Caesars Entertainment, Inc.CZRNASDAQ
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Operator: Good day, and thank you for standing by. Welcome to the Caesars Entertainment, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brian Agnew, Senior Vice President of Corporate Finance, Treasury and Investor Relations. Please go ahead.
Brian Agnew: Thank you, Shannon, and good afternoon to everyone on the call. Welcome to our conference call to discuss our third quarter 2025 earnings. This afternoon, we issued a press release announcing our financial results for the period ended September 30, 2025. A copy of the press release is available in the Investor Relations section of our website at investor.caesars.com. As usual, joining me on the call today are Tom Reeg, our CEO; Anthony Carano, our President and Chief Operating Officer; Bret Yunker, our CFO; Eric Hession, President, Caesars Sports and Online; and Charise Crumbley, Investor Relations. Before I turn the call over to Anthony, I would like to remind you that during today's conference call, we may make certain forward-looking statements under safe harbor federal securities laws, and these statements may or may not come true. Also, during today's call, the company may discuss certain non-GAAP financial measures as defined by SEC Regulation G. Please visit our press releases located on our Investor Relations website for a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure. Our Q3 investor presentation has been posted to our website, and our Form 10-Q has also been issued as well. We experienced hold volatility in our reported results. Management will discuss hold normalized results in our call today, and a full reconciliation can be found in our earnings presentation posted on our website on Slide 21. I will now turn the call over to Anthony.
Anthony Carano: Thank you, Brian, and good afternoon to everyone on the call. Our diversified portfolio delivered third quarter consolidated net revenues of $2.9 billion and adjusted EBITDA of $884 million. On a hold normalized basis, the company reported $927 million in consolidated EBITDA. During the third quarter, our Digital segment delivered strong volume growth in both sports and iCasino. Adjusted EBITDA in our Digital segment was negatively impacted by NFL hold in September and faced a difficult comparison to last year, which included WSOP results. Our Las Vegas segment posted solid results in the face of softer market-wide visitation and adjusted for poor table games hold. We are seeing sequential improvement in operating trends in Las Vegas as we enter the fourth quarter. Regional revenues were up year-over-year, driven by strong returns in Danville and New Orleans and same-store net revenue growth, resulting from continued strategic reinvestment in our Caesars Rewards customer database. Regional EBITDA grew 4% on a hold normalized basis during the quarter. Starting in our Las Vegas segment, we reported same-store adjusted EBITDA of $379 million and hold normalized EBITDA of $398 million. Segment results were driven by 92% occupancy versus 97% last year and ADR decreased 5% as a result of citywide visitation weakness during the quarter. As we progress through the quarter, trends improved sequentially with September delivering the strongest results of the quarter. During the quarter, the group room night mix was 13%, and the segment is on track to deliver a record EBITDA year in 2025 due to our strong Q4 booking pace, where group mix should increase to 17%. Recent CapEx investments at the Flamingo in Las Vegas, including a brand-new pool experience, Pinky's by Lisa Vanderpump, Gordon Ramsay Burger and Havana 57 continue to exceed return expectations. We are excited about upcoming CapEx projects in Las Vegas, including a new Omnia Day Club by Tao at Caesars Palace, the rebrand of the Cromwell to the Vanderpump Hotel and the recently announced Project 10 by Luke Combs that will transform the vacant Margaritaville space at the Flamingo. These exciting projects continue our commitment to reinvest in our assets while elevating our guest experiences. As we look to the fourth quarter in Las Vegas, we see trends improving sequentially, driven by positive leisure trends and a strong group and convention calendar. In our regional segment, we reported adjusted EBITDA of $506 million and hold normalized EBITDA of $517 million, driven by 6% net revenue growth. Early results from our strategic customer reinvestments are promising, driven by strong rated play trends in the quarter. We will continue to refine our marketing approach as we remain focused on delivering strong returns on these investments. Margins improved sequentially this quarter, driven by better flow-through on these investments. New projects in Danville and New Orleans continue to generate strong returns, and we look forward to completing Phase 2 of the master plan currently underway at Caesars Republic Lake Tahoe in mid-2026. I want to thank all of our team members for their hard work through the first 3 quarters of 2025. Their dedication to exceptional guest service has been the driving force behind our accomplishments this year. With that, I will now turn the call over to Eric for some insights into the third quarter for our Digital segment.
Eric Hession: Thanks, Anthony. During the third quarter, Caesars Digital delivered net revenue of $311 million, adjusted EBITDA of $28 million and hold normalized adjusted EBITDA of $40 million. Recall that last year, in Q3 2024, we benefited from approximately $8 million of net revenue and EBITDA contribution from the World Series of Poker. The World Series of Poker was sold in Q3 of last year, and so now we fully annualize the impact of the sale on our EBITDA comparisons. In addition to the effect of the poor hold and the loss of the World Series of Poker revenues impact on flow-through, we had a number of other headwinds this quarter that included incremental state taxes, higher acquisition marketing spend and some bad debt. As we previously noted, there will be volatility across quarters, but we're on track to exceed our 50% target flow-through for the year. Our core KPIs remained strong during the quarter. Specifically in sports, total parlay mix improved approximately 210 basis points year-over-year, and we saw growth in average legs per parlay and a higher cash out mix versus the prior year period. In addition, we realized volume growth of 6%, a notable sequential improvement, which was unfortunately more than offset by the negative sports outcomes our industry experienced in September. In iCasino, we delivered 29% net revenue growth, driven by continued strength in volume and average monthly active users. We continue to evaluate or elevate our product offering during the 2 quarters to include new in-house games, improved bonusing capabilities and elevated live dealer product. We look forward to a redesigned Horseshoe Online casino update in Q4. Overall, in Q3, our total monthly unique payers increased 15% to 460,000. From a tech perspective, we continue to convert new jurisdictions to our universal digital wallet and proprietary player account management system, which is now live in 22 states. The enhancement gives our customers a significant upgrade to their wagering experience. Pending regulatory approval, we plan for the Missouri State sports betting launch in December of this year to be the first state where we offer a shared wallet experience to our customers from day 1. We continue to expect a complete rollout of our universal wallet product on our proprietary TAM by early 2026. As we head into Q4 and 2026, I'm pleased with the significant progress on the technology side of the business that's driving strong volumes in both sports and iCasino. The continued progress in all areas is showing up in our top line results, and our focus on spending efficiency will drive solid flow-through to EBITDA. We continue to see a business capable of driving 20% top line growth with 50% flow-through to EBITDA, which keeps us on track to achieve our long-term goals. I'll now pass the call over to Bret for comments on the balance sheet.
Bret Yunker: Thanks, Eric. In addition to redeeming $546 million of senior notes during the quarter, we repurchased $100 million of stock, including October activity. We've now repurchased close to $400 million of stock since mid-'24, shrinking our share base by 6%. Our balance sheet remains in great shape with our nearest maturity in 2028 and a floating rate debt mix that will continue to benefit from interest rate cuts. Our weighted average cost of debt currently sits at just over 6%. We expect to continue using our strong and growing free cash flow to both reduce debt and opportunistically repurchase stock. Turning it over to Tom.
Thomas Reeg: Thanks, Bret. To jump into a little more detail, we told you on the last call that Vegas was going to be a soft summer. It was a soft summer. Our ADR was down a little over 6%. Occupancy percentage -- occupancy was down about 5 percentage points. So that's about 90,000 room nights for us that flows through all of the non-gaming pieces of the business. On the gaming side, volumes held in pretty well. Slot handle was down only 2%, even though we had 90,000 less room nights. I hate talking about hold, but this is a quarter where you can't get away without talking about hold. Hold was down almost 600 basis points in Vegas in the quarter. On a year-over-year basis, it impacted us a little over $30 million. And it's -- and there were another -- a little over $10 million of onetime items that benefited us last year that don't repeat, the largest of those being cancellation of the sponsorship contract on the Planet Hollywood Live theater in Vegas. The quarter got better throughout. So July was the worst month of the quarter. August got better. September got better. What we told you when we talked to you in the beginning of the quarter was it would be soft. We would expect recovery in the fourth quarter. That is what we are seeing. Our cash room revenue forecast for the quarter is down just slightly. Cash room revenues in the third quarter were down a little over 11%. So that's considerable improvement. A lot of that is the group calendar that Anthony referenced. We have some Caesars-specific groups that benefit us, not necessarily the entire market. We had the Oracle conference that was in 3Q last year and was in early October this year. And then we have BravoCon coming up as the quarter continues. F1 for us is looking considerably better than it did last year -- than it performed last year, not as good as year 1, but up from last year. The headwind for the remainder of the year is New Year's Eve is middle of the week this year, which is not particularly helpful calendar-wise. But other than that, we see Vegas coming back strongly. I know that's a big question -- has been a big question. Again, what we laid out in July of soft summer recovery in the fourth quarter, continued recovery in the first quarter is still what we see today. Group should be, as Anthony said, a record in '25 versus '24. That's largely on the strength of the fourth quarter. And then first quarter should be a new all-time record ahead of '25 -- I'm sorry, '26 should be a full-time -- a new record for the full year ahead of '25, largely on strength in the first quarter of the year. So it was a difficult summer. There is definitely -- has been softness in leisure demand for Las Vegas in the summer months, particularly in properties that I would view as priced takers, those that are as you go down the customer spectrum or you move out from the center of the strip, demand for those were soft. Premium has held up better, but it's the return of group business in the fourth quarter and first quarter that allows rate compression that brings us back to a much healthier looking market as we look at this quarter and into '26. For regionals, we talked about how last quarter we'd embarked on increase in marketing reinvestment, starting in properties that were competitively impacted and moving beyond that as we saw what was working. As the quarters go by, I think I've said this to you a number of times, you'll see us refine that, take out what's not working, expand what is to more markets. We have a lot of test and control out all of the time. And you could see better flow-through. You would have seen even better flow-through if we had held both brick-and-mortar and Vegas hold percentage was the lowest that it's been in over 3 years, and that's particularly unusual in regional, regional pretty is pretty stable. But what we're seeing in regional is the flow-through of the marketing is improving. You should expect that to continue to grow -- to continue going forward and demand in regional is pretty solid. Like we have no complaints about what we're seeing in regional. In digital, obviously, we've got the sports outcomes that have been -- there's been a lot of conversation about those both here and elsewhere. So I won't belabor those. We're happy with where we are. Margin-wise, happy to see us growing handle. iGaming continues to perform quite well. So all of our goals remain in front of us in terms of what we've laid out for digital and fully expect that we'll get there. So we feel good about that story as well. And then in terms of free cash flow, you should expect that we'll remain balanced in using our free cash flow between paying down debt and repurchasing our stock. At current levels, our stock is attractive to us. You should expect us to be active as we go through the remainder of the year. And with that, I'll open it up to questions.
Operator: [Operator Instructions]. Our first question comes from the line of Brandt Montour with Barclays.
Brandt Montour: So Tom and team, I want to start with Las Vegas. And I want to just sort of dig into some of the comments that you made, Tom, specifically around leisure demand. And I heard positive leisure recovery, but I also heard that the group fill-in is most of the sequential improvement that you are looking for or seeing into the fourth quarter. And so maybe you could highlight some other metrics in terms of how we should think about the sort of very near-term sequential leisure recovery, whether that's bookings 4 weeks out, occupancy, et cetera, or anything else that might be helpful there?
Thomas Reeg: Yes. So when we talked to you last quarter, we're looking at the same forward booking calendar that we can see. Now looking at that point, it looked particularly soft, which is why we told you we were expecting a soft summer. That came in when you adjust for hold about where we anticipated it would be as we sit -- and if you think about sequentially and the quarter that you're in, because it's the third quarter, it's a leisure-dominated quarter. There's not a lot of group business in Vegas when the weather is particularly hot relative to other quarters. And that leisure customer continued to get better during the quarter. July was the worst. August built on that and then September, October has continued, but that leisure customer is still softer on a year-over-year basis. The difference is what you get in group activity allows us to compress rate much better than we were able to in the third quarter, and you don't have nearly the amount of miss in occupied rooms. We had 90,000 in the third quarter, about 500 basis points of occupancy. Our occupancy looks better and our rate looks better than it did third quarter.
Brandt Montour: Great. And then maybe moving over to regionals. You guys put up a hold adjusted regional number that did show growth, and you had told the market that you were promoting more last quarter and perhaps rolling out promos to less or more impacted -- more non-supply impacted markets. But it looks like either that hasn't started yet or you're getting pretty good returns on those tactics. And so I guess the question is, are you -- is this the type of flow-through that we can expect from this program, whether it's supply impacted or nonsupply impacted markets as you sort of move through the evolution of those new programs?
Thomas Reeg: Yes, Brandt, that's a great question. And we would expect as the quarters go by, we become more efficient in that marketing, you're dialing back more that's not working and expanding what does. And I want to be clear, there was a sense that we were getting into some sort of promo war. I heard that from a lot of investors. The way we look at it in most of our -- in all of our markets, Caesars Rewards is the most impactful customer program that there is among any operator. In many of our markets, we have a property as well that is better than others. So that's higher quality. So if you think about the way marketing works, you may lean on those advantages a little bit and say, I'm not going to be as generous in my giveback as others, and you're still going to perform quite well. I think that, that gap got to be a little larger than we needed it to be in properties that were not competitively impacted. So I would think of what we're doing is kind of taking up that slack, not entering into a promotional war. And we're not seeing significant response from competitors that suggest that this is going to keep going higher. What I'd expect you'd see going forward is what you saw this quarter where the flow-through from that revenue growth continues to look better as the quarters move on.
Operator: Our next question comes from the line of Dan Politzer with JPMorgan.
Daniel Politzer: I just wanted to go back to Vegas and that leisure customer. I mean it sounds like things are getting a little bit better. Just group is obviously helping in terms of compression. But I mean, how do you kind of look to stimulate that leisure customer? Do you think that there are structural issues in Las Vegas that need to be addressed in terms of pricing? And then it sounds like in terms of fourth quarter, things have gotten better. So I don't know if there's any way to kind of frame kind of that bouncing off of third quarter in terms of some kind of broad estimates.
Thomas Reeg: Yes. So on the pricing question, we price hundreds, thousands of items across Vegas every day from obviously, rooms and restaurants to ATM fees to everything that you purchase in Vegas, and we're constantly adjusting them. What was interesting -- there's a few things that are interesting to me in that conversation. And I don't discount that there are areas in our business and in Las Vegas that got -- might have gotten over their skis pricing-wise. But to put it in context, we're in a quarter where while we're talking about pricing and degradation to demand, our occupancy percentage was over 90% in the quarter. It's stronger as we move into the fourth quarter. But most interestingly, while those stories were out there, most days that you read those stories, you could have gotten a room in Vegas for $29 plus a resort fee on the strip. So there's a value trade in -- what's great about Vegas is there's something for everybody. Sean McBurney, our Regional President out here who does such a fantastic job using the example of, you can come see Paul McCartney and pay $500 plus a ticket at the same weekend that you're going to see -- you can see Donny Osmond for $60. So there's something at every price point. And keep in mind, in a quarter where we're -- it was undeniably soft versus last year, and we're glad to see it coming back in the fourth quarter. It doesn't take a lot to turn that back the other way. You're talking about 5 percentage points of occupancy got us to a 10% decline in adjusted EBITDA. You don't need much to swing back the other way to where you're right back to where you were before. So -- and one more point, we're talking about a quarter where we did about $400 million of adjusted EBITDA in the third quarter, so the summer in Vegas. That quarter typically premerger was $300 million to $320 million of EBITDA. So this is still a very strong market. It offers something for every price point. And sure when you're pricing thousands of things every day as we are and our peers are, it's going to be easy to find things where you say, look at how much this bottle of water costs. But the value proposition in Vegas stacks up versus just about anywhere that you could want to travel. And what you can do while you're in town is the breadth of what's available, you cannot -- I line that up with any city in the world. So we feel fantastic about Vegas fundamentally. And we think it won't be very long until that's a story where we'll be talking about -- remember when -- remember the summer when we talked about $25 bottle of water, and that's not what was driving activity.
Daniel Politzer: Right. Okay. No, that's really helpful detail. Just pivoting to regionals, this is more of a high-level one. But obviously, in terms of that more promotional strategy, and I get it's kind of more short-term oriented. But how did you kind of think through that versus maybe the puts and takes of putting more capital into the ground at some of these properties to improve the amenities if there would have been a return on that as opposed to just being more promotional?
Thomas Reeg: Yes. I mean we -- since the merger, we have invested $3.1 billion in just our regional assets. $2.8 billion of that is in the 16 properties that generate 75% of our regional EBITDA. So the properties that have been less touched by capital and all of them have been touched are those that are pretty small, may not have hotel. I think the -- if you look at the regional capital investment across us and our peers, we've outpaced everybody in the last 5 years. And we're really in -- let's harvest those investments and let's give people a reason to come and see them. You spend the capital. Keep in mind, these are properties that are in somebody's neighborhood. They pass it or they pass a billboard every day for 10, 15, 25 years, if you put the money that we put into these properties over the past 5 years, the customer is not going to automatically know it unless you stimulate a visit, get them into the property. And that's what we see is as we reactivate customers that didn't know the money that was put in, New Orleans being a great example of, you start to see organic momentum build because you're showing customers a property that's different than they remember. And so that investment has been made. This is the message of, hey, come and see us and see what we've done. And what we see out of that is organic follow-through. And like I said, this doesn't happen neatly in 90-day periods. This stuff happens over a longer period of time. But we are particularly encouraged by the trends that we're seeing that suggests that what we're doing is working and driving more aggregate cash flow, which is the goal of this whole enterprise.
Brian Agnew: Shannon, for Q&A, we've got a lot of people in the queue. Can we just have everybody ask one question and then circle back if possible?
Operator: Our next question comes from the line of Steve Pizzella with Deutsche Bank.
Steven Pizzella: Just wanted to ask on the regional performance. From the state level data, it looked like trends deceled a little bit in September from July and August levels. Did you see that in your business? And then how do you think about the fourth quarter from a comps perspective for regionals given we saw an acceleration in the data starting October of last year?
Thomas Reeg: So the September question, recall that last year, Labor Day Sunday was in September, and this year, it was in August. So that's a -- that's one of the biggest weekends of the summer, and that's a significant calendar shift. So I would look at August numbers and September numbers together. The only market I can think of that saw a significant shift in demand in September was Atlantic City. The rest of the countries performed kind of as you'd expect. Cost side, I don't have anything in particular to call out on the regional side. What -- in terms of driving incremental margin, that will be a function of -- as we refine our marketing as we move through the quarters, you should expect flow-through and margin to increase.
Operator: Our next question comes from the line of Lizzie Dove with Goldman Sachs.
Elizabeth Dove: I guess big picture, longer term or for next year, specifically for Vegas, it's a lot of moving pieces. You've got the capital investments you mentioned, some good guys from conferences, but also maybe 1 or 2 conferences leaving the system, macro TBD. High level, I know it's early, but just curious how you're thinking about how those kind of puts and takes play out to Vegas next year.
Thomas Reeg: Yes. The big question, Lizzie, is the consumer. Is this leisure demand -- are we going to see it continue to improve and recover? Or do we stall at some point that's shy of where we were before. That's a difficult question to answer. That's a macroeconomic question. I know that the mix will be better for us, in particular, recall that we have the State Farm conference early in the second quarter, which is a particularly large conference for us that drives significant EBITDA. And then you've got the market-wide stuff that's well understood. But the -- we're now, what, 4 months into this stepdown in leisure demand for Vegas. And we -- while we're better than we were in July, we're still not back to where we were on a year-over-year basis. So that will be the question in '26 in my mind is how quick does that recover.
Operator: Our next question comes from the line of David Katz with Jefferies.
David Katz: I just wanted to double back on digital, if I may, for the fourth quarter. I know that the sequential cadence can be tricky where there is some preseason spending in 3Q. I recall a comment, Tom, that indicated the fourth quarter should be super strong. We're still focused on kind of that run rate of $500 million by the fourth quarter. If you could just update us there, please?
Thomas Reeg: Yes. The big swing factor there, David, is game outcomes. Obviously, we had a fourth quarter -- a third quarter that wasn't great. We're 4 of 13 weekends into the fourth quarter, those outcomes have not gotten substantially better. So we are hold for the first 4 weekends was above last year's hold, but below our budgeted hold. So that will have an impact on where the fourth quarter comes in. But the -- as you have seen, sports outcomes are particularly volatile. So I wouldn't take 4 of 13, whether it's positive or negative as determinative at this point, but that's where we stand as we sit here today.
Operator: Our next question comes from the line of John DeCree with CBRE.
John DeCree: Maybe, Eric, I wanted to circle back to your prepared remarks. I think you were kind of dissecting the quarter a little bit and had mentioned, if I heard correctly, some higher acquisition marketing spend in the quarter. If I heard that correctly, I'm wondering if you could elaborate a little bit. Was that kind of expected or unexpected? And was that more customers than you thought getting on board? Just curious if you could give us a little bit more color there.
Eric Hession: Sure. Yes, it wasn't kind of unexpected. It was spend that as we went through the quarter, we steadily increased heading into football and heading into a strong acquisition period for the iCasino side. We acquired a lot more customers during the period as a result of that spend. We believe that over time, those -- that spend will come to fruition with the lifetime values of the customers. However, in the period in which we spent it, it shows up as a drag. And so because on a year-over-year basis, we did increase the spending, I wanted to call that out as one of the reasons why the flow-through was challenged in the quarter.
Operator: Our next question comes from the line of Steven Wieczynski with Stifel.
Steven Wieczynski: So Tom, I want to go back to the regional reinvestment and ask that question maybe a little bit differently. But it's one of the questions we get a lot from investors is the fact that when you were at Eldorado and you were out buying things like Isle of Capri, I mean, you were kind of known as the kind of the king of cutting promotions and basically getting your peers to kind of do the same thing and understand that was kind of a smart business decision. Now you're somewhat kind of pivoting away from that, and you mentioned a lot of that decision is tied to Total Rewards and the power of that platform. So I know you said that hasn't started a promotional war yet, but just trying to get a little more color as to what gives you the confidence that, that doesn't eventually happen.
Thomas Reeg: Well, I mean, we can see -- we see it down to the granular customer level, what's the customer responding to, what are they not responding to. The point I was trying to make is in most markets, there's going to be a gap between what we're spending and what our peers are spending that we're going to be spending less. That gap in hindsight may have gotten too wide. And so what you're seeing is recovery in that, not one-upmanship. And when you change that, it's like when you make an investment, the customer notices that you're making an effort to win their business and all of the reasons that they came to the property before and into the rewards program are -- make them sticky when you get them back. So this is -- this evolves every day. You're competing in these markets all the time. I would say the level of discipline throughout the business is far better than it was before we started this, and we're not seeing anything that suggests that this needs to keep climbing higher and higher. And you should be able -- you should start to -- you can start to see that in the flow-through as we go through the quarters that this quarter was better than last quarter, and you'd expect -- I would expect that to continue.
Operator: Our next question comes from the line of Barry Jonas with Truist.
Barry Jonas: Some of your competitors are looking at the predictive markets. What's your view there for Caesars Digital? And have you seen any impact as these markets are starting to make inroads into sports?
Eric Hession: Yes. To answer your second part first, so far, we haven't seen any impact. I suspect most of the volume that they're generating is coming from states that don't have legalized sports betting. And then there's probably some on the margin that is coming from the legalized states that we might not have been able to access anyway, like 18- to 21-year olds and that type of customer demographics. In terms of the overall plan, we're actively watching it. As we've said before, we can't be out on the lead on this one. We're going to monitor it, make sure that we're not left behind if there's regulatory clarity and that we have a good plan in place for -- should that outcome happen. But in terms of our current actions when there's still uncertainty, and I'm sure you've seen some of the letters from the regulatory agencies, our best approach at this point is to monitor it, put our plans in place, make sure that we're adequately resourced and be ready to move if there's a legalization definition in either direction.
Thomas Reeg: Yes. We will not put any of our licenses at risk. We believe what's happening in prediction markets is sports gambling. If there is a -- if there's a path that develops where we can participate in a way that doesn't put licenses at risk, you should expect we would be -- we are preparing and would be prepared to go down that path, but we're watching it the same as you are.
Operator: Our next question comes from the line of Shaun Kelley with Bank of America.
Shaun Kelley: Tom or Eric, just wondering if we could get your thoughts or help on sort of both the seasonality of the digital segment as we kind of move into Q4 because it is a peak sports season. Obviously, you mentioned we appreciate there's some outcome headwinds, but just more broadly, how you'd expect that to trend? And then secondarily, if you could, Eric, given the lean in on marketing, this kind of -- in this period, your thoughts around customer acquisition as we move into next year, especially as digital wallet is kind of up and running and just you feel really good about the product.
Thomas Reeg: So let me take the seasonality question. Obviously, fourth quarter is your highest volumes given that it's football season and football dominates sports betting. The way that we account for our partnerships is that those -- that spend hits during the season of play. So if you think about some of our large contracts that will roll off in '26, the bulk of that expense hits in the fourth quarter. So it makes volatility -- it makes volatility and hold -- sports hold outcomes more impactful because you're carrying a bigger fixed cost than we're carrying in any other quarter of the year, but then I'll let Eric take the rest.
Eric Hession: Yes. And then in terms of the marketing spend, I would expect it to go back to normal levels for Q4 versus prior year. So nothing -- no incremental acquisition spend along those lines versus kind of where we were trending prior to that. But to your point about heading into next year, I would say the vast majority of our marketing spend has traditionally been earmarked towards the direct channels like Facebook, Google, Snap, those types of things and very more limited on the brand side. I think to your point, with the app in the shape that it is and with the shared wallet now being active in nearly every state and will be in the first quarter, there is an opportunity to do a little bit more of the top of funnel type advertising because the retention rates are going up and the customer response to the app is improving. So I would look at that mostly as a shift, though, not necessarily as an incremental spend, but we'll evaluate it as we go through. And if we're getting really short paybacks on certain spend, we might increase it slightly, but I wouldn't anticipate anything major next year.
Thomas Reeg: And it's -- Shaun, that's similar to what I just talked about in regionals, right? I mean our -- we did our big brand campaign in '21 when sports betting kicked off and our app was not as competitive as it needed to be versus our peers, we've done a lot of work in getting the app up to par, culminating with share of wallet, as you pointed out, we need to give that customer a reason to take a look again. And so that's kind of the top of funnel that Eric is referring to.
Operator: Our next question comes from the line of Stephen Grambling with Morgan Stanley.
Stephen Grambling: Two quick follow-ups on digital. Just given you've seen a lot of moving parts in the regulatory environment across brick-and-mortar and digital, what do you see as the key milestones you're watching for to get comfort on the prediction markets? Is it really just waiting until we get maybe all the way to the Supreme Court? Are there other things that could happen between now and then? And then given the outsized wins on behalf of consumers, are you seeing any change in how much money is being kept in accounts that might be indicative of future wagers or strength further into the football season?
Thomas Reeg: So I'll do the first one, have Eric do the second one. I wish there would be a point of clarity and certainty in the near term around prediction markets. It seems like the path this is going to go on will ultimately be decided at the court level, ultimately, the Supreme Court level. And I'd expect that there's going to be rulings that go in both directions along the way. And ultimately, if something gets appealed up to the Supreme Court, there is a state rights versus federal rights question here that's larger than just sports betting that might argue that the court takes it up relatively quickly. There's also the argument. There's a lot of stuff bubbling up to the Supreme Court and maybe this gets pushed back further than we'd like. But we -- I would expect we're going to be in this cloudy period for quite some time.
Eric Hession: And then on the second part of the question, we -- after customers have a good weekend, we do see the balances higher. It doesn't necessarily persist all that much over time. They tend to either draw them down or recycle it throughout the week and into the next weekend. But there is definitely a loose correlation between the customer outcomes and the volume as you'd expect when the hold goes down. But I would say that the outcomes of the customers in Q3, while it was to their favor, our core volume growth was still much stronger than in prior periods. So that -- the entire result wasn't driven by the customer outcomes.
Operator: Our next question comes from the line of Chad Beynon with Macquarie.
Chad Beynon: During the quarter, I know the city ran a few ad campaigns. I'm not sure if that stimulated demand. So a, I wanted to ask about that. And then secondly, is this something that you think we could maybe continue -- could continue to see throughout 2026 to just help the perception of value for some of those customers that have fallen away?
Thomas Reeg: Yes to both, Chad. So we participated in the sale that you're referring to. Our bookings picked up considerably during that sale. So it was effective. And we know that LVCVA intends this to be an ongoing campaign. So you should expect this not to be one shot in terms of the messaging around value in Las Vegas.
Operator: Our next question comes from the line of Jordan Bender with Citizens.
Jordan Bender: There's been some movement in the M&A market. As you think about your leverage and your footprint in Las Vegas, I just want to check your temperature around potential asset sales in Las Vegas and then also how you think about the Caesars Forum put call agreement outstanding.
Thomas Reeg: The call option -- the put call option is -- you should expect that if that's exercised, it would be called by VICI. I'd anticipate that they'd be doing that toward the end of that period of time. And -- but I don't want to speak for them. We choose the rent, it would be -- we would choose the lowest rent that we're able to choose. In terms of M&A, we would -- we're never closed. So if there was something that made sense for us, I'd say we're open to talking about each and every asset, but we are not actively involved in marketing the Vegas asset.
Operator: Our next question comes from the line of Daniel Guglielmo with Capital One Securities.
Daniel Guglielmo: We've seen some OpEx pressure this quarter and last. And as you start budgeting for next year, are there certain expenses outside maybe the marketing that we've hit on that you all are going to spend more time thinking about for 2026?
Thomas Reeg: I mean labor is always our biggest, and we're constantly looking to optimize labor across the enterprise. We're well into the union contracts in both Vegas and Atlantic City. So you're kind of at manageable increases as we move forward. There's nothing that stands out as you asked that question to me.
Brian Agnew: But if you're looking at labor in the 10-Q, specifically in the regional segment, that's not exactly same-store because you've got Danville and New Orleans in there, and there were some onetime benefits in the prior year quarter. So it's not really a same-store number if you're looking at that labor line in the Q.
Thomas Reeg: Yes. So Danville and New Orleans are both substantial integrated resorts that had -- Danville wasn't open, and New Orleans was much smaller last year.
Operator: Thank you. And we've run out of time. I would now like to turn the call back over to Tom Reeg for closing remarks.
Thomas Reeg: Thanks, everybody. We'll see you next time.
Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.