announced that its Board of Directors authorized a $500 million common stock repurchase program (the "2024 Share Repurchase Program") in September 2024. Under the 2024 Share Repurchase Program, the Company may, from time to time, repurchase shares of common stock on the open market (either with or without a 10b5-1 plan) or through privately negotiated transactions. The 2024 Share Repurchase Program has no time limit and may be suspended or discontinued at any time without notice. There is no minimum number of shares of common stock that the Company is required to repurchase under the 2024 Share Repurchase Program. All share repurchases under the 2024 Share Repurchase Program will be retired. As of September 30, 2024, there were no share repurchases made under the 2024 Share Repurchase Program.
Shares Held in Escrow
In connection with the settlement of convertible notes during 2021, the Company issued approximately 139 thousand shares of common stock, at a fair value of approximately $14 million. The shares were contributed to, and held in, an escrow trust which was recorded within Treasury stock. During the nine months ended September 30, 2024, the shares were released from escrow and returned to the Company following an update to the estimated disputed claims liability.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 10. Income Taxes
The Company utilized a discrete effective tax rate method, as allowed by ASC 740-270 "Income Taxes, Interim Reporting," to calculate taxes for the three and nine months ended September 30, 2024 and 2023. The Company determined that small changes in estimated "ordinary" income would result in significant changes in the estimated annual effective tax rate ("AETR"), and therefore, the AETR method would not provide a reliable estimate.
|
Income Tax Allocation
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
(In millions)
|
2024
|
2023
|
2024
|
2023
|
Income (loss) before income taxes
|
$
|
52
|
$
|
139
|
$
|
(167)
|
$
|
(20)
|
Benefit (provision) for income taxes
|
(43)
|
(47)
|
(68)
|
904
|
Effective tax rate
|
82.7
|
%
|
33.8
|
%
|
(40.7)
|
%
|
*
|
____________________
* Not meaningful.
The Company classifies accruals for uncertain tax positions within Other long-term liabilities on the Balance Sheets, separate from any related income tax payable or deferred income taxes. Reserve amounts relate to any potential income tax liabilities resulting from uncertain tax positions as well as potential interest or penalties associated with those liabilities.
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use existing deferred tax assets. During the second quarter of 2023, the Company evaluated its forecasted adjusted taxable income and objectively verifiable evidence and placed substantial weight on its 2022 and 2023 quarterly earnings, adjusted for non-recurring items, including the interest expense disallowed under current tax law. Accordingly, the Company determined it was more likely than not that a portion of the federal and state deferred tax assets will be realized and, as a result, during the second quarter of 2023, the Company reversed the valuation allowance related to these deferred tax assets and recorded an income tax benefit of $940 million. The Company is still carrying a valuation allowance on certain federal and state deferred tax assets that are not more likely than not to be realized in the future. The Company has assessed the changes to the valuation allowance, including realization of the disallowed interest expense deferred tax asset, using the integrated approach.
The income tax provision for the three and nine months ended September 30, 2024 differed from the expected income tax provision based on the federal tax rate of 21% primarily due to an increase in federal and state valuation allowances against the deferred tax assets for excess business interest expense.
The income tax provision for the three months ended September 30, 2023 differed from the expected income tax provision based on the federal tax rate of 21% primarily due to an increase in federal and state valuation allowances against the deferred tax assets for excess business interest expense. The income tax benefit for the nine months ended September 30, 2023 differed from the expected income tax benefit based on the federal tax rate of 21% primarily due to the partial release of federal and state valuation allowances.
The Company, including its subsidiaries, files tax returns with federal, state, and foreign jurisdictions. The Company does not have tax sharing agreements with the other members within its consolidated group. The Company is subject to exam by various state and foreign tax authorities. With few exceptions, the Company is no longer subject to US federal or state and local tax assessments by tax authorities for years before 2020, and it is possible that the amount of the liability for unrecognized tax benefits could change during the next 12 months.
Note 11. Related Party and Affiliate Transactions
C. S. & Y. Associates
The Company owns the entire parcel on which Eldorado Resort Casino Reno is located, except for approximately 30,000 square feet which is leased from C. S. & Y. Associates ("CSY") (the "CSY Lease"). CSY is a general partnership in which a trust has an approximate 27% interest. The Company's Executive Chairman of the Board, Gary L. Carano, and his siblings are direct or indirect beneficiaries of the trust. The CSY Lease expires on June 30, 2057. Annual rent pursuant to the CSY Lease is currently $0.6 million, paid monthly. Annual rent is subject to periodic rent escalations of 1 to 2 percent through the term of the lease. Commensurate with its interest, the trust receives directly from the Company approximately 27% of the rent paid by the Company. As of September 30, 2024 and December 31, 2023, there were no amounts due to or from CSY.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
CVA Holdco, LLC
In May 2023, the Company entered into a joint venture, CVA Holdco, LLC, with the Eastern Band of Cherokee Indians ("EBCI") and an additional minority partner, to construct, own and operate a gaming facility in Danville, Virginia ("Caesars Virginia"). On July 31, 2024, the Company and EBCI bought out the additional minority partner. Caesars Virginia opened in a temporary facility on May 15, 2023 which will be replaced by a permanent facility that is currently under construction and is estimated to open in December 2024. As the managing member, the Company will operate the business and manage the development, construction, financing, marketing, leasing, maintenance and day-to-day operation of the various phases of the project. While the Company holds a 50.0% variable interest in the joint venture, it is the primary beneficiary; as such, the joint venture's operations are included in the Financial Statements, with a minority interest recorded reflecting the operations attributed to the other partner. The Company participates ratably, based on ownership percentage, in the profits and losses of the joint venture. During the nine months ended September 30, 2024, the Company made distributions totaling $16 million to the partners.
Pompano Joint Venture
In April 2018, the Company entered into a joint venture with Cordish Companies ("Cordish") to plan and develop a mixed-use entertainment and hospitality destination expected to be located on unused land adjacent to the casino and racetrack at the Company's Pompano property. As the managing member, Cordish will operate the business and manage the development, construction, financing, marketing, leasing, maintenance and day-to-day operation of the various phases of the project. Additionally, Cordish will be responsible for the development of the master plan for the project with the Company's input and will submit it for the Company's review and approval. While the Company holds a 50% variable interest in the joint venture, it is not the primary beneficiary; as such, the investment in the joint venture is accounted for using the equity method and is recorded in Investment in and advances to unconsolidated affiliates on the Balance Sheets. The Company participates evenly with Cordish in the profits and losses of the joint venture, which are included in Transaction and other costs, net on the Statements of Operations.
Since inception of the joint venture, the Company has contributed a total of $7 million in cash and approximately 209 acres of land with a total fair value of $69 million. The Company has no further obligation to contribute additional real estate or cash. During the year ended December 31, 2023, the Company recorded $64 million of income related to the investment, primarily due to the joint venture's gain on the sale of a land parcel. During the three months ended September 30, 2024, the Company received distributions of $39 million and recorded $11 million of income related to our investment due to the joint venture's gain on the sale of a land parcel. As of September 30, 2024 and December 31, 2023, the Company's investment in the joint venture was $119 million and $147 million, respectively, and is recorded in Investments in and advances to unconsolidated affiliates on the Balance Sheets.
Note 12. Segment Information
The executive decision maker of the Company reviews operating results, assesses performance and makes decisions on a "significant market" basis. Management views each of the Company's casinos as an operating segment. Operating segments are aggregated based on their similar economic characteristics, types of customers, types of services and products provided, and their management and reporting structure. The Company's principal operating activities occur in four reportable segments. The reportable segments are based on the similar characteristics of the operating segments with the way management assesses these results and allocates resources, which is a consolidated view that adjusts for the effect of certain transactions between these reportable segments within Caesars: (1) Las Vegas, (2) Regional, (3) Caesars Digital, and (4) Managed and Branded, in addition to Corporate and Other. See table below for a summary of these segments. Also, see Note 3and Note 4 for a discussion of any impairment of intangible assets or long-lived assets related to certain segments, when applicable.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The following table sets forth certain information regarding our properties (listed by segment in which each property is reported) as of September 30, 2024:
|
Las Vegas
|
Regional
|
Managed and Branded
|
Caesars Palace Las Vegas
|
Caesars Atlantic City
|
Harveys Lake Tahoe
|
Managed
|
The Cromwell
|
Caesars New Orleans
|
Horseshoe Baltimore
|
Harrah's Ak-Chin
|
Flamingo Las Vegas
|
Caesars Virginia (a)
|
Horseshoe Black Hawk
|
Harrah's Cherokee
|
Harrah's Las Vegas
|
Circus Circus Reno
|
Horseshoe Bossier City
|
Harrah's Cherokee Valley River
|
Horseshoe Las Vegas
|
Eldorado Gaming Scioto Downs
|
Horseshoe Council Bluffs
|
Harrah's Resort Southern California
|
The LINQ Hotel & Casino
|
Eldorado Resort Casino Reno
|
Horseshoe Hammond
|
Caesars Windsor
|
Paris Las Vegas
|
Grand Victoria Casino
|
Horseshoe Indianapolis
|
Branded
|
Planet Hollywood Resort & Casino
|
Harrah's Atlantic City
|
Horseshoe Lake Charles
|
Caesars Republic Scottsdale
|
Harrah's Columbus Nebraska (b)
|
Horseshoe St. Louis
|
Caesars Southern Indiana
|
Caesars Digital
|
Harrah's Council Bluffs
|
Horseshoe Tunica
|
Harrah's Northern California
|
Caesars Digital
|
Harrah's Gulf Coast
|
Isle Casino Bettendorf
|
Harrah's Hoosier Park Racing & Casino
|
Isle of Capri Casino Boonville
|
Harrah's Joliet
|
Isle of Capri Casino Lula
|
Harrah's Lake Tahoe
|
Isle Casino Waterloo
|
Harrah's Laughlin
|
Lady Luck Casino - Black Hawk
|
Harrah's Metropolis
|
Silver Legacy Resort Casino
|
Harrah's North Kansas City
|
Trop Casino Greenville
|
Harrah's Philadelphia
|
Tropicana Atlantic City
|
Harrah's Pompano Beach
|
Tropicana Laughlin Hotel & Casino
|
____________________
(a)Temporary gaming facility opened on May 15, 2023. The construction of the permanent facility of Caesars Virginia is expected to be completed in December 2024.
(b)Temporary gaming facility was open from June 12, 2023 through March 20, 2024, closing in anticipation of the permanent facility which opened on May 17, 2024, following weeks of construction disruption due to weather.
Certain of our properties operate off-track betting locations, including Harrah's Hoosier Park Racing & Casino, which operates Winner's Circle Indianapolis and Winner's Circle New Haven, and Horseshoe Indianapolis, which operates Winner's Circle Clarksville. The LINQ Promenade is an open-air dining, entertainment, and retail promenade located on the east side of the Las Vegas Strip next to The LINQ Hotel & Casino (the "LINQ") that features the High Roller, a 550-foot observation wheel, and the Fly LINQ Zipline attraction. We also own the CAESARS FORUM convention center, which is a 550,000 square feet conference center with 300,000 square feet of flexible meeting space, two of the largest pillarless ballrooms in the world and direct access to the LINQ.
Corporate and Other includes certain unallocated corporate overhead costs and other adjustments, including eliminations of transactions among segments, to reconcile to the Company's consolidated results.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The following table sets forth, for the periods indicated, certain operating data for the Company's four reportable segments, in addition to Corporate and Other:
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
(In millions)
|
2024
|
2023
|
2024
|
2023
|
Las Vegas:
|
Net revenues
|
$
|
1,062
|
$
|
1,120
|
$
|
3,191
|
$
|
3,379
|
Adjusted EBITDA
|
472
|
482
|
1,426
|
1,527
|
Regional:
|
Net revenues
|
1,446
|
1,565
|
4,196
|
4,415
|
Adjusted EBITDA
|
498
|
575
|
1,400
|
1,531
|
Caesars Digital:
|
Net revenues
|
303
|
215
|
861
|
669
|
Adjusted EBITDA
|
52
|
2
|
97
|
9
|
Managed and Branded:
|
Net revenues
|
68
|
98
|
206
|
239
|
Adjusted EBITDA
|
19
|
20
|
54
|
58
|
Corporate and Other:
|
Net revenues
|
(5)
|
(4)
|
(8)
|
1
|
Adjusted EBITDA
|
(40)
|
(36)
|
(123)
|
(117)
|
Reconciliation of Net Income (Loss) Attributable to Caesars to Adjusted EBITDA by Segment
Adjusted EBITDA is presented as a measure of the Company's performance. Adjusted EBITDA is defined as revenues less certain operating expenses and is comprised of net income (loss) before (i) interest income and interest expense, net of interest capitalized, (ii) income tax (benefit) provision, (iii) depreciation and amortization, and (iv) certain items that we do not consider indicative of our ongoing operating performance at an operating property level.
In evaluating Adjusted EBITDA you should be aware that, in the future, we may incur expenses that are the same or similar to some of the adjustments in this presentation. The presentation of Adjusted EBITDA should not be construed as an inference that future results will be unaffected by unusual or unexpected items.
Adjusted EBITDA is a financial measure commonly used in our industry and should not be construed as an alternative to net income (loss) as an indicator of operating performance or as an alternative to cash flows provided by operating activities as a measure of liquidity (as determined in accordance with GAAP). Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies within the industry. Adjusted EBITDA is included because management uses Adjusted EBITDA to measure performance and allocate resources, and believes that Adjusted EBITDA provides investors with additional information consistent with that used by management.
CAESARS ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
(In millions)
|
2024
|
2023
|
2024
|
2023
|
Net income (loss) attributable to Caesars
|
$
|
(9)
|
$
|
74
|
$
|
(289)
|
$
|
858
|
Net income attributable to noncontrolling interests
|
18
|
18
|
54
|
26
|
(Benefit) provision for income taxes (a)
|
43
|
47
|
68
|
(904)
|
Other (income) loss (b)
|
(4)
|
1
|
(29)
|
(5)
|
Loss on extinguishment of debt
|
-
|
3
|
51
|
200
|
Interest expense, net
|
596
|
581
|
1,780
|
1,761
|
Depreciation and amortization
|
326
|
320
|
979
|
943
|
Impairment charges (c)
|
-
|
-
|
118
|
-
|
Transaction costs and other, net(d)
|
7
|
(27)
|
49
|
47
|
Stock-based compensation expense
|
24
|
26
|
73
|
82
|
Adjusted EBITDA
|
$
|
1,001
|
$
|
1,043
|
$
|
2,854
|
$
|
3,008
|
|
Adjusted EBITDA by Segment:
|
Las Vegas
|
$
|
472
|
$
|
482
|
$
|
1,426
|
$
|
1,527
|
Regional
|
498
|
575
|
1,400
|
1,531
|
Caesars Digital
|
52
|
2
|
97
|
9
|
Managed and Branded
|
19
|
20
|
54
|
58
|
Corporate and Other
|
(40)
|
(36)
|
(123)
|
(117)
|
____________________
(a)Benefit for income taxes during the nine months ended September 30, 2023 includes the release of $940 million of valuation allowance against deferred tax assets.
(b)Other (income) loss for the nine months ended September 30, 2024 primarily represents a change in estimate of our disputed claims liability.
(c)Impairment charges for the nine months ended September 30, 2024 includes impairments within our Regional segment, identified in the second quarter of 2024, as a result of a decrease in projected future cash flows at certain properties primarily due to localized competition.
(d)Transaction costs and other, net primarily includes costs related to non-cash losses on the write down and disposal of assets, professional services for transaction and integration costs, various contract exit or termination costs, pre-opening costs in connection with new property openings and expansion projects at existing properties, and non-cash changes in equity method investments. Additionally, transactions costs and other, net for the three and nine months ended September 30, 2024 includes (i) net proceeds received in exchange for participation rights in an insurance claim and (ii) proceeds received for the termination of the Caesars Dubai management agreement.
|
Total Assets - By Segment
|
(In millions)
|
September 30, 2024
|
December 31, 2023
|
Las Vegas
|
$
|
24,847
|
$
|
24,230
|
Regional
|
15,704
|
15,291
|
Caesars Digital
|
1,034
|
1,095
|
Managed and Branded
|
266
|
224
|
Corporate and Other (a)
|
(8,882)
|
(7,474)
|
Total
|
$
|
32,969
|
$
|
33,366
|
____________________
(a)Includes eliminations of transactions among segments, to reconcile to the Company's consolidated results.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of the financial condition and operating results of Caesars Entertainment, Inc., a Delaware corporation, and its consolidated subsidiaries, which may be referred to as the "Company," "CEI," "Caesars," "we," "our," or "us," for the three and nine months ended September 30, 2024 and 2023 should be read in conjunction with the unaudited consolidated condensed financial statements and the notes thereto and other financial information included elsewhere in this Form 10-Q as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the "2023 Annual Report"). Capitalized terms used but not defined in this Form 10-Q have the same meanings as in the 2023 Annual Report.
We refer to (i) our Consolidated Condensed Financial Statements as our "Financial Statements," (ii) our Consolidated Condensed Balance Sheets as our "Balance Sheets," (iii) our Consolidated Condensed Statements of Operations and Consolidated Condensed Statements of Comprehensive Income (Loss) as our "Statements of Operations," and (iv) our Consolidated Condensed Statements of Cash Flows as our "Statements of Cash Flows." References to numbered "Notes" refer to "Notes to Consolidated Condensed Financial Statements" included in Item 1, "Unaudited Financial Statements," unless otherwise noted.
The statements in this discussion regarding our expectations of our future performance, liquidity and capital resources, and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties. Our actual results may differ materially from those contained in or implied by any forward-looking statements. See "Cautionary Statements Regarding Forward-Looking Information" in this report.
Objective
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to be a narrative explanation of the financial statements and other statistical data that should be read in conjunction with the accompanying financial statements to enhance an investor's understanding of our financial condition, changes in financial condition and results of operations. Our objectives are: (i) to provide a narrative explanation of our financial statements that will enable investors to see the Company through the eyes of management; (ii) to enhance the overall financial disclosure and provide the context within which financial information should be analyzed; and (iii) to provide information about the quality of, and potential variability of, our earnings and cash flows so that investors can ascertain the likelihood of whether past performance is indicative of future performance.
Overview
We are a geographically diversified gaming and hospitality company that was founded in 1973 by the Carano family with the opening of the Eldorado Hotel Casino in Reno, Nevada. Beginning in 2005, we grew through a series of acquisitions, including the acquisition of MTR Gaming Group, Inc. in 2014, Isle of Capri Casinos, Inc. in 2017, Tropicana Entertainment, Inc. in 2018, Caesars Entertainment Corporation in 2020 and William Hill PLC in 2021. Our ticker symbol on the NASDAQ Stock Market is "CZR."
We own, lease, brand or manage an aggregate of 53 domestic properties in 18 states with approximately 50,900 slot machines, video lottery terminals and e-tables, approximately 2,700 table games and approximately 44,900 hotel rooms as of September 30, 2024. In addition, we have other properties in North America that are authorized to use the brands and marks of Caesars Entertainment, Inc. Our primary source of revenue is generated by our gaming operations, our retail and online sports betting and online gaming. Additionally, we utilize our hotels, restaurants, bars, entertainment, racing, retail shops and other services to attract customers to our properties.
As of September 30, 2024, we owned 22 of our casinos and leased 24 casinos in the U.S. We lease 18 casinos from VICI Properties L.P., a Delaware limited partnership ("VICI"), pursuant to a regional lease, a Las Vegas lease and a Joliet lease (the "VICI Leases"). In addition, we lease six casinos from GLP Capital, L.P., the operating partnership of Gaming and Leisure Properties, Inc. ("GLPI") pursuant to a Master Lease (as amended, the "GLPI Master Lease") and a Lumière lease associated with our Horseshoe St. Louis property (together with the GLPI Master Lease, the "GLPI Leases").
We operate and conduct retail and online sports wagering across 32 jurisdictions in North America, 26 of which offer online sports betting. Additionally, we operate iGaming in five jurisdictions in North America. The map below illustrates Caesars Digital's presence as of September 30, 2024:
In 2022, we partnered with NYRABets LLC, the official online wagering platform of the New York Racing Association, Inc., and have launched the Caesars Racebook app within 22 states as of September 30, 2024. The Caesars Racebook app provides access for pari-mutuel wagering at over 300 racetracks around the world as well as livestreaming of races. Wagers placed can earn credits towards our Caesars Rewards loyalty program or points which can be redeemed for free wagering credits.
We are also in the process of expanding our Caesars Digital footprint into other states in the near term with our Caesars Sportsbook, Caesars Racebook and iGaming mobile apps as jurisdictions legalize or provide necessary approvals. No customers under 21 years old are allowed to wager on any of our Caesars Sportsbook, Caesars Racebook or iGaming mobile apps.
Investments and Partnerships
Pompano Joint Venture
In April 2018, we entered into a joint venture with Cordish Companies ("Cordish") to plan and develop a mixed-use entertainment and hospitality destination expected to be located on unused land adjacent to the casino and racetrack at our Pompano property. As the managing member, Cordish will operate the business and manage the development, construction, financing, marketing, leasing, maintenance and day-to-day operation of the various phases of the project. Additionally, Cordish will be responsible for the development of the master plan for the project with our input and will submit it for our review and approval. While we hold a 50% variable interest in the joint venture, we are not the primary beneficiary; as such, the investment
in the joint venture is accounted for using the equity method. We participate evenly with Cordish in the profits and losses of the joint venture, which are included in Transaction and other costs, net on the Statements of Operations.
Since inception of the joint venture, we have contributed a total of $7 million in cash and approximately 209 acres of land with a total fair value of $69 million. We have no further obligation to contribute additional real estate or cash. During the year ended December 31, 2023, we recorded $64 million of income related to the investment, primarily due to the joint venture's gain on the sale of a land parcel. During the three months ended September 30, 2024, we received distributions of $39 million and recorded $11 million of income related to our investment due to the joint venture's gain on the sale of a land parcel. As of September 30, 2024 and December 31, 2023, our investment in the joint venture was $119 million and $147 million, respectively, and is recorded in Investments in and advances to unconsolidated affiliates on the Balance Sheets.
Reportable Segments
Segment results in this MD&A are presented consistent with the way our management reviews operating results, assesses performance and makes decisions on a "significant market" basis. Management views each of the Company's casinos as an operating segment. Operating segments are aggregated based on their similar economic characteristics, types of customers, types of services and products provided, and their management and reporting structure. Our principal operating activities occur in four reportable segments: (1) Las Vegas, (2) Regional, (3) Caesars Digital, and (4) Managed and Branded, in addition to Corporate and Other.
Presentation of Financial Information
The presentation of financial information herein for the periods after our completed divestiture of Rio All-Suite Hotel & Casino ("Rio") at the end of the third quarter of 2023 is not fully comparable to the periods prior to such divestiture.
This MD&A is intended to provide information to assist in better understanding and evaluating our financial condition and results of operations. Our historical operating results may not be indicative of our future results of operations because of the factor described in the preceding paragraph and the changing competitive landscape in each of our markets, including changes in market and societal trends, as well as by factors discussed elsewhere herein. We recommend that you read this MD&A in conjunction with our unaudited Financial Statements and the notes to those statements included in this Quarterly Report on Form 10-Q.
Key Performance Metrics
Our primary source of revenue is generated by our gaming operations, our retail and online sports betting, as well as our online gaming. Additionally, we utilize our hotels, restaurants, bars, entertainment venues, retail shops, racing and other services to attract customers to our properties. Our operating results are highly dependent on the volume and quality of customers staying at, or visiting, our properties and using our sports betting and iGaming applications.
Key performance metrics include volume indicators such as drop or handle, which refer to amounts wagered by our customers. The amount of volume we retain, which is not fully controllable by us, is recognized as casino revenues and is referred to as our win or hold. Slot win percentage is typically in the range of approximately 9% to 11% of slot handle for both the Las Vegas and Regional segments. Table games hold percentage is typically in the range of approximately 16% to 23% of table games drop in both the Las Vegas and Regional segments. Sports betting hold is typically in the range of 7% to 11% and iGaming hold typically ranges from 3% to 5%. In addition, hotel occupancy, which is the average percentage of available hotel rooms occupied during a period, is a key indicator for our hotel business in the Las Vegas segment. See "Results of Operations" section below. Complimentary and discounted rooms are treated as occupied rooms in our calculation of hotel occupancy. The key metrics we utilize to measure our profitability and performance are Adjusted EBITDA and Adjusted EBITDA margin.
Significant Factors Impacting Financial Results
The following summary highlights the significant factors impacting our financial results for the three and nine months ended September 30, 2024 and 2023:
•New Developments - During the construction of the permanent facilities for Caesars Virginia and Harrah's Columbus Nebraska, we opened temporary gaming facilities during the second quarter of 2023. Caesars Virginia's temporary facility opened on May 15, 2023, and the permanent facility is scheduled to open in December 2024. Harrah's Columbus Nebraska's temporary facility was open from June 12, 2023, through March 20, 2024, closing in anticipation of the permanent facility which opened on May 17, 2024, following weeks of construction disruption due to weather.
•Caesars Sportsbook, Caesars Racebook and iGaming mobile apps- We continue to launch Caesars Sportsbook and Caesars Racebook in new jurisdictions, as well as our online and mobile iGaming applications. Caesars Palace Online Casino launched in August 2023 and Horseshoe Online Casino has initially launched in October 2024 in Michigan, with plans to expand into other jurisdictions where Caesars Digital iGaming platforms are live. As new states and jurisdictions have legalized sports betting, we have made varying degrees of upfront investments which have been executed through marketing campaigns and promotional incentives to acquire new customers and establish our presence in the new state or jurisdiction. We adjust our level of investment during the launch period in new jurisdictions based, in part, on prior experience and do not expect such investment to continue at elevated levels subsequent to the initial launch periods.
•Debt Transactions - In April 2024, Caesars Virginia, LLC entered into a $425 million Caesars Virginia Delayed Draw Term Loan and Revolving Credit Facility and has utilized $210 million of the Caesars Virginia Delayed Draw Term Loan as of September 30, 2024. During the nine months ended September 30, 2024 and 2023,we refinanced $4.4 billion of debt in both periods. In addition,in May 2024 we amended the CEI Credit Agreement and reduced the interest rate margin on the CEI Term Loan B and in June 2024 we made a voluntary principal repayment of $100 million on the CEI Term Loan B. We recorded losses on the early extinguishment of debt on the Statements of Operations of $3 million for the three months ended September 30, 2023 and $51 million and $200 million for the nine months ended September 30, 2024 and 2023, respectively.Subsequent to September 30, 2024, we issued $1.1 billion aggregate principal amount of 6.00% Senior Notes due 2032 (the "CEI Senior Notes due 2032") and utilized the proceeds to redeem approximately $1.1 billion of the CEI Senior Notes due 2027. See Liquidity and Capital Resources below for more detail related to 2024 transactions.
•Economic Factors Impacting Discretionary Spending - Gaming and other leisure activities we offer represent discretionary expenditures which may be sensitive to economic downturns which impacts the behavior among the components of our customer mix differently. We also monitor recent trends, including higher inflation, interest rates, and global hostilities, and the related effects on travel, our customers, and our operations.
•Impairment Charges -Primarily due to localized competition within certain markets in the Regional segment, resulting in decreased projected future cash flows at certain properties, the Company recognized impairments of certain intangible assets during the second quarter of 2024. The Company identified trademarks, gaming rights and goodwill at three reporting units with estimated fair values below their respective carrying values. During the nine months ended September 30, 2024, the Company recognized impairment charges totaling $118 million. During the nine months ended September 30, 2023, the Company did not recognize an impairment.
Results of Operations
The following table highlights the results of our operations:
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
(Dollars in millions)
|
2024
|
2023
|
2024
|
2023
|
Net revenues:
|
Las Vegas
|
$
|
1,062
|
$
|
1,120
|
$
|
3,191
|
$
|
3,379
|
Regional
|
1,446
|
1,565
|
4,196
|
4,415
|
Caesars Digital
|
303
|
215
|
861
|
669
|
Managed and Branded
|
68
|
98
|
206
|
239
|
Corporate and Other (a)
|
(5)
|
(4)
|
(8)
|
1
|
Total
|
$
|
2,874
|
$
|
2,994
|
$
|
8,446
|
$
|
8,703
|
|
Net income (loss)
|
$
|
9
|
$
|
92
|
$
|
(235)
|
$
|
884
|
|
Adjusted EBITDA (b):
|
Las Vegas
|
$
|
472
|
$
|
482
|
$
|
1,426
|
$
|
1,527
|
Regional
|
498
|
575
|
1,400
|
1,531
|
Caesars Digital
|
52
|
2
|
97
|
9
|
Managed and Branded
|
19
|
20
|
54
|
58
|
Corporate and Other (a)
|
(40)
|
(36)
|
(123)
|
(117)
|
Total
|
$
|
1,001
|
$
|
1,043
|
$
|
2,854
|
$
|
3,008
|
|
Net income (loss) margin
|
0.3
|
%
|
3.1
|
%
|
(2.8)
|
%
|
10.2
|
%
|
Adjusted EBITDA margin
|
34.8
|
%
|
34.8
|
%
|
33.8
|
%
|
34.6
|
%
|
____________________
(a)Corporate and Other includes revenues related to certain licensing arrangements and various revenue sharing agreements and includes eliminations of transactions among segments to reconcile to the Company's consolidated results. Corporate and Other Adjusted EBITDA includes corporate overhead costs, which consist of certain expenses, such as: payroll, professional fees and other general and administrative expenses.
(b)See the "Supplemental Unaudited Presentation of Consolidated Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") for the three and nine months ended September 30, 2024 and 2023" discussion later in this MD&A for a definition of Adjusted EBITDA and a reconciliation of net income (loss) to Adjusted EBITDA.
Consolidated comparison of the three and nine months ended September 30, 2024 and 2023
Net Revenues
Net revenues were as follows:
|
Three Months Ended September 30,
|
Percent Change
|
Nine Months Ended September 30,
|
Percent Change
|
(Dollars in millions)
|
2024
|
2023
|
Variance
|
2024
|
2023
|
Variance
|
Casino
|
$
|
1,599
|
$
|
1,620
|
$
|
(21)
|
(1.3)
|
%
|
$
|
4,691
|
$
|
4,789
|
$
|
(98)
|
(2.0)
|
%
|
Food and beverage
|
438
|
443
|
(5)
|
(1.1)
|
%
|
1,295
|
1,305
|
(10)
|
(0.8)
|
%
|
Hotel
|
515
|
553
|
(38)
|
(6.9)
|
%
|
1,522
|
1,581
|
(59)
|
(3.7)
|
%
|
Other
|
322
|
378
|
(56)
|
(14.8)
|
%
|
938
|
1,028
|
(90)
|
(8.8)
|
%
|
Net revenues
|
$
|
2,874
|
$
|
2,994
|
$
|
(120)
|
(4.0)
|
%
|
$
|
8,446
|
$
|
8,703
|
$
|
(257)
|
(3.0)
|
%
|
Consolidated net revenues decreased for the three and nine months ended September 30, 2024, as compared to the same prior year period, due to a decline in casino revenues in our Las Vegas segment primarily driven by the decrease in gaming volume associated with the divestiture of Rio at the end of the third quarter of 2023 and lower table games hold. The Regional segment was negatively impacted by competition associated with new casino resorts opening in some of our regional markets, construction disruption from renovation projects at certain of our properties, and inclement weather in several of our property locations during the first quarter of 2024. These results were partially offset for the nine months ended September 30, 2024 by net revenues generated from the opening of our temporary gaming facilities at Caesars Virginia and Harrah's Columbus Nebraska during the second quarter of 2023, followed by the permanent facility of Harrah's Columbus Nebraska in May 2024. Furthermore, net revenues within our Caesars Digital segment improved due to a significant increase in iGaming handle coupled with improved hold and higher hold in sports betting.
Operating Expenses
Operating expenses were as follows:
|
Three Months Ended September 30,
|
Percent Change
|
Nine Months Ended September 30,
|
Percent Change
|
(Dollars in millions)
|
2024
|
2023
|
Variance
|
2024
|
2023
|
Variance
|
Casino
|
$
|
828
|
$
|
831
|
$
|
(3)
|
(0.4)
|
%
|
$
|
2,497
|
$
|
2,476
|
$
|
21
|
0.8
|
%
|
Food and beverage
|
271
|
266
|
5
|
1.9
|
%
|
800
|
775
|
25
|
3.2
|
%
|
Hotel
|
152
|
146
|
6
|
4.1
|
%
|
428
|
426
|
2
|
0.5
|
%
|
Other
|
104
|
118
|
(14)
|
(11.9)
|
%
|
298
|
336
|
(38)
|
(11.3)
|
%
|
General and administrative
|
478
|
528
|
(50)
|
(9.5)
|
%
|
1,443
|
1,536
|
(93)
|
(6.1)
|
%
|
Corporate
|
76
|
74
|
2
|
2.7
|
%
|
234
|
239
|
(5)
|
(2.1)
|
%
|
Impairment charges
|
-
|
-
|
-
|
*
|
118
|
-
|
118
|
*
|
Depreciation and amortization
|
326
|
320
|
6
|
1.9
|
%
|
979
|
943
|
36
|
3.8
|
%
|
Transaction and other costs, net
|
(5)
|
(13)
|
8
|
61.5
|
%
|
14
|
36
|
(22)
|
(61.1)
|
%
|
Total operating expenses
|
$
|
2,230
|
$
|
2,270
|
$
|
(40)
|
(1.8)
|
%
|
$
|
6,811
|
$
|
6,767
|
$
|
44
|
0.7
|
%
|
____________________
* Not meaningful.
Casino expenses consist principally of salaries and wages associated with our gaming operations, gaming taxes and marketing and advertising costs attributable to our Caesars Digital segment. Food and beverage expenses consist principally of salaries and wages and costs of goods sold associated with our food and beverage operations. Hotel expenses consist principally of salaries, wages and supplies associated with our hotel operations. Other expenses consist principally of salaries and wages, costs of goods sold associated with our retail operations, entertainment costs, including professional talent fees, and other operations.
Casino expenses were flat for the three and nine months ended September 30, 2024, as compared to the same prior year period, in connection with higher gaming taxes and software costs associated with increased revenues in our Caesars Digital segment, offset in part by lower gaming revenues in our Regional segment. We continue to strategically manage our marketing and advertising spend to reduce our casino expenses related to our Caesars Digital segment. Food and beverage expenses have increased mainly due to higher union and non-union wages in addition to increased employee head count in our Las Vegas segment associated with new food and beverage offerings. We continue to focus on labor efficiencies to manage increased labor costs.
General and administrative expenses include items such as information technology, facility maintenance, utilities, property and liability insurance, expenses for administrative departments such as accounting, compliance, purchasing, human resources, legal, internal audit, property taxes and marketing expenses indirectly related to our gaming and non-gaming operations. General and administrative expenses decreased for the three and nine months ended September 30, 2024, as compared to the same prior year periods, due to lower general advertising expenses and reduced rent expense related to the Rio which was divested at the end of the third quarter of 2023.
Corporate expenses include unallocated expenses such as payroll, inclusive of the annual bonus, stock-based compensation, professional fees, and other various expenses not directly related to the Company's operations.
Impairment charges were recorded within our Regional segment in June 2024 as a result of a decrease in projected future cash flows at certain properties primarily due to localized competition.
Depreciation and amortization expenses increased for the three and nine months ended September 30, 2024 as compared to the same prior year period primarily related to recently completed construction projects.
Transaction and other costs, net for the three and nine months ended September 30, 2024 primarily includes non-cash losses on the write down and disposal of assets and non-cash changes in equity method investments. Transaction and other costs, net for the three and nine months ended September 30, 2023 primarily includes pre-opening costs in connection with new property openings, professional services for integration activities and non-cash changes in equity method investments.
Other income (expenses)
Other income (expenses) were as follows:
|
Three Months Ended September 30,
|
Percent Change
|
Nine Months Ended September 30,
|
Percent Change
|
(Dollars in millions)
|
2024
|
2023
|
Variance
|
2024
|
2023
|
Variance
|
Interest expense, net
|
$
|
(596)
|
$
|
(581)
|
$
|
(15)
|
(2.6)
|
%
|
$
|
(1,780)
|
$
|
(1,761)
|
$
|
(19)
|
(1.1)
|
%
|
Loss on extinguishment of debt
|
-
|
(3)
|
3
|
100.0
|
%
|
(51)
|
(200)
|
149
|
74.5
|
%
|
Other income (loss)
|
4
|
(1)
|
5
|
*
|
29
|
5
|
24
|
*
|
Benefit (provision) for income taxes
|
(43)
|
(47)
|
4
|
8.5
|
%
|
(68)
|
904
|
(972)
|
*
|
____________________
* Not meaningful.
Interest expense, net increased for the three and nine months ended September 30, 2024, as compared to the same prior year period primarily due to the annual rent escalator associated with our VICI Leases. Interest expense associated with our debt instruments is also slightly higher due to our debt mix, partially offset by our continuing efforts to reduce outstanding debt. An increase in capitalized interest resulting from ongoing construction projects, including our new developments, has also offset the increase in total interest expense.
For the nine months ended September 30, 2024, loss on extinguishment of debt was primarily related to the prepayments of the CEI Senior Secured Notes due 2025 and the Caesars Resort Collection ("CRC") Senior Secured Notes and the partial prepayment of the CEI Term Loan B. For the nine months ended September 30, 2023, loss on extinguishment of debt was primarily related to the prepayments of the CRC Term Loan, the CRC Incremental Term Loan and the Baltimore Term Loan.
Other income (loss) for the nine months ended September 30, 2024 primarily represents a change in estimate of our disputed claims liability.
The income tax provision for the three and nine months ended September 30, 2024 differed from the expected income tax provision based on the federal tax rate of 21% primarily due to an increase in federal and state valuation allowances against the deferred tax assets for excess business interest expense.
The income tax provision for the three months ended September 30, 2023 differed from the expected income tax provision based on the federal tax rate of 21% primarily due to an increase in federal and state valuation allowances against the deferred tax assets for excess business interest expense. The income tax benefit for the nine months ended September 30, 2023 differed from the expected income tax benefit based on the federal tax rate of 21% primarily due to the partial release of federal and state valuation allowances.
Segment comparison of the three and nine months ended September 30, 2024 and 2023
Las Vegas Segment
|
Three Months Ended September 30,
|
Percent Change
|
Nine Months Ended September 30,
|
Percent Change
|
(Dollars in millions)
|
2024
|
2023
|
Variance
|
2024
|
2023
|
Variance
|
Net revenues:
|
Casino
|
$
|
294
|
$
|
323
|
$
|
(29)
|
(9.0)
|
%
|
$
|
829
|
$
|
945
|
$
|
(116)
|
(12.3)
|
%
|
Food and beverage
|
283
|
285
|
(2)
|
(0.7)
|
%
|
866
|
868
|
(2)
|
(0.2)
|
%
|
Hotel
|
330
|
341
|
(11)
|
(3.2)
|
%
|
1,049
|
1,067
|
(18)
|
(1.7)
|
%
|
Other
|
155
|
171
|
(16)
|
(9.4)
|
%
|
447
|
499
|
(52)
|
(10.4)
|
%
|
Net revenues
|
$
|
1,062
|
$
|
1,120
|
$
|
(58)
|
(5.2)
|
%
|
$
|
3,191
|
$
|
3,379
|
$
|
(188)
|
(5.6)
|
%
|
|
Table games drop (a)
|
$
|
721
|
$
|
840
|
$
|
(119)
|
(14.2)
|
%
|
$
|
2,342
|
$
|
2,596
|
$
|
(254)
|
(9.8)
|
%
|
Table games hold %
|
23.1
|
%
|
24.7
|
%
|
(1.6) pts
|
20.9
|
%
|
22.5
|
%
|
(1.6) pts
|
Slot handle (a)
|
$
|
2,605
|
$
|
2,715
|
$
|
(110)
|
(4.1)
|
%
|
$
|
7,737
|
$
|
8,207
|
$
|
(470)
|
(5.7)
|
%
|
|
Hotel occupancy
|
97.1
|
%
|
96.6
|
%
|
0.5 pts
|
97.8
|
%
|
96.5
|
%
|
1.3 pts
|
|
Adjusted EBITDA
|
$
|
472
|
$
|
482
|
$
|
(10)
|
(2.1)
|
%
|
$
|
1,426
|
$
|
1,527
|
$
|
(101)
|
(6.6)
|
%
|
Adjusted EBITDA margin
|
44.4
|
%
|
43.0
|
%
|
1.4 pts
|
44.7
|
%
|
45.2
|
%
|
(0.5) pts
|
|
Net income attributable to Caesars
|
$
|
226
|
$
|
238
|
$
|
(12)
|
(5.0)
|
%
|
$
|
696
|
$
|
792
|
$
|
(96)
|
(12.1)
|
%
|
____________________
(a)Prior year gaming volumes include Rio's table games drop of $20 million and $70 million for the three and nine months ended September 30, 2023, respectively, and slot handle of $98 million and $342 million for the three and nine months ended September 30, 2023, respectively.
Our Las Vegas segment's net revenues, net income and Adjusted EBITDA decreased for the three and nine months ended September 30, 2024, as compared to the same prior year period. Net revenues, net income and gaming volumes were negatively impacted by the divestiture of Rio at the end of the third quarter of 2023, although the segment's Adjusted EBITDA margin improved due to lower rent expense resulting from the divestiture and improved operating efficiencies. Casino revenues also declined as a result of lower table games hold, which was at the high end and mid-point of our typical range for the three and nine months ended September 30, 2024, respectively, but down compared to the same prior year periods. Entertainment revenues also declined due to the mix of headliner performances in the current year, as compared to prior year. These decreases were slightly offset by higher hotel and food and beverage revenues associated with improved hotel occupancy, higher room rates and new food and beverage offerings. Net income and Adjusted EBITDA in the Las Vegas segment in the nine months ended September 30, 2024 were also negatively impacted by higher operating costs associated with (a) higher union and non-union wages, (b) increased employee head count associated with new food and beverage offerings and (c) increased promotional costs associated with special events held over the Super Bowl weekend.
For the three and nine months ended September 30, 2024, slot win percentage in the Las Vegas segment was within our typical range.
Regional Segment
|
Three Months Ended September 30,
|
Percent Change
|
Nine Months Ended September 30,
|
Percent Change
|
(Dollars in millions)
|
2024
|
2023
|
Variance
|
2024
|
2023
|
Variance
|
Net revenues:
|
Casino
|
$
|
1,024
|
$
|
1,111
|
$
|
(87)
|
(7.8)
|
%
|
$
|
3,072
|
$
|
3,247
|
$
|
(175)
|
(5.4)
|
%
|
Food and beverage
|
155
|
158
|
(3)
|
(1.9)
|
%
|
429
|
437
|
(8)
|
(1.8)
|
%
|
Hotel
|
185
|
212
|
(27)
|
(12.7)
|
%
|
473
|
514
|
(41)
|
(8.0)
|
%
|
Other
|
82
|
84
|
(2)
|
(2.4)
|
%
|
222
|
217
|
5
|
2.3
|
%
|
Net revenues
|
$
|
1,446
|
$
|
1,565
|
$
|
(119)
|
(7.6)
|
%
|
$
|
4,196
|
$
|
4,415
|
$
|
(219)
|
(5.0)
|
%
|
|
Table games drop
|
$
|
1,038
|
$
|
1,144
|
$
|
(106)
|
(9.3)
|
%
|
$
|
3,018
|
$
|
3,166
|
$
|
(148)
|
(4.7)
|
%
|
Table games hold %
|
21.2
|
%
|
21.6
|
%
|
(0.4) pts
|
21.2
|
%
|
21.8
|
%
|
(0.6) pts
|
Slot handle
|
$
|
10,434
|
$
|
11,477
|
$
|
(1,043)
|
(9.1)
|
%
|
$
|
30,836
|
$
|
32,850
|
$
|
(2,014)
|
(6.1)
|
%
|
|
Adjusted EBITDA
|
$
|
498
|
$
|
575
|
$
|
(77)
|
(13.4)
|
%
|
$
|
1,400
|
$
|
1,531
|
$
|
(131)
|
(8.6)
|
%
|
Adjusted EBITDA margin
|
34.4
|
%
|
36.7
|
%
|
(2.3) pts
|
33.4
|
%
|
34.7
|
%
|
(1.3) pts
|
|
Net income attributable to Caesars
|
$
|
125
|
$
|
176
|
$
|
(51)
|
(29.0)
|
%
|
$
|
115
|
$
|
375
|
$
|
(260)
|
(69.3)
|
%
|
Our Regional segment's net revenues, net income, Adjusted EBITDA and Adjusted EBITDA margin decreased for the three and nine months ended September 30, 2024, as compared to the same prior year period, primarily due to the continued impact of competition associated with new casino resorts opening in some of our regional markets and ongoing construction disruption from renovation projects at certain of our properties. Additionally, inclement weather in several of our regional property locations negatively impacted visitor volume in the first quarter of 2024. The impact of these unfavorable factors was partially offset for the nine months ended September 30, 2024 by the incremental revenues attributable to our temporary gaming facilities at Caesars Virginia and Harrah's Columbus Nebraska that opened during the second quarter in 2023. The permanent facility of Harrah's Columbus Nebraska opened in May 2024 following the closure of the temporary facility in March 2024.
As a result of the aforementioned factors impacting certain of our properties in the Regional segment, we recorded impairments totaling $118 million during the second quarter of 2024.
Slot win percentage in the Regional segment for the three and nine months ended September 30, 2024 was within our typical range.
Caesars Digital Segment
|
Three Months Ended September 30,
|
Percent Change
|
Nine Months Ended September 30,
|
Percent Change
|
(Dollars in millions)
|
2024
|
2023
|
Variance
|
2024
|
2023
|
Variance
|
Net revenues:
|
Casino (a)
|
$
|
282
|
$
|
186
|
$
|
96
|
51.6
|
%
|
$
|
794
|
$
|
599
|
$
|
195
|
32.6
|
%
|
Other
|
21
|
29
|
(8)
|
(27.6)
|
%
|
67
|
70
|
(3)
|
(4.3)
|
%
|
Net revenues
|
$
|
303
|
$
|
215
|
$
|
88
|
40.9
|
%
|
$
|
861
|
$
|
669
|
$
|
192
|
28.7
|
%
|
|
Sports betting handle(b)
|
$
|
2,328
|
$
|
2,320
|
$
|
8
|
0.3
|
%
|
$
|
8,207
|
$
|
8,213
|
$
|
(6)
|
(0.1)
|
%
|
Sports betting hold %
|
8.6
|
%
|
6.5
|
%
|
2.1 pts
|
7.4
|
%
|
6.3
|
%
|
1.1 pts
|
|
iGaming handle
|
$
|
3,826
|
$
|
2,472
|
$
|
1,354
|
54.8
|
%
|
$
|
10,861
|
$
|
7,542
|
$
|
3,319
|
44.0
|
%
|
iGaming hold %
|
3.5
|
%
|
3.1
|
%
|
0.4 pts
|
3.4
|
%
|
3.0
|
%
|
0.4 pts
|
|
Adjusted EBITDA
|
$
|
52
|
$
|
2
|
$
|
50
|
*
|
$
|
97
|
$
|
9
|
$
|
88
|
*
|
Adjusted EBITDA margin
|
17.2
|
%
|
0.9
|
%
|
16.3 pts
|
11.3
|
%
|
1.3
|
%
|
10 pts
|
|
Net income (loss) attributable to Caesars
|
$
|
11
|
$
|
(29)
|
$
|
40
|
*
|
$
|
(19)
|
$
|
(83)
|
$
|
64
|
77.1
|
%
|
____________________
* Not meaningful.
(a)Includes total promotional and complimentary incentives related to sports betting, iGaming, and poker of $66 million and $52 million for the three months ended September 30, 2024 and 2023, respectively, and $214 million and $184 million for the nine months ended September 30, 2024 and 2023, respectively. Promotional and complimentary incentives for poker were $5 million and $4 million for the three months ended September 30, 2024 and 2023 and $11 million for both the nine months ended September 30, 2024 and 2023.
(b)Caesars Digital generated an additional $191 million and $205 million of sports betting handle for the three months ended September 30, 2024 and 2023, respectively, and $669 million and $745 million for the nine months ended September 30, 2024 and 2023, respectively, which is not included in this table, for select wholly-owned and third-party operations for which Caesars Digital provides services and we receive all, or a share of, the net profits. Hold related to these operations was 12.7% and 8.9%, for the three months ended September 30, 2024 and 2023, respectively, and 10.5% and 10.1% for the nine months ended September 30, 2024 and 2023, respectively. Sports betting handle includes $10 million and $11 million for the three months ended September 30, 2024 and 2023, respectively, and $32 million and $35 million for the nine months ended September 30, 2024 and 2023, respectively, related to horse racing and pari-mutuel wagers.
Caesars Digital reflects the operations for retail and online sports betting, iGaming, poker, and horse racing, which includes our Caesars Sportsbook, Caesars Racebook and iGaming mobile apps.
Caesars Digital's net revenues, net income (loss), Adjusted EBITDA, and Adjusted EBITDA margin improved significantly for the three and nine months ended September 30, 2024, as compared to the same prior year periods, primarily due to higher iGaming handle and iGaming hold coupled with improved sports betting hold. iGaming handle and iGaming hold improved following the launch of Caesars Palace Online Casino in August 2023. The improved sports betting hold reflects the benefit of the continued investment in our sports betting platform.
As sports betting and online casinos expand through increased state or jurisdictional legalization, new product launches, and customer adoption, variations in hold percentages and increases in promotional and marketing expenses in highly competitive markets during promotional periods may negatively impact Caesars Digital's net revenues, net income, Adjusted EBITDA and Adjusted EBITDA margin in comparison to current or prior periods.
Sports betting and iGaming hold percentages in the Caesars Digital segment for the three and nine months ended September 30, 2024 were within our typical range.
Managed and Branded Segment
|
Three Months Ended September 30,
|
Percent Change
|
Nine Months Ended September 30,
|
Percent Change
|
(Dollars in millions)
|
2024
|
2023
|
Variance
|
2024
|
2023
|
Variance
|
Net revenues:
|
Other
|
$
|
68
|
$
|
98
|
$
|
(30)
|
(30.6)
|
%
|
$
|
206
|
$
|
239
|
$
|
(33)
|
(13.8)
|
%
|
Net revenues
|
$
|
68
|
$
|
98
|
$
|
(30)
|
(30.6)
|
%
|
$
|
206
|
$
|
239
|
$
|
(33)
|
(13.8)
|
%
|
|
Adjusted EBITDA
|
$
|
19
|
$
|
20
|
$
|
(1)
|
(5.0)
|
%
|
$
|
54
|
$
|
58
|
$
|
(4)
|
(6.9)
|
%
|
Adjusted EBITDA margin
|
27.9
|
%
|
20.4
|
%
|
7.5 pts
|
26.2
|
%
|
24.3
|
%
|
1.9 pts
|
|
Net income attributable to Caesars
|
$
|
19
|
$
|
45
|
$
|
(26)
|
(57.8)
|
%
|
$
|
54
|
$
|
83
|
$
|
(29)
|
(34.9)
|
%
|
We manage several properties and license rights to the use of certain of our brands. These revenue agreements typically include reimbursement of certain costs that we incur directly. Such costs are primarily related to payroll costs incurred on behalf of the properties under management. The revenue related to these reimbursable management costs has a direct impact on our evaluation of Adjusted EBITDA margin which, when excluded, reflects margins typically realized from such agreements. The table below presents the amount included in net revenues and total operating expenses related to these reimbursable costs. In September 2023, we recorded $25 million of additional other revenue related to the termination of the Caesars Dubai management agreement, which has been excluded from Adjusted EBITDA.
|
Three Months Ended September 30,
|
Percent Change
|
Nine Months Ended September 30,
|
Percent Change
|
(Dollars in millions)
|
2024
|
2023
|
Variance
|
2024
|
2023
|
Variance
|
Reimbursable management revenue
|
$
|
49
|
$
|
53
|
$
|
(4)
|
(7.5)
|
%
|
$
|
152
|
$
|
156
|
$
|
(4)
|
(2.6)
|
%
|
Reimbursable management cost
|
49
|
53
|
(4)
|
(7.5)
|
%
|
152
|
156
|
(4)
|
(2.6)
|
%
|
Corporate & Other
|
Three Months Ended September 30,
|
Percent Change
|
Nine Months Ended September 30,
|
Percent Change
|
(Dollars in millions)
|
2024
|
2023
|
Variance
|
2024
|
2023
|
Variance
|
Net revenues:
|
Casino
|
$
|
(1)
|
$
|
-
|
$
|
(1)
|
*
|
$
|
(4)
|
$
|
(2)
|
$
|
(2)
|
(100.0)
|
%
|
Other
|
(4)
|
(4)
|
-
|
-
|
%
|
(4)
|
3
|
(7)
|
*
|
Net revenues
|
$
|
(5)
|
$
|
(4)
|
$
|
(1)
|
(25.0)
|
%
|
$
|
(8)
|
$
|
1
|
$
|
(9)
|
*
|
|
Adjusted EBITDA
|
$
|
(40)
|
$
|
(36)
|
$
|
(4)
|
(11.1)
|
%
|
$
|
(123)
|
$
|
(117)
|
$
|
(6)
|
(5.1)
|
%
|
____________________
* Not meaningful.
Supplemental Unaudited Presentation of Consolidated Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") for the Three and Nine Months Ended September 30, 2024 and 2023
Adjusted EBITDA (described below), a non-GAAP financial measure, has been presented as a supplemental disclosure because it is a widely used measure of performance and basis for valuation of companies in our industry and we believe that this non-GAAP supplemental information will be helpful in understanding our ongoing operating results. Management has historically used Adjusted EBITDA when evaluating operating performance because we believe that the inclusion or exclusion of certain recurring and non-recurring items is necessary to provide a full understanding of our core operating results and as a means to evaluate period-to-period results. Adjusted EBITDA represents net income (loss) before interest income or interest expense net of interest capitalized, (benefit) provision for income taxes, depreciation and amortization, stock-based compensation expense, (gain) loss on extinguishment of debt, impairment charges, other (income) loss, net income (loss) attributable to noncontrolling interests, transaction costs associated with our acquisitions, developments, and divestitures, and non-cash changes in equity method investments. Adjusted EBITDA also excludes the expense associated with certain of our leases as these transactions were accounted for as financing obligations and the associated expense is included in interest expense. Adjusted EBITDA is not a measure of performance or liquidity calculated in accordance with accounting principles generally accepted in the United States ("GAAP"). Adjusted EBITDA is unaudited and should not be considered an alternative to, or more meaningful than, net
income (loss) as an indicator of our operating performance. Uses of cash flows that are not reflected in Adjusted EBITDA include capital expenditures, interest payments, income taxes, debt principal repayments, and payments under our leases with affiliates of VICI Properties Inc. and GLPI, which can be significant. As a result, Adjusted EBITDA should not be considered as a measure of our liquidity. Other companies that provide EBITDA information may calculate Adjusted EBITDA differently than we do. The definition of Adjusted EBITDA may not be the same as the definitions used in any of our debt agreements.
The following tables summarizes our Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023, respectively, in addition to reconciling net income (loss) to Adjusted EBITDA in accordance with GAAP (unaudited):
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
(In millions)
|
2024
|
2023
|
2024
|
2023
|
Net income (loss) attributable to Caesars
|
$
|
(9)
|
$
|
74
|
$
|
(289)
|
$
|
858
|
Net income attributable to noncontrolling interests
|
18
|
18
|
54
|
26
|
(Benefit) provision for income taxes(a)
|
43
|
47
|
68
|
(904)
|
Other (income) loss (b)
|
(4)
|
1
|
(29)
|
(5)
|
Loss on extinguishment of debt
|
-
|
3
|
51
|
200
|
Interest expense, net
|
596
|
581
|
1,780
|
1,761
|
Impairment charges (c)
|
-
|
-
|
118
|
-
|
Depreciation and amortization
|
326
|
320
|
979
|
943
|
Transaction costs and other, net (d)
|
7
|
(27)
|
49
|
47
|
Stock-based compensation expense
|
24
|
26
|
73
|
82
|
Adjusted EBITDA
|
1,001
|
1,043
|
2,854
|
3,008
|
Pre-disposition Adjusted EBITDA (e)
|
-
|
-
|
-
|
(15)
|
Same-Store Adjusted EBITDA
|
$
|
1,001
|
$
|
1,043
|
$
|
2,854
|
$
|
2,993
|
____________________
(a)Benefit for income taxes during the nine months ended September 30, 2023 includes the release of $940 million of valuation allowance against deferred tax assets.
(b)Other (income) loss for the nine months ended September 30, 2024 primarily represents a change in estimate of our disputed claims liability.
(c)Impairment charges for the nine months ended September 30, 2024 includes impairments within our Regional segment, identified in the second quarter of 2024, as a result of a decrease in projected future cash flows at certain properties primarily due to localized competition.
(d)Transaction costs and other, net primarily includes costs related to non-cash losses on the write down and disposal of assets, professional services for transaction and integration costs, various contract exit or termination costs, pre-opening costs in connection with new property openings and expansion projects at existing properties, and non-cash changes in equity method investments. Additionally, transactions costs and other, net for the three and nine months ended September 30, 2023 includes (i) net proceeds received in exchange for participation rights in an insurance claim and (ii) proceeds received for the termination of the Caesars Dubai management agreement.
(e)Adjustment for pre-disposition results of operations reflecting the subtraction of results of operations for Rio prior to divestiture at the end of the third quarter of 2023. Such figures are based on unaudited internal financial statements and have not been reviewed by the Company's auditors for the periods presented. The additional financial information is included to enable the comparison of current results with results of prior periods.
Liquidity and Capital Resources
We are a holding company, and our only significant assets are ownership interests in our subsidiaries. Our ability to fund our obligations depends on existing cash on hand, cash flows from our subsidiaries and our ability to raise capital. Our primary sources of liquidity and capital resources are existing cash on hand, cash flows from operations, availability of borrowings under our CEI Revolving Credit Facility and proceeds from the issuance of debt and equity securities. Our cash requirements may fluctuate significantly depending on our decisions with respect to business acquisitions or divestitures and strategic capital and marketing investments.
As of September 30, 2024, our cash on hand and borrowing capacity was as follows:
|
(In millions)
|
September 30, 2024
|
Cash and cash equivalents
|
$
|
802
|
Revolver capacity (a)
|
2,035
|
Revolver capacity committed to letters of credit
|
(84)
|
Revolver capacity committed as regulatory requirement
|
(46)
|
Total (b)
|
$
|
2,707
|
____________________
(a)Revolver capacity includes $2.05 billion under the CEI Revolving Credit Facility, maturing in January 2028 (subject to a springing maturity in the event certain other long-term debt of Caesars is not extended or repaid), and $25 million under the CVA Revolving Credit Facility, maturing on April 26, 2029, less $40 million reserved for specific purposes.
(b)Excludes approximately $190 million of additional borrowing available under the CVA Delayed Draw Term Loan.
During the nine months ended September 30, 2024, our operating activities generated operating cash inflows of $766 million, as compared to operating cash inflows of $1.3 billion during the nine months ended September 30, 2023, primarily due to changes in working capital, coupled with the results of operations described above.
On February 6, 2024, we entered into an Incremental Assumption Agreement No. 3 pursuant to which we incurred a new senior secured incremental term loan in an aggregate principal amount of $2.9 billion(the "CEI Term Loan B-1") under the CEI Credit Agreement. The CEI Term Loan B-1 requires quarterly principal payments in amounts equal to 0.25%of the original aggregate principal amount of the CEI Term Loan B-1, with the balance payable at maturity. Borrowings under the CEI Term Loan B-1 bear interest, paid at least quarterly, at a rate equal to, at our option, either (a) a forward-looking term rate based on the Secured Overnight Financing Rate ("Term SOFR"), subject to a floor of 0.50%or (b) a base rate (the "Base Rate") determined by reference to the highest of (i) the "Prime Rate" in the United States, (ii) the federal funds rate plus 0.50%per annum and (iii) the one-month Term SOFR plus 1.00%per annum, in each case, plus an applicable margin. Such applicable margin is 2.75% per annum in the case of any Term SOFR loan and 1.75%per annum in the case of any Base Rate loan. The CEI Term Loan B-1 was issued at a price of 99.75%of the principal amount and will mature on February 6, 2031.
Additionally, on February 6, 2024, we issued $1.5 billion in aggregate principal amount of 6.50% senior secured notes due 2032 (the "CEI Senior Secured Notes due 2032") pursuant to an indenture by and among the Company, the subsidiary guarantors party thereto, U.S. Bank Trust Company, National Association, as trustee, and U.S. Bank National Association, as collateral agent. The CEI Senior Secured Notes due 2032 rank equally with all existing and future first-priority lien obligations of the Company and the subsidiary guarantors. The CEI Senior Secured Notes due 2032 will mature on February 15, 2032, with interest payable semi-annually on February 15 and August 15 of each year, commencing August 15, 2024.
The net proceeds from the CEI Term Loan B-1 and the net proceeds from the issuance of the CEI Senior Secured Notes due 2032,together with borrowings under the CEI Revolving Credit Facility, were used to tender, redeem, repurchase, defease, and/or satisfy and discharge any and all of the principal amounts, including accrued and unpaid interest, related expenses and fees of both the 5.75%Senior Secured Notes due 2025 (the "CRC Senior Secured Notes") and the 6.25%Senior Secured Notes due 2025 (the "CEI Senior Secured Notes due 2025"). As a result of these transactions, we recognized $48 millionof loss on early extinguishment of debt.
On May 9, 2024, we entered into a fourth amendment to the CEI Credit Agreement which, among other things, reduces the interest rate margin applicable to the Company's existing CEI Term Loan B to 2.75% per annum in the case of any Term SOFR loan and 1.75% per annum in the case of any Base Rate loan. Prior to the fourth amendment, the applicable margin was 3.25% per annum in the case of any Term SOFR loan (plus a Term SOFR adjustment of 0.10%) and 2.25% per annum in the case of any Base Rate loan, subject to one 0.25% step-down based on our net total leverage ratio. On June 28, 2024, we made a voluntary repayment of $100 million in aggregate principal amount of the CEI Term Loan B with cash on hand.
On April 26, 2024, Caesars Virginia, LLC entered into a credit agreement with Wells Fargo Bank, N.A., as administrative agent and collateral agent, and certain banks and other financial institutions and lenders party thereto (the "CVA Credit Agreement"), which provides for a senior secured first lien multi-draw term loan facility in an aggregate principal amount of $400 million (the "CVA Delayed Draw Term Loan") and a senior secured first lien revolving credit facility in an aggregate principal amount of $25 million (the "CVA Revolving Credit Facility"), both maturing on April 26, 2029. The CVA Delayed Draw Term Loan requires quarterly principal payments commencing on the last day of the first full fiscal quarter following the opening date of the permanent facility of Caesars Virginia. The CVA Revolving Credit Facility and the CVA Delayed Draw Term Loan are subject to a variable rate of interest based on Term SOFR plus an applicable margin. As of September 30, 2024, there was $210 million utilized under the CVA Delayed Draw Term Loan.
On October 17, 2024, we issued $1.1 billion in aggregate principal amount of the CEI Senior Notes due 2032. The net proceeds from the issuance of the CEI Senior Notes due 2032 were used toredeem approximately $1.1 billionof the principal amount, including accrued and unpaid interest, related expenses and fees of the CEI Senior Notes due 2027. As a result of the early repayment, we estimate to incur approximately $31 million of loss on extinguishment of debt during the fourth quarter of 2024.
On November 8, 2018, we announced that our Board of Directors authorized a $150 million common stock repurchase program (the "2018 Share Repurchase Program"). During the nine months ended September 30, 2024, we acquired 3,872,478 shares of common stock under the 2018 Share Repurchase Program at an aggregate value of $141 million, excluding any applicable excise taxes, and an average of $36.38 per share. In connection with these repurchases, including repurchases of $9 million in 2018, the 2018 Share Repurchase Program was completed and all shares repurchased under the 2018 Share Repurchase Program were retired. No shares were repurchased during the nine months ended September 30, 2023. In September 2024, our Board of Directors authorized a $500 million common stock repurchase program (the "2024 Share Repurchase Program"). See "Share Repurchase Program" below for details.
We expect that our primary capital requirements going forward will relate to the expansion and maintenance of our properties, taxes, servicing our outstanding indebtedness, and rent payments under the GLPI Leases and the VICI Leases. We make capital expenditures and perform continuing refurbishment and maintenance at our properties to maintain our quality standards. Our capital expenditure requirements for the remainder of 2024 include the completion of expansion projects, hotel renovations and continued investment into new markets with our Caesars Sportsbook and iGaming applications. In addition, we may, from time to time, seek to repurchase or prepay our outstanding indebtedness. Any such purchases or prepayments may be funded by existing cash balances or the incurrence of debt. The amount and timing of any repurchase will be based on business and market conditions, capital availability, compliance with debt covenants and other considerations.
We have agreements with certain professional sports leagues and teams, sporting event facilities and media companies for tickets, suites, advertising, marketing, promotional and sponsorship opportunities including communication with partner customer databases. Some of the agreements provide us with exclusivity to access the aforementioned rights within the casino and/or sports betting category. As of September 30, 2024 and December 31, 2023, obligations related to these agreements were $455 million and $605 million, respectively, with contracts extending through 2040. These obligations include various third-party agreements which have been entered into by us for certain of our Las Vegas and Regional properties, or our Caesars Digital segment. The agreements include leasing of event suites that are generally considered short-term leases for which we do not record a right of use asset or lease liability. We recognize expenses in the period services are received in accordance with the various agreements. In addition, assets or liabilities may be recorded related to the timing of payments as required by the respective agreement.
We partnered with the Eastern Band of Cherokee Indians to build and develop Caesars Virginia. The permanent development has a budget of $750 million and will include a premier destination resort casino with a 320-room hotel, 1,300 slot machines, 85 live table games, a WSOP Poker Room, a Caesars Sportsbook, a live entertainment theater and 40,000 square feet of meeting and convention space. Caesars Virginia's temporary facility opened on May 15, 2023 and the permanent facility is scheduled to open in December 2024. Construction of Caesars Virginia's permanent facility is being funded in part by cash flows from the temporary facility as well as funds available under the CVA Credit Agreement.
Additionally, on May 17, 2024, we opened the permanent facility of Harrah's Columbus Nebraska which is a casino featuring a new one-mile horse racing surface, a 40,000-square-foot-casino and sportsbook with more than 400 slot machines and 20 table games, as well as a restaurant and retail space.
As a condition of the extension of the casino operating contract and ground lease for Caesars New Orleans, formerly Harrah's New Orleans, we were also required to make a capital investment of at least $325 million on or around Caesars New Orleans. The capital investment involves the rebranding of the property to Caesars New Orleans which includes a renovation and full interior and exterior redesign, updated casino floor, new culinary experiences and a new 340-room hotel tower. As of September 30, 2024, the Company has met the capital investment requirements, and the project is expected to be completed in the fourth quarter of 2024.
Cash used for capital expenditures totaled $1.0 billionand $895 million for the nine months ended September 30, 2024 and 2023, respectively, related to our growth, renovation, maintenance, and other capital projects. The following table summarizes our capital expenditures for the nine months ended September 30, 2024, and an estimated range of capital expenditures for the remainder of 2024. Excluding capital expenditure relating to Caesars Virginia, we estimate 2024 cash capital expenditure spend of approximately $850 million.
|
Nine Months Ended September 30, 2024
|
Estimate of Remaining Capital Expenditures for 2024
|
(In millions)
|
Actual
|
Low
|
High
|
Growth and renovation projects
|
$
|
311
|
$
|
50
|
$
|
90
|
Caesars Digital
|
79
|
25
|
35
|
Maintenance projects
|
321
|
60
|
90
|
Total estimated capital expenditures from unrestricted cash
|
711
|
135
|
215
|
|
Caesars Virginia (a)
|
306
|
65
|
115
|
|
Total
|
$
|
1,017
|
$
|
200
|
$
|
330
|
___________________
(a)On April 26, 2024, Caesars Virginia, LLC entered into a new five-year $425 million pro rata bank financing to fund the remaining capital expenditures associated with the permanent casino resort facility, which is expected to open in December 2024.
A significant portion of our liquidity needs are for debt service and payments associated with our leases. Our estimated debt service (including principal and interest) is approximately $175 million for the remainder of 2024. We also lease certain real property assets from third parties, including VICI and GLPI. The VICI Leases are subject to annual escalations, that take effect in November of each year, based on the Consumer Price Index ("CPI"). In addition to the CPI escalator, November 2024 represents the beginning of the first lease year in which our VICI leases are also subject to a variable rent component based on certain historical net revenues of our leased properties. The next such lease year with a variable rent adjustment begins November 2027. We estimate our lease payments to VICI and GLPI to be approximately $331 million for the remainder of 2024.
We have periodically divested assets to raise capital or, in previous cases, to comply with conditions, terms, obligations or restrictions imposed by antitrust, gaming and other regulatory entities. If an agreed upon selling price for future divestitures does not exceed the carrying value of the assets, we may be required to record additional impairment charges in future periods which may be material.
On August 1, 2024, we entered into a definitive agreement to sell the World Series of Poker ("WSOP") assets to NSUS Group Inc ("NSUS"). Under the terms of the agreement, NSUS will pay $250 million in cash at closing and enter into a term loan with us for an additional $250 million for a total purchase price of $500 million. The term loan will bear interest at a market rate, plus an applicable margin, with interest and principal payments due quarterly through the fifth anniversary of the closing date. On October 29, 2024, we closed the sale to NSUS.
Concurrent with signing the sale agreement, we entered into licensing agreements with NSUS that allows us to continue our current operations within the United States, including the WSOP's live tournament series in Las Vegas for the next 20 years.
We are also continuing to negotiate the sale of certain non-core assets.
Weexpect that our current liquidity, including availability of borrowings under our committed credit facility and cash flows from operations will be sufficient to fund our operations, capital requirements and service our outstanding indebtedness for the next twelve months.
Debt and Master Lease Covenant Compliance
The CEI Revolving Credit Facility, the CEI Term Loan A, the CEI Term Loan B, the CEI Term Loan B-1 and the indentures governing the CEI Senior Secured Notes due 2030, the CEI Senior Secured Notes due 2032, the CEI Senior Notes due 2027, and the CEI Senior Notes due 2029 contain covenants which are standard and customary for these types of agreements. These include negative covenants, which, subject to certain exceptions and baskets, limit our ability to (among other items) incur additional indebtedness, make investments, make restricted payments, including dividends, grant liens, sell assets and make acquisitions.
The CEI Revolving Credit Facility and the CEI Term Loan A include a maximum net total leverage ratio financial covenant of 7.25:1 until December 31, 2024 and 6.50:1 from and after December 31, 2024. In addition, the CEI Revolving Credit Facility and the CEI Term Loan A include a minimum fixed charge coverage ratio financial covenant of 1.75:1 until December 31, 2024 and 2.0:1 from and after December 31, 2024. From and after the repayment of the CEI Term Loan A, the financial covenants applicable to the CEI Revolving Credit Facility will be tested solely to the extent that certain testing conditions are satisfied. Failure to comply with such covenants could result in an acceleration of the maturity of indebtedness outstanding under the relevant debt document.
The GLPI Leases and VICI Leases contain certain covenants requiring minimum capital expenditures based on a percentage of net revenues along with maintaining certain financial ratios.
As of September 30, 2024, we were in compliance with all of the applicable financial covenants described above.
The CVA Revolving Credit Facility and the CVA Delayed Draw Term Loan contain covenants which are standard and customary for this type of agreement, including a maximum net total leverage ratio financial covenant of 4:1 and a minimum fixed charge coverage ratio financial covenant of 1.05:1. Caesars Virginia LLC's compliance requirements commence after the first full quarter following the opening of the permanent facility of Caesars Virginia.
Share Repurchase Program
Subsequent to the completion of the 2018 Share Repurchase Program in September 2024, as described above, on October 2, 2024, we announced that our Board of Directors authorized a $500 million common stock repurchase program in September 2024. Under the 2024 Share Repurchase Program, we may, from time to time, repurchase shares of common stock on the open market (either with or without a 10b5-1 plan) or through privately negotiated transactions. The 2024 Share Repurchase Program has no time limit and may be suspended or discontinued at any time without notice. There is no minimum number of shares of common stock that we are required to repurchase under the 2024 Share Repurchase Program. All share repurchases under the 2024 Share Repurchase Program will be retired. As of September 30, 2024, there were no share repurchases made under the 2024 Share Repurchase Program.
Contractual Obligations
There have been no other material changes during the nine months ended September 30, 2024 to our contractual obligations as disclosed in Part II, Item 7 of the 2023 Annual Report. See Note 5to our unaudited Financial Statements, which is included elsewhere in this report, for additional information regarding contractual obligations.
Other Liquidity Matters
We are faced with certain contingencies, from time to time, involving litigation, claims, assessments, environmental remediation or compliance. These commitments and contingencies are discussed in greater detail, when applicable, in "Part II, Item 1. Legal Proceedings" and Note 5to our unaudited Financial Statements, both of which are included elsewhere in this report. See "Part I, Item 1A. Risk Factors-Risks Related to Our Business" which is included elsewhere in the 2023 Annual Report.
Critical Accounting Policies
Our critical accounting policies disclosures are included in the 2023 Annual Report. There have been no material changes since December 31, 2023. We have not substantively changed the application of our policies, and there have been no material changes in assumptions or estimation techniques used as compared to those described in the 2023 Annual Report.
Off-Balance Sheet Arrangements
We do not currently have any off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. We are exposed to changes in interest rates primarily from variable rate long-term debt arrangements. We manage our interest rate risk by monitoring interest rates, including future projected rates, and adjust our mix of fixed and variable rate borrowings.
As of September 30, 2024, long-term variable-rate borrowings totaled $6.3 billion under the CEI Term Loans, the CVA Delayed Draw Term Loan and the CEI Revolving Credit Facility and no amounts were outstanding under the CVA Revolving Credit Facility. Long-term variable-rate borrowings under the CEI Term Loans, the CVA Delayed Draw Term Loan and the CEI Revolving Credit Facility represented approximately 50% of consolidated long-term debt as of September 30, 2024. As of September 30, 2024, the weighted average interest rates on our variable and fixed rate debt were 7.87% and 6.70%, respectively.
All of the variable rate debt instruments are subject to Term SOFR interest rates plus a reasonable margin.
We evaluate our exposure to market risk by monitoring interest rates in the marketplace and have, on occasion, utilized derivative financial instruments to help manage this risk. We do not utilize derivative financial instruments for trading purposes. There have been no other material quantitative changes in our market risk exposure, or how such risks are managed from the information previously reported under Part II, Item 7A of the 2023 Annual Report.
Item 4. Controls and Procedures
(a)Evaluation of Disclosure Controls and Procedures
We have established and maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports that we file under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized, evaluated and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q are effective to ensure that the information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized, evaluated and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
(b)Changes in Internal Controls
There were no significant changes in our internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of our "Legal Proceedings," refer to Note 5of our Consolidated Condensed Financial Statements located elsewhere in this Quarterly Report on Form 10-Q and Note 11 to our Consolidated Financial Statements included in the 2023 Annual Report.
Cautionary Statements Regarding Forward-Looking Information
This report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding our strategies, objectives and plans for future development or acquisitions of properties or operations, as well as expectations, future operating results, trends and other information that is not historical information. When used in this report, the terms or phrases such as "anticipates," "believes," "projects," "plans," "intends," "expects," "might," "may," "estimates," "could," "should," "would," "will likely continue," and variations of such words or similar expressions and their negative forms are intended to identify forward-looking statements. These statements are made on the basis of management's current views and assumptions regarding future events.
Forward-looking statements are based upon certain underlying assumptions, including any assumptions mentioned with the specific statements, as of the date such statements were made. Such assumptions are in turn based upon internal estimates and analyses of market conditions and trends, management plans and strategies, economic conditions and other factors. Such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control, and are subject to change. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend upon future circumstances that may not occur. Actual results and trends may differ materially from any future results, trends, performance or achievements expressed or implied by such statements. Forward-looking statements speak only as of the date they are made, and we assume no duty to update forward-looking statements. Forward-looking statements should not be regarded as a representation by us or any other person that the forward-looking statements will be achieved. Undue reliance should not be placed on any forward-looking statements. Some of the contingencies and uncertainties to which any forward-looking statement contained herein are subject include, but are not limited to, the following:
•our sensitivity to reductions in discretionary consumer spending as a result of downturns in the economy and other factors outside our control;
•projections of future results of operations or financial condition;
•expectations regarding our business and results of operations of our existing casino properties and prospects for future development;
•the impact of economic trends, inflation and public health emergencies on our business and financial condition;
•expectations regarding trends that will affect our market and the gaming industry generally, including expansion of internet betting and gaming, and the impact of those trends on our business and results of operations;
•our ability to comply with the covenants in the agreements governing our outstanding indebtedness and leases;
•our ability to meet our projected debt service obligations, operating expenses, and maintenance capital expenditures;
•expectations regarding availability of capital resources;
•our intention to pursue development opportunities and additional acquisitions and divestitures;
•our ability to complete pending dispositions and divestitures and effectively reinvest the proceeds thereof;
•the impact of regulation on our business and our ability to receive and maintain necessary approvals for our existing properties and future projects and operation of our online sportsbook, poker and gaming;
•the impact of the Data Incident and any other future cybersecurity breaches on our business, financial conditions and results of operations;
•factors impacting our ability to successfully operate our digital betting and iGaming platform and expand its user base;
•our ability to adapt to the very competitive environments in which we operate, including the online market;
•the impact of economic downturns and other factors that impact consumer spending;
•the impact of win rates and liability management risks on our results of operations;
•our reliance on third parties for strategic relationships and essential services;
•costs associated with investments in our online offerings and technological and strategic initiatives;
•risk relating to fraud, theft and cheating;
•our ability to collect gaming receivables from our credit customers;
•the impact of our substantial indebtedness and significant financial commitments, including our obligations under our lease arrangements;
•restrictions and limitations in agreements governing our debt and leased properties could significantly affect our ability to operate our business and our liquidity;
•financial, operational, regulatory or other potential challenges that may arise as a result of leasing of a number of our properties;
•the effect of disruptions or corruption to our information technology and other systems and infrastructure;
•the ability to identify suitable acquisition opportunities and realize growth and cost synergies from any future acquisitions;
•the impact of governmental regulation on our business and the cost of complying or the impact of failing to comply with such regulations;
•changes in gaming taxes and fees in jurisdictions in which we operate;
•risks relating to pending claims or future claims that may be brought against us;
•changes in interest rates and capital and credit markets;
•the effect of seasonal fluctuations;
•our particular sensitivity to energy and water prices;
•deterioration in our reputation or the reputation of our brands;
•potential compromises of our information systems or unauthorized access to confidential information and customer data;
•our reliance on information technology, particularly for our digital business;
•our ability to protect our intellectual property rights;
•our reliance on licenses to use the intellectual property of third parties and our ability to renew or extend our existing licenses;
•the effect of war, terrorist activity, acts of violence, natural disasters, public health emergencies and other catastrophic events;
•increased scrutiny and changing expectations regarding our environmental, social and governance practices and reporting;
•our reliance on key personnel and the intense competition to attract and retain management and key employees in the gaming industry;
•work stoppages and other labor problems;
•our ability to retain performers and other entertainment offerings on acceptable terms; and
•other factors described in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in this Quarterly Report on Form 10-Q, our most recently filed Quarterly Reports on Form 10-Q, and our most recent Annual Report on Form 10-K filed with the SEC.
In light of these and other risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur. These forward-looking statements speak only as of the date on which this statement is made, even if subsequently made available on our website or otherwise, and we do not intend to update publicly any forward-looking statement to reflect events or circumstances that occur after the date on which the statement is made, except as may be required by law.
You should also be aware that while we, from time to time, communicate with securities analysts, we do not disclose to them any material non-public information, internal forecasts or other confidential business information. Therefore, you should not assume that we agree with any statement or report issued by any analyst, irrespective of the content of the statement or report.
To the extent that reports issued by securities analysts contain projections, forecasts or opinions, those reports are not our responsibility and are not endorsed by us.
Item 1A. Risk Factors
A description of our risk factors can be found in "Part I, Item 1A. Risk Factors" included in the 2023 Annual Report. There have been no material changes to those risk factors during the nine months ended September 30, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table summarizes our share repurchases during the three months ended September 30, 2024:
|
Period
|
Total Number of Shares Purchased
|
Average Price Paid per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)
|
July 1, 2024 to July 31, 2024
|
-
|
$
|
-
|
-
|
$
|
141
|
August 1, 2024 to August 31, 2024
|
2,658,146
|
36.18
|
2,658,146
|
45
|
September 1, 2024 to September 30, 2024
|
1,214,332
|
36.80
|
1,214,332
|
500
|
Total
|
3,872,478
|
$
|
36.38
|
3,872,478
|
$
|
500
|
On November 8, 2018, we announced that our Board of Directors authorized a $150 million common stock repurchase program (the "2018 Share Repurchase Program"). During the three and nine months ended September 30, 2024, we repurchased an aggregate of $141 million of common stock, excluding any applicable excise tax, as described in the table above. As of result of these repurchases, including repurchases of $9 million in 2018, the 2018 Repurchase Program was completed and the Company elected to retire all shares repurchased under the 2018 Share Repurchase Program.
On October 2, 2024, we announced that our Board of Directors authorized a new $500 million common stock repurchase program (the "2024 Share Repurchase Program") in September 2024. Under the 2024 Share Repurchase Program, we may, from time to time, repurchase shares of common stock on the open market (either with or without a 10b5-1 plan) or through privately negotiated transactions. The 2024 Share Repurchase Program has no minimum number of shares of common stock that we are required to repurchase, no time limit, and may be suspended or discontinued at any time without notice. All shares repurchased under the 2024 Share Repurchase Program will be immediately retired. As of September 30, 2024, there were no share repurchases made under the 2024 Share Repurchase Program.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(a) None.
(b) None.
(c) Rule 10b5-1 Trading Plans
For the three months ended September 30, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as defined in Item 408 of Regulation S-K.
Item 6. Exhibits
|
Exhibit
Number
|
Description of Exhibit
|
Method of Filing
|
|
3.1
|
|
Previously filed on Form 8-K filed on June 16, 2023.
|
|
3.2
|
|
Previously filed on Form 8-K filed on August 1, 2022.
|
|
4.1
|
|
Previously filed on Form 8-K filed on October 17, 2024.
|
|
31.1
|
Certification of Thomas R. Reeg pursuant to Rule 13a-14a and Rule 15d-14(a)
|
Filed herewith.
|
|
31.2
|
Certification of Bret Yunker pursuant to Rule 13a-14a and Rule 15d-14(a)
|
Filed herewith.
|
|
32.1
|
Certification of Thomas R. Reeg in accordance with 18 U.S.C. Section 1350
|
Filed herewith.
|
|
32.2
|
Certification of Bret Yunker in accordance with 18 U.S.C. Section 1350
|
Filed herewith.
|
|
101.1
|
Inline XBRL Instance Document
|
Filed herewith.
|
|
101.2
|
Inline XBRL Taxonomy Extension Schema Document
|
Filed herewith.
|
|
101.3
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
Filed herewith.
|
|
101.4
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
Filed herewith.
|
|
101.5
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
Filed herewith.
|
|
101.6
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
Filed herewith.
|
|
104
|
Cover Page Interactive Data File (embedded within the Inline XBRL document)
|
Filed herewith.
|
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
CAESARS ENTERTAINMENT, INC.
|
|
Date: October 29, 2024
|
/s/ Thomas R. Reeg
|
Thomas R. Reeg
Chief Executive Officer (Principal Executive Officer)
|
|
Date: October 29, 2024
|
/s/ Bret Yunker
|
Bret Yunker
Chief Financial Officer (Principal Financial Officer)
|