Caesars Entertainment Inc (CZR) 2020 Q2 法說會逐字稿

(technical difficulty), and welcome to today's Caesars Entertainment 2020 Second Quarter Earnings Call. My name is Michelle, and I will be your events specialist today. (Operator Instructions) And that today's webcast is being recorded. (Operator Instructions)

It is now my pleasure to turn today's program over to Brian Agnew, Vice President of Finance and Investor Relations. Sir, the floor is yours.

Thank you, Michelle, and good afternoon to everyone on the call, and welcome to the first earnings call for the new Caesars Entertainment to discuss our second quarter 2020 earnings. This afternoon, we issued a press release announcing our second quarter financial results for the period ended June 30, 2020. A copy of the press release is available on the Investor Relations section of our website at investor.caesars.com.

Joining me on the call today are Tom Reeg, our Chief Executive Officer; Anthony Carano, our President and Chief Operating Officer; and Bret Yunker, our Chief Financial Officer.

Before I turn the call over to Tom, I would like to remind you that during today's conference call, we may make certain forward-looking statements about the company's performance. Such forward-looking statements are not guarantees of future performance and therefore, one should not place undue reliance on them. Forward-looking statements are also subject to the inherent risks and uncertainties that could cause actual results to differ materially from those expressed. For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements, you should refer to the cautionary statements contained in our press release as well as the risk factors contained in the company's filings with the Securities and Exchange Commission. Caesars Entertainment undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after today's call.

Also during today's call, the company may discuss certain non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company's website at investor.caesars.com by selecting the press release regarding the company's 2020 second quarter financial results.

And finally, while our press release today and our 10-Q cover the operations of Legacy Eldorado for the second quarter of 2020, the company posted supplemental financial information for the combined new Caesars to our website this afternoon, covering the period, January 1, 2019 to June 30, 2020, which we will discuss today on the call.

I will now turn the call over to Tom.

Thanks, Brian. Good afternoon, everybody, and thanks for joining us. We're in a totally different world than the last time we spoke to you on an earnings call. At that point, every casino in the country on both sides was closed. The Caesars deal had not -- the Caesars transaction had not closed. And I was sitting in a car in a parking lot of a grocery store addressing you, so that I had a cell signal. So we've come a long way since then.

I want to thank the Caesars' management team and the ERI team for the extraordinary effort to get 50-plus properties reopened as the world reopened in the May, June time frame.

We want to thank most of all our front-line employees that are dealing with customers every day. As everyone knows, this is an uncertain situation that we're dealing with. There are scary reports out there. Our employees came back at better than a 95% clip in terms of being called back to work. We've got about 55% of them back. We're very happy that, that's the case. And we're thankful for the work that they have put in to make our reopening as successful as it's been.

On our last call, I talked to you about things that I saw in press reports and in the investor community that I thought were in error, most notably pointed to, you should expect to see a significant margin surprise on the regional side. I think you've seen that across the sector. I think there's some misconception still around particularly the regional business that I'll address as we get to that point of the call.

In terms of results, as Brian told you, this is an odd quarter for us, in that, we filed financials just for the Eldorado side. So we took the step of a supplemental filing that gives you pro forma, historical results in the same layout that we intend to report on going forward, so that you should be able to build into your models as seamlessly as you can in something that's this big in terms of transaction.

For the quarter on a consolidated basis, we were just shy of $500 million of revenue. We lost $136 million on the EBITDA line. Obviously, that was due to most of the portfolio being closed for the first 2 months of the year. You already saw our reopening results when we did our financing in June -- I'm sorry, in July. So you know that regionals were quite strong, destination markets have lagged. And Anthony will get into specifics of the numbers there. But that the -- our experience has been the same going into this quarter. You had some, what I would describe as, media fear mongering over what might happen 4th of July weekend that I think muted visitation across the country. But other than that, weekend, our results across the board have been similar to what we reported in the reopening period.

As discussed, we closed the Caesars transaction on July 20. Prior to that, we did some significant capital raising both debt and equity, and Bret will take you through specifics of that.

Moving to our operating segments. In Las Vegas, we are running and have been running mid-week occupancy around 50% and starting to climb again. We're running weekend occupancy to our caps, which are now in the high 70s. We've capped occupancy in Las Vegas because of limitations on what the customers can be offered in the non-gaming area, in food and beverage limitations, no bars most recently and social distancing at pools when it's 110 degrees. We want to keep our -- we want to keep control of the health and safety situation for both customers and employees. So Caesars was capping occupancy as properties reopened at 80% and was running that on weekends. They pulled back to 70% as cases rose in Nevada, and we've started to move that back up since we took over.

We're pushing almost 60% of our rooms, our casino rooms. So effectively, our prior casino block and -- which used to represent convention business of 14%, 15% has combined into 1 casino room block. That's very different than our peers in Las Vegas, and I'm sure you're aware as you listen to these comments. We are putting customers into rooms where we're supremely confident as to how much revenue we're going to get from that room during the visit. We're far less dependent on the random guy who books through FTA, and you really don't know what you're going to get. And it has shown us and should show you the power of Caesars rewards, that's clearly a very different mix and occupancy level than our competition here. And keep in mind that those numbers are prior to the Eldorado customers coming into the Caesars database. So we think that's going to continue to get better.

As you look at Vegas going forward, what I think you should consider are the following: one, the numbers relative to the virus have been gradually improving from the spike a few weeks ago. Unless you presume that, that's going to reverse and we're going to go in the wrong direction, we and all of our peers in Las Vegas should be doing as (technical difficulty) we're going to do right now. And I just told you the levels that we're doing.

We are significantly EBITDA positive in Las Vegas. Every property that is open -- every hotel that's open is EBITDA positive. And we feel we're going to build from there. If you think about a stable virus situation or improving virus situation, the next steps in Las Vegas would be bars would come back, which we think is a reasonable possibility, relatively soon and then you'd be looking at socially distance entertainment as a possibility. We're unique in our mix of entertainment and that we are not as dependent on headliners and CIRC as the rest of the market. We have a lot of shows that are smaller venues, multiple times a day and would be profitable at typical social distance guidelines. So as those come online, we should have a mix of entertainment that isn't matched in the market just because of the structure of how us and our peers have tackled entertainment historically.

And then the big piece is the group business. So group business, we had a very strong quarter of booking new group business. Group business, as you book it in a quarter, is typically for 6 to 24 months out. And our booking levels were dramatically in excess of last year. But what's happening in the meantime is existing group business in the near-term is canceling. We've got a prohibition on groups north of 50 in Las -- in Nevada, Las Vegas in particular. Until those caps are lifted, I don't think you're going to see group business return. And those groups -- well, I know that group business will return, and particularly your larger groups, those are -- those require a lot of forward planning. So it's not surprising to us that you start to see first quarter conferences start to cancel when the 50-person cap is still in place.

As you start to see bars reopen, you start to see socially distance entertainment, and ultimately, you see groups more than 50. And importantly, we get out of the pool season where there's such heavy demand for that product, we would expect to lift our caps and we expect to fill to those caps in Las Vegas. So we're extremely pleased with the way that Las Vegas reopened. Gary Selesner leads our team out here as Regional President. And he and all of the GMs and leaders in the Las Vegas market did a fantastic job under incredibly-trying circumstances to get us off and running. We're excited for where we'll go from here.

On the regional side, we are seeing continued strength. We have drags in Atlantic City, Reno and New Orleans, where we're generating positive EBITDA, but at levels that are comparable to the declines that we've seen in Las Vegas in terms of year-over-year numbers, basically because those customers come from beyond an hour to drive. And in Reno, for example, we've only got about half of our rooms open. Atlantic City, you can't serve food in restaurants, you can't serve alcohol, you've got 25% access to your casino floor. So you have structural limitations that are drags on those properties' results. But even with that, in the regional space, we are approaching prior year levels in EBITDA. We're still not quite there, but we're getting pretty close. So the regional markets continue to improve.

And in terms of what I'm seeing in narrative that I disagree with, we've seen tremendous margin improvement as we detailed, and Anthony will go into detail in his remarks. We expect that to continue. It's not going to continue 100% because you are going to bring in pieces of the business like lower limit table games that will be profitable, but are dilutive to that margin number as you move forward and are able to do that. But I think the fear of return of promotional spending in the regional space is completely off the mark. The -- we have, for a very long time, have looked at -- have talked to you about the -- that these subsidies in the business were unnecessary. All of us, everybody in the sector has gotten a look now as to what their business looks like without those subsidies. And it's impossible to argue with the results that we're seeing. I just saw 10 this morning, super strong quarter and just the latest in a line of them. You should not expect people running back to promotions that are dilutive to EBITDA.

For -- on the one hand, if you believe that, you believe the people that run the businesses in this sector are morons because they can see what the business looks like without them. But two, the actors that you would have been worried about in the past in that area have largely been absorbed by companies like us and Penn and Boyd and others. And those that are left could behave in that fashion, don't have enough scale to where somebody like us would need to react to. So I think the -- I read a lot about fears or hear questions on fear of promotional return. I think you guys are way off base.

The other point, I think, is off is the fear that this level of business is unsustainable. It is undoubtedly true that we have benefited from customers that have no other entertainment or little in the way of other entertainment options coming to visit our properties over -- since reopening. That -- as those other options, movie theaters, cruise lines, sporting events, as those come online and you will have more options, some of those will go away, some of them will keep. But our softest segment is 55 plus, which coincides with our most -- if not our most valuable, among our most valuable segments, and those are generally people that are fearful of leaving their house at this point. So logically, we're seeing some softness there. Despite that, we're putting up the numbers that we're putting up. And I don't see a scenario where those other entertainment options are opening. So we're losing some of that new business and the health situation hasn't improved to the point where that 55-plus group is coming back. So I think you're also off-base there.

Our unrated business is up substantially since reopening and really has replaced the lag in 55-plus. Like I said, I think we're going to keep some of that unrated business, and I think the 55-plus will come back. So I think regional is very strong now and going to get stronger.

And then I would conclude my opening remarks with sports and online is a hot topic of conversation these days with anybody I talk to on the phone. I'll tell you again, we want to come to a permanent solution for this business for us. We bring the William Hill partnership. We bring our Internet gaming business. Caesars brings its own Internet gaming business and its sports business and its sports partnerships. And we see the same valuations that you see in this space as we sit here today. But I will tell you, as shareholders, we're not going to react in a knee-jerk fashion to those valuations and do something that's not the right solution for the business over the long haul. So we're going to prosecute that opportunity. I would still expect that we'll have something comprehensive to talk to you about inside of this calendar year, but you shouldn't expect us to be printing something right around the corner.

And just to give you an idea of what this business looks like. If you look at the combination of what we bring into the William Hill partnership, we believe that next year, we're in the range of $600 million to $700 million of revenue in this area, which, as you know, is similar to others out there. The difference is we're making money. So if you look at just 2020 IGaming revenues, which we own 100% of, we're pacing to $125 million of revenue in just New Jersey and margins are mid to high 30s on that business. So we think we have an extraordinary opportunity and they're -- I'll say it again, there is room for multiple success stories in this space. This is the most exciting growth opportunity that I've seen in over 25 years in or around this space. There's going to be multiple players that succeed. I'm a 100% convinced we're going to be one of them.

And with that, I'm going to turn it to Anthony to go into operating detail.

Thank you, Tom, and good afternoon to everyone on the call. I'd like to take a few minutes to provide you with some operational highlights for the combined new Caesars reopened properties during the second quarter. Our first regional property began reopening on May 18, and week by week, we were able to continue reopening additional properties throughout the quarter. As of today, 51 of our 54 owned, leased and managed properties in the U.S. have reopened. All of our regional properties have successfully reopened and 6 of our 9 assets in Las Vegas have reopened. Currently, Rio, Planet Hollywood and Cromwell remain closed.

As disclosed in our 8-K from July 15, the Caesars legacy regional property that reopened during the second quarter reported strong operating results. Through June 30, these properties achieved revenue growth of 9% to 11% year-over-year and EBITDA growth of 70% to 80%. Margins for the reopened regional properties increased approximately 1,800 basis points.

Additionally, the reopened legacy Caesars destination properties reported revenue declines of 48% to 50% and EBITDA declines of 55% to 60%, both on a hold-adjusted basis. Margins for legacy Caesars destination properties decreased approximately 1,500 basis points.

On the legacy Eldorado side, revenues for the reopened regional properties decreased approximately 9%, EBITDA increased 16% and margins expanded by 920 basis points year-over-year. Legacy Eldorado destination properties that we opened during Q2, generated revenue declines of 42% and EBITDA declines of 29%. Margins expanded by 540 basis points.

Overall, our immediate actions to reduce operating expenses at our reopened properties contributed to a leaner cost structure that we believe will contribute to sustainable EBITDA margin expansion. I'm extremely proud of our team members and their commitment to deliver great guest experiences in these very difficult times. All of our team members have contributed to our ability to successfully reopen our properties and to deliver these strong operational results.

With that, I'll now turn the call over to Bret for some additional insights on the second quarter and details on our balance sheet and capital structure. Bret?

Thanks, Anthony. As everyone on this call is aware, we had a very active second quarter from a financial perspective, which was highlighted by our historic debt and equity executions that were successfully placed in late June and yielded us $8.8 billion of proceeds to finalize the merger financing.

In conjunction with our capital markets execution, we also announced $700 million of incremental liquidity through transactions with VICI and our banks, that we expect to be effective by the end of September. The driving logic behind our capital raises was to put an abundance of liquidity on the balance sheet, that will allow us to navigate through various operating scenarios that we understand will evolve alongside the ongoing health crisis.

Pro forma for the full redemption of the Caesars convertible notes and closing of the aforementioned transactions will have access to $2.2 billion of undrawn revolving credit facilities, just under $1 billion of operating cash and approximately $600 million of excess cash on the balance sheet.

Based on current operating trends and the execution of incremental cost savings, we expect to end the year with bulk of that excess cash on hand and 0 balance on the revolvers. Given the number of properties in our system and short booking windows being experienced in our destination markets, this is the most dynamic modeling scenario we've ever encountered. What we know sitting here today is that our regional portfolio in large part is performing admirably on a year-over-year basis. The strip will remain challenged until we see a meaningful return of group business and other nongaming forms of entertainment. And we will continue to execute on our original plan to drive merger-related revenue and expense synergies.

Our approach to maintenance and growth capital investment will be focused and disciplined. We're learning more every day about the Caesars' portfolio and are excited by many of the investment opportunities being brought to us by both our corporate and property level leadership teams and the potential for cash flow savings in areas where capital resources had been previously misdirected.

In terms of modeling over the next 12 months, we expect to spend approximately $350 million on CapEx, excluding any Atlantic City CapEx that was escrowed when we closed the merger.

With that, I'll turn it back to Tom.

Thanks, Bret. With that, we'll open it up to questions from the group.

(Operator Instructions) Your first question comes from the line of Carlo Santarelli from Deutsche Bank.

Tom, you spoke a little bit about the 2Q group booking pace for Las Vegas. And I just wanted to confirm because it wasn't entirely clear. Would you talk about the group productivity over the next 6 to 18 months that you experienced in 2Q? Is that, I don't want to say organic, but unique to stuff that -- you're not talking about stuff that might have been canceled earlier, then was rebooked, those are kind of incremental things, or it wasn't stuff that was canceled in the near-term and pushed out to 2021 or 2022 or whatever it was. Is that correct?

Yes. So to give you, Carlo, specifics, we booked almost $200 million worth of business versus $120 million in last year's quarter, about 15% of that business was rebooking. So 85% is new business.

Okay. That was very specific. I appreciate it. Just in terms of how you guys are thinking about. I know, obviously, there's couple of divestitures here that are already ticketed and targeted. There's a couple that you'll still work through. And then there is the Las Vegas Strip asset. Just in terms of the cadence of those as you move forward, what are you kind of thinking in terms of timelines for some of the Indiana stuff as well as any that may potentially happen in Las Vegas?

Yes. So Carlo, we had some smaller properties that had processes ongoing before and through the merger process. So to the extent that any of that resolves itself, soon you could see some activity there, but that would be largely immaterial to the size of the business. If you look at what's coming, obviously, we have divestiture requirements coming out in Indiana that have a relatively near-term timeline associated with them. You should expect that we are working on those and we'll be looking to get something done relatively quickly in Las Vegas. We still intend to sell a Las Vegas asset. I would say, pre-COVID, we were talking about a deal within the first 12 months post closing, it's possible that -- now that's first 12 to 18 months. But as soon as you get to the other side of the virus and more normalized business levels, you should expect we'll be thinking about that as well.

Great. And then, Bret, excuse me, if this is maybe -- I saw that the Q was just filed, but I don't believe that there's anything in there as it pertains to the pro forma entity. Any chance you could provide cash and debt for the combined company as of June 30, potentially?

Yes. The round numbers are about $14.7 billion of traditional debt and roughly $1.7 billion-ish of total cash. So $13 billion of net debt, which if you look back to last year's merger announcement deck, you would have landed at $13.5 billion and $1 billion, so $12.5 billion. The difference is really the ticking fees and some of the escrowed cash for CapEx.

Your next question comes from the line of Steve Wieczynski from the company of Stifel.

Tom, I guess, given everything you've gone through the last couple of months, I think you might -- maybe I'm crazy, but to me, it almost sounds more optimistic than ever on the long-term health of the regional, and I'd even say, maybe strip gaming markets. With all the costs that you have taken out of the business, I guess, how do you maybe envision EBITDA flow through? What is that going to look like a couple of years down the road?

Yes. So Steve, as you know, normally, we'd be telling you, here's what the synergies were realized for the first day, here's where we are versus our target. That's been flipped on its ear. You've got about a little over $1.25 billion of cost that is not back in the business. And at closing, Caesars had executed on about $200 million of the original $400 million of cost savings. So to hit our $800 million target, the $400 million original and the $400 million we announced in the financing, about half of that would stay off-line. That certainly seems eminently achievable, and that would put our margins in the mid-30s versus a 28% number, if you use the same revenue number as 2019. But obviously, at a lower revenue number, that margin is going to be higher.

I think that as you look out past what's going on with the virus and getting into a normal environment, I think you should be thinking about this consolidated business as at least high 30s of EBITDA margin, if not a 4 handle.

Okay. That's very, very helpful. I guess the second question would be, you talked about the sports betting opportunity. And I think you said $600 million to $700 million in revenues. I don't know if that was -- I think you said next year. But can you maybe help us break that down a little bit in terms of how you're getting to that range?

That's what we're bringing to the party and what William Hill U.S. does combined. So we've got an ownership piece in William Hill U.S., which is predominantly our piece of -- the partnership that they have with us, plus our iGaming stuff that's outside of that partnership, we think total revenue will be $600 million to $700 million next year.

Your next question comes from the line of Thomas Allen from Morgan Stanley.

Just (technical difficulty)

Tom, you're breaking out.

All right. Sorry. Can you hear me now?

Yes. Now you're good.

Perfect. Just thinking of sports betting. Can you just talk about what you've seen in the sports book since the major leagues relaunched?

You see -- anecdotally, I'd tell you, you see significant activity because there's really not a lot else that's open. Right now, if you're in Vegas, you're at a gaming table or you're at a pool, or you're in your room, and now you've got sport books as well. You're seeing more than normal levels of activity live in the retail sports books.

Okay. Perfect. And then thinking longer term, in New Jersey, I think you have a little bit over 20% market share in iGaming and decent share in sports betting, could you just talk a little bit about the cross-sell between those products that you're planning on doing?

Yes. Clearly, that's going to be key, a single-wallet solution, particularly one that is tied to our rewards database and what we can offer, we think is going to be powerful. And as I said, we're already significantly EBITDA positive in that business. So we don't have the same customer acquisition cost as others that we're competing with, nor do we have the access fees as well. So it should be -- that's why we think we can be so well positioned in this space. But as I said, I expect multiple winners here.

Can you give us July EBITDAR for the combined companies?

No. Thanks for the question.

Your next question comes from the line of Dan Politzer from JPMorgan.

You've had to divest a lot of assets, and there's still more planned. I guess, how should we think about the free cash flow algorithm that maybe laid out when you first announced the deal of $1.5 billion? I ask that acknowledging that it's a much different operating environment, but assuming things do normalize at some point, what does that look like?

We laid out a -- we thought there was a path to $10 of free cash flow per share when we announced the transaction, we still think there's a path to $10 of free cash flow per share.

And does that assume a recovery of the strip in full? Or is it above prior peak in that scenario?

From a revenue standpoint, it's a recovery to something resembling 2019, but not -- we're not presuming a peak beyond that.

All right. And then on sports betting and iGaming, can you maybe talk about how you think about growing your share there? And we've looked at -- we've seen the numbers in New Jersey, and we've also seen the numbers in Pennsylvania. I guess, what are the differences in what's going on in those states? Is this just the matter of Caesars hadn't really ramped its product there? Or is this something that you guys are looking to grow share in the near future?

It's a function of the former that Caesars has not ramped its product in Pennsylvania and it has in Jersey.

And then on -- how do you think about your long-term share in sports betting and iGaming, any opportunity?

Look, you know us, you know that we're going to -- we're not going to be the guy that's out there buying share. We think the combination of all of the assets that we can bring to bear there and the rewards database should put us among the leaders in the space. And I think that leaders in the space are going to be, call it, somewhere between 15% and 30% market share.

Got it. Congrats on closing the acquisition.

Your next question comes from the line of John DeCree of Union Gaming.

And I'll second the congratulations on getting the transaction over the finish line.

Thank you, John.

Tom, I wanted to ask about the casino mix in Las Vegas. I think in your prepared remarks, you had mentioned 60% or so right now. Curious if you could put a little context around that as to what former Caesars kind of casino mix in Las Vegas had been? And where do you think the optimal mix is going forward in Las Vegas as things hopefully begin to normalize?

We were at 40 -- prior caesars was at 40% and about 15% of group business. We sure like to have that group business back. But as I said, that's going to take a little bit of time. Bringing the Eldorado -- the piece that you want to take from is the OTA piece. Just because there's nothing wrong with OTAs, it's just that customer is the least predictable in terms of what they spend outside the room. And so to the extent that we can by bringing our customers into the Caesars database, increasing the opportunity set by 20%, we can cause some more share in casino play at the expense of OTA. That's a good trade for us. Casino expense for -- I'm sorry, casino segment for group segment is not as good of a trade, but it's far better than replacing group business with either an empty room or an OTA customer.

Got it. That's helpful. And the last one is a quick follow-up on Las Vegas, the properties that have not yet reopened. You've mentioned you're kind of seeing a little bit of occupancy build. And when some restrictions are lifted, you could build this occupancy at the open properties. How do you think about the reopening of what's left? General guidelines obviously, tough to predict how things will play out over the next couple of weeks, but what should we look for as you contemplate reopening additional rooms at additional properties?

Well, we look at Las Vegas as the city, right? So if we can open a property and it's additive to incremental EBITDA citywide, that's when we'll pull the trigger.

Right. Thanks you and thanks for the Reg FD filing with the pro forma, that's very helpful.

Your next question comes from the line of Barry Jonas from Truist.

Tom, how important is having an omnichannel strategy when you think about digital? And are there any limits to executing on that strategy if your land-based and digital businesses would somehow be separate entities?

Well, you want to be -- as I said in answer to Thomas' question, you want a single-wallet strategy that's integrated into your player database and takes advantage of all the offerings that we have on the physical side. So you shouldn't expect us to do a deal that gets in the way of that outcome.

Got it. Got it. And then maybe I missed this as well. But after Indiana and potentially one asset in Vegas, are there -- are you thinking about any more divestitures or potentially, are there any holes that you'd like to fill in any markets?

Everything is for sale every day, Barry. We're entirely economic animals. In terms of what we are looking at, the divestitures that you listed are what we're considering, but we're always happy to be wowed by an offer for one of our assets.

In terms of holes in the system, I really don't look at the map and say, I got to figure out a way to be in some particular city. And you shouldn't expect us to be doing anything on the international front anytime soon.

Got it. And just if I can one more. We've heard a little bit today about cashless technologies and potentially their introduction. Any thoughts there about introducing that to your properties and potentially how meaningful that could be?

I think it's long overdue in the space. I think the -- this entire public health situation has been thoughtful across the board. That's among the handfuls of silver linings that the handling of cash in this business is antiquated. Most of the rest of the world is now moving to cashless are already there. And I think that because of what's happened with the virus, I would expect the pace of the ability to get there to quicken, and that's a big cost savings for us that's additional liquidity. It's a whole -- it hits a lot of different areas that you might not be thinking of if you think of that transition. That would be a big win for the entire space.

Your next question comes from the line of Chad Beynon of Macquarie.

Congrats on the acquisition. Tom, you answered the synergy question already, but I wanted to ask it in a slightly different way. I guess, the way that we have been thinking about it before, just thinking about the original bucket. So I think you've noted that labor, I guess, in totality is around $3 billion on an annual basis. And you mentioned that now you're back to roughly 55%. So when the Rio, Planet Hollywood and Cromwell are open, I guess, where does this put you? And then more importantly, realistically, where do you think this number gets to in the next 6 to 12 months on a percentage basis?

So I'd say we're 55% in terms of bodies. In terms of expenses that have come back, we'd be higher than that. Most of what is furloughed are frontline employees, it is in terms of absolute volumes. So there's more cost that has come back than the 55%. But that's where you think about areas that are likely gone forever, like I'm used to hear the rest of the space now talk about buffets, like I've been talking about them with you for 4 or 5 years, Chad, where I don't really understand why we would lose as much money as we did in that business historically. Well, now everybody seems to have come to that conclusion. And from a health and safety standpoint, frankly, it doesn't matter whether we came to that conclusion or not, you can't open them. So areas like that, you're going to see significant costs not come back. We raised our synergy at some like $400 million post-COVID. And a significant piece of that is areas like that, that don't come back and then marketing that doesn't come back where, as I said, everybody in the space has gotten kind of the answer key to the test. And I don't expect a lot of that to come back.

Great. You're definitely a trendsetter. And then regarding the William Hill relationship. I believe they've moved pretty fast on the strip from a retail standpoint. I think their books are now live at Paris Link and maybe even Caesars Palace. But on the online branding side, should we still expect that they'll be running with Caesars Sports and William Hill as the brands to customers online? And is there anything with the CBS partnership that customers will be able to see in the near-term now that sports are open?

Well, the CBS partnership really is access to -- from a business standpoint, it's access to a database that should drive business. From a rollout standpoint, our books here are, what is it, William Hill at Caesars. In terms of what the brand is online, 2 brands, William Hill and Caesars, for now.

Your next question comes from the line of David Katz from Jefferies.

You've covered a lot as usual. Bret, I hope you don't mind me asking you to just repeat the very last sentence of the remark around CapEx for the next 12 months and help us with some cadence? And any color you might be able to give us beyond that just since we're modeling a bit longer than that, it would help?

Yes. No problem, David. I spoke about $350 million looking out over the next 12 months of CapEx across the portfolio, excluding Atlantic City specific CapEx, which we escrowed for the day we closed the merger.

And -- so the $350 million, is that inclusive of maintenance and growth? Or is that the total number?

Yes, that's exact both.

Got it. Because I can recall talking about numbers that were a little higher, obviously, pre-pandemic, that may have started with a 6. Are you deferring some of that? Or am I mixing an apple and an orange?

A little bit of both. We've got a compression of the portfolio, obviously, with a number of divestitures. So the size of the portfolio comes down. So this is a cadence of CapEx. There's a little bit of remaining room remodel CapEx in Las Vegas that was traditionally in that run rate number that you would see by Caesars historically. So we've got a little bit of both. We expect that as everything comes back online, some of the lower returning capital projects will get turned on as you get past this next 12 months.

And I would add, David, that, that $300 million doesn't include the capital that will be spent in Atlantic City. Because for our purposes, the $400 million is already in escrow, it's already been spent.

Your next question comes from the line of Shaun Kelley of Bank of America.

Just really one question or kind of clarification because you always spoken about the -- but I'm just interested in the casino mix with the 60% number that you spoke of in the prepared remarks. Just curious, how has that trended as you kind of reintroduced or opened new properties? Does that number stay pretty stable for you? And is that an optimal number when you kind of think about going forward, if you could get the group mix back, do you want to keep that casino mix high? Or are you actually more profitable if you mix into more, kind of, let's call it, traditional hotel and leisure guests, but this is who's available right now.

So like I said, you want the group business back, you'd like and expect that to grow as the forum comes online with groups coming back. So that would eat into -- or that would grow higher. The casino mix, we expected it to go higher post transaction because we're introducing the Eldorado player database in, but that would have been at the expense of OTA. And in terms of experience at properties as we have reopened, it's been pretty steady throughout. It's been very heavy casino mix, which, again, speaks to the power of that database.

And Tom, just to clarify, you haven't yet, I mean, -- or are you at the place yet where you have introduced this at all to the Eldorado database? Or I mean, I would assume with how quickly the merger is closed, you haven't even gotten to that point yet?

So day 1, you were able to link your account if you were -- whether you were on the Eldorado side or the Caesars side similar to when 2 airlines merge, and you have both frequent flyer programs. So you can effectively transfer your status. It's a bit clunky. By the middle of September, it will have rolled out on a not fully functional, but functional enough for most of the customer base throughout the Eldorado portfolio. And then there's another level of fully integrated, like it was a Caesars property all along, that starts in December, and that will probably take another 6 months or so to roll through the entire portfolio. So that's the mechanics.

But in terms of impact on the business, until you get to mid-September and you rolled it out across the ERI system, you really -- you have the people that are really paying attention that are taking advantage now. It should be a step function in the middle of September.

Your last question comes from the line of Jared Shojaian of Wolfe Research.

Tom, if I could just go back to your comments on sports and iGaming. You said you'll have something comprehensive to talk about inside of this calendar year. Are you specifically referring to a separation? Or is it maybe a restructured agreement with William Hill? Can you just help me understand that comment?

And then if you were to separate this business, would you still want to have majority ownership?

The answer to what happens before year-end is a comprehensive strategy that describes how we are going to prosecute the sports opportunity that could include any number of what you laid out or more. We are looking for the greatest return for our shareholders. I'm not trying to solve for how much of an entity I need to own, but I'd also say the -- as I said in my opening remarks, this is the biggest growth opportunity I've seen in this space since riverboats were being legalized in the early '90s, we want to own a lot of this. So we're looking for what's the best path operationally just in terms of running the business, and we've had some questions dealt with that and then what makes the best sense for our shareholders. And the marriage of that will produce what we're hoping to be able to announce by the end of the year.

Got it. Okay. And then just as an unrelated follow-up going back to Vegas. Appreciate all the commentary, pretty impressive just given circumstance. But can you give us a sense for what the Vegas Strip did in the month of June on revenue and EBITDA? I know in your July update you gave us the destination properties. But I'm not sure if that's fair to extrapolate to the Vegas Strip, just given you're periodically reopening properties throughout the month. And then whatever that number is for June, is it fair to extrapolate that out to July and what you're seeing so far to date?

So Vegas did about $100 million of revenue in June and about $25 million of EBITDA. And in terms of forward -- in terms of July, you'd have been softer than that pace for the first week and pretty much back at that pace after that.

There's no questions at the moment. Please continue.

All right. Thanks, everyone, for your time and we look forward to...

Thanks to all joining us today. We hope you found this presentation informative. This concludes your webcast, and you may now disconnect.

Thanks very much.