Q1 2020 Earnings Call
Please standby.
Good day, ladies and gentlemen, and welcome to the Eldorado resorts 2021st quarter Earnings Conference call. Today's conference is being recorded at this time I would like to hand, the call over to Mr., Joe just Sony Investor Relations. Please go ahead Sir.
Thank you Lisa and good afternoon, everyone and welcome to Eldorado resorts, 2021st quarter Conference call joining us today from the company, our Chief Executive Officer, Tom Reeg, President Chief Operating Officer, Anthony, Colorado, Chief Financial Officer, Bright younger NBP corporate clients Bryant Agnew.
On today's call will review the company's ongoing progress progress against its key strategic priorities, including the status of El Dorados proposed acquisition of Caesars Entertainment. We we'll then open the call to participants for questions.
Afternoon, Eldorado resorts issued a press release announcing its first quarter financial results for the period ended March 31 2020.
This is available in the Investor Relations section of the company's website at Www Dot Eldorado resorts Dot com.
Before we get started today I'd like to remind everyone that this call is being recorded a webcast replay will be available for 90 days the details of which are in today's press release.
During today's 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 discussing 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.
Throughout our resorts undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances are occurring after today's call.
Also during today's call the company May discuss non-GAAP financial measures as defined by FCC regulation G.
GAAP financial measures most directly comparable to each non-GAAP financial measure discussing a reconciliation of the differences between each non-GAAP financial measure and in the comparable GAAP financial measure can be found on the company's website at www Dot Eldorado resorts Dot com.
Selecting the press release regarding the company's 2021st quarter financial results.
You for your patience with that at this time, it's my pleasure to turn the call over to the company CEO Tom Reeg. Tom. Please go ahead.
Thanks, Joe.
Good afternoon, everyone.
Welcome to first quarter.
Earnings call I'd start by saying I hope this fight that.
We find each of you on yours.
Hi healthy at this point. This is obviously, we are obviously living through.
Extraordinary times.
It was an eventful quarter for us.
We lost 18 member to the virus switches.
Horrible we're living through things we would.
Ever expected too but.
We're pulling together and.
Working through it and we look forward to.
Period ahead.
For the quarter.
I'm going to spend a very brief amount of time on the actual financials because.
Unlike any quarter I'd been associated with they really don't matter now.
So the first two months of the year.
We were off to an extraordinarily strong start.
Revenue was up over 6% on a same store basis EBITDA was up almost 25%.
That was through the first two months and then March started to slow.
As news the virus spreading.
Traveled and then we started to get the closings.
In March turned out to be.
Very difficult months or so.
And for everyone on.
On a same store basis, we in the first quarter.
Revenue was down 17.5% to 473 million.
EBITDA was a little over 102 million down.
33%.
I'll talk about what we did.
Yes.
The crisis started to unfold.
Our immediate reaction was.
As a company with.
Balance sheet resources and liquidity, our job was to bridge our employees to the point where.
Hey, we're able to get help help from the government we paid our employees.
Through April Ken.
And then let them take CTO after that so most of our employees repaid.
Mark post closing and restructuring we continue to pay their benefits.
Through June Thirtyth.
We did for low.
Hi, good perhaps majority of our employees on.
Grow 11 that was.
Probably the worst single day in my career.
We drew down our revolver finished the quarter with.
How about 670 million.
Cash on the balance sheet.
We and then we look to.
Caesars transaction that started with.
What's the right thing to do.
For shareholders on a long term basis, both short and long term, it's very clear to us.
That's a batch option for us is too.
Continue and close the Caesars transaction all of the upside that we underwrote.
It's still available to us and Caesars, it's really the timing of the realization thats been pushed back.
As we once we made that decision and started to move.
And down the path.
Closing, where we were in the middle of the FTC.
Provable process, we remain in the FCC approval process.
We had a buyer for.
Our Shreveport and title assets that we were concerned was going to be problematic for the FCC to approve.
When you have.
When you have a remedy in an FCC situation they need to approve youre buyer.
It was.
More more risk than we wanted to take so we look for.
A substitute buyer and we found.
When we're at river willing to step in bye.
Report and Taco they were separately talking too.
Users about valleys Atlantic City.
Which was an asset that.
We were ultimately likely to sell as well and so that transaction was announced.
A few weeks ago, which puts us on the path.
For FTC approval.
We have.
Indiana, New Jersey, Indiana, as both racing and gaming New Jersey gaming.
Nevada gaming that are necessary for.
Box to reach closing.
Optimistic that.
We will have all of the necessary approvals.
To close by the end of June.
But I would tell you that we're dealing with.
Multiple governmental metal kind of you've done a state and federal level that have been very varying degrees of disruption related to.
The virus. So it is certainly possible that one of them could slip to July.
But I would say that.
A fairly swim possibility, we're hopeful that we will close.
By the end of June and that's our expectation at this time.
We are committed financing remains in place.
We would expect that to come to market.
We know and closing.
We have ample liquidity post closing and no covenant issues either in our traditional bad.
For our lease financing post closing on a pro forma basis.
So.
Goes.
Decisions made and started to be implemented we've started to look toward.
Reopened.
And we are of course weird.
Our various state regulatory bodies.
And then.
The states in general looking to what's the safest way to reopen what precautions will be put in place.
We've developed a plan.
It involves social distancing similar to what you have seen.
No other company announcements were.
Enhanced and enhance cleaning more often.
Spreading of limiting exposure or limited capacity and properties.
Reducing capacity, you're slot machines, reducing capacity or tables.
We're looking to implement that.
Yes things open we found out shortly before this call.
That Louisiana is allowing casinos to open as soon as this weekend that will be the first state that will reopen for us, but we would expect substantially all of the combined portfolio will be allowed to open in the next several weeks.
So we are more moving forward to reopening as I look at.
What's out there.
What strikes me or.
When you read the research reports that are caught out there on the various companies including <unk>.
There's a fairly uniform view on how things will shake out in terms of.
Recovery pace of recovery.
Scrip <unk> regional before strip the pace of the recovery in both of them.
Frankly, my body experience in markets. He is when everybody thinks the same thing they tend to be wrong.
No offense to those you on the phone that went up asking questions but.
That's been my experience. So you start to think about which way.
Would you be wrong and you know in me negative area, where you could be wrong is that how situation could turn out.
To be worse than we anticipated you could see a spike in the fall and winter that leads to more restrictions.
There you are looking to.
How much liquidity will you have we'd expect will have.
The better part of the year, if not more at closing on a pro forma basis with no revenue.
So we feel good about that but if you look too.
You don't have any negative health outcome.
And.
They start to reopen Asics ads.
As expected now what I would tell you is.
I would expect the entire sector is going to surprise you on margins post oak.
Everyone in the business has been able to examine their operating structures in a way that's really never been possible.
And I can tell you.
We are a company that I think has a pretty good reputation for being efficient.
We have found.
A lot of.
Additional efficiency in our own business in a business that we're going to take over as we move forward.
I think that's going to be a surprise.
I think you've seen as as places have opened.
And social distinct.
The thing has been ease.
Theres band.
Enthusiastic.
Got it re commitment by consumers.
I would hope that's the case in our business.
And I'd tell you, whereas we.
As we reopened we're mindful that our employees.
That have gotten through the unemployment system in the states where they live.
Our making.
In some cases more than they make as employees and a lot of cases nearly as much.
With the supplemental employment insurance that the federal government is.
As has implemented what I would tell you is we're going to be careful about bringing back.
Employees, and making sure that we have the demand that will give them enough hours to work what we don't want.
To bring employees back and then find out.
Demand is not there and we think we don't have the hours for them, we've taken them off on employment I think you heard Penn.
The same thing I don't think you Didnt see many of you touched on in terms of what was written.
But I think you're going to see margins that are.
Quite impressive early on.
I'd also tell you I've heard focus on what about.
Yeah extra clearing that you're going to has to do and that will add some incremental costs.
But if you think about the way places will open in the pieces of the business.
That are likely to open.
Very slowly if at all.
I'm thinking about the phase I think it's going to be a long time before customers are willing to.
Yes at the phase where their grabbing food.
And then other customers have been grabbing food from what I would tell you.
From our standpoint, we've been.
Local in the past that the phase or an inefficient way to market to customers.
They are very costly you lose a lot of money there.
Simply not having buffets opened in your properties.
Going to dramatically offset.
Any increase in cleaning costs, what I would tell you is not a pro forma basis for closing the transaction.
We believe that as a company.
We will be free cash flow positive.
So covering all of our extensive financial and operating will be free cash flow positive at about 60% of 2019 residents.
So I don't think that level of efficiency as being assumed in what I, what I see.
And then you look to you know how about demand.
And I I've been reading about coal that versus financial crisis.
I tell you those are two very different.
Then.
Here, we haven't and unemployment spikes that.
It was certainly unimaginable Khamenei I'm sure. It was on a manageable everybody on this call, but it is cushion somewhat by the easy access payments.
We're going to see a drop rapidly as the U.S. reopens.
If you looked at the regions or the regional properties.
I heard Keith and Josh on the Boyd call point this out.
In the financial crisis is what you had was you didnt have a visitation problem you had to spend from.
That's the worst scenario for casino operators.
Because there you are at your highest labor levels and the customers just not spending so your cost structure.
Hi, It has as it could be in the spending is not there yet.
What I'd tell you in this case.
We're looking at.
The man shock as demand comes back as I've said, we're going to be careful as we add labor to make sure that our touch our employees are able to work the full amount of hours and it's worth them coming back.
That's a very different situation than.
Okay, and then as I said arming them straight and the financial crisis that I'd like said the.
If you think about how regionals will open you're going to be heavy slots.
We're going to be lighter tables, you would have no. The thing is you're going to be lighter full service restaurants.
Your cost structure is going to be very different than it was.
Before we came into this crisis and as we came into the crisis.
First two months of the year.
Was the strongest I had seen the consumer and all the time that I've been better Eldorado, so how much of that.
Oh, it comes back well I'll find that out together.
But again I think.
The consensus in the market could prove to be.
Conservative if you look at Vegas.
Yeah, I'll pause to give you a little bit history lesson in Vegas for those of you who weren't around.
For the crisis.
As we entered the crisis a lot so opened on December Thirtyth 2007.
3000 rooms.
Less than three months later bear Stearns collapse in JP Morgan bought.
Six months after that mean and filed for bankruptcy and we were in free fall.
In December of 2008, Encore opened with 2000 room.
December 2009 City Center opened with 6000 rooms December 2010, Cosmo open with 3000 room.
You had the man shock in the supply shock at the same time.
There are over 14000 rooms added to the Vegas strip during the financial crisis and increases.
About 15%.
If you listen to the called at Caesars, just had where they're going to phase three openings and.
Las Vegas, you heard MGM is going to open allows you on New York, New York, The Vegas strip could open with as much as 50000 rooms offline.
How about about half the capacity of the market might not be there.
So again from.
Margin perspective at lower volume.
Thank you are going to be surprised that what the sector.
Generate and as demand picks up you are going to see properties open as Nick.
They can generate profitable.
Result, and that is in an extremely different situation.
Versus the financial crisis Caesars at MGM in the crisis entered with.
Significant near term debt maturities there was no avenue to monetize real real estate there was no path.
Online sports to sports outside of Nevada, Florida online gaming all of those are different in this crisis.
You've got capital markets are wide open right.
The read Avenue is available to sports I gaming opportunity.
The headlines.
All of this makes us optimistic about as we reopened as we move forward as a business.
In in the United States, If you look at the pro forma company.
I don't think about the strip as it reopens.
The group business is.
Seems to be clearly a laggard in terms of recovery.
Either as the lease exposed to the group business with anybody on the street.
Caesars reward allows caesars to identify customers by how much EBITDA, they're going to generate in and occupied room.
Versus going to OTI, a channels and taking.
Your rate wherever you sit on the spectrum of rate in the city.
I think Caesars is very well positioned.
To perform in this Vegas environment post reopening.
We are the only company that I'm aware of in the leisure entertain business.
Sets of prosecutor giant synergy opportunity as we moved into this.
And now we've been able to move.
Yeah, I think they've been able to dig deeper.
As we've examined the business over the last couple of months on both sides.
And then I'd look at sports and I gaming I looked at the valuation of Draftkings I look at their and they've got a great business I look at their presentation.
Look at the numbers are in there they don't look similar to what.
Our combined Caesars and William Hill platform.
Is projected to generate over the same timeframe.
So we feel very good about that as well.
So as we get too.
Closing here, we see ample liquidity capital markets wide open.
We own a half of our real estate. So that's a lever that we can pull there are a number of levers.
Cash flow streams in Caesars that you could monetize if you were looking to.
To raise liquidity going forward.
Yes, we expect to be free cash flow positive.
About 60% of 19 revenues.
There are no near term debt maturities in our capital stack post closing there are no covenant issues.
We're not a cash taxpayer until 2024.
Ah that's the.
The plus side of losing as much money as the virus has caused both sides to lose as it extends here I know how opportunity.
There's opportunity there is cash flow enhancement through.
Through the cares back in the combined company that should approach a couple of hundred million dollars.
And I'd, just say again, the Caesars opportunity that we underwrote is still there what we've got.
As a delay in realization.
But we are excited as we look forward to getting reopened the closing the transaction into getting on our land.
And with that I'll open the line two questions.
Thank you, Sir ladies and gentlemen, if he would like to ask a question today. Please press star one on your telephone keypad, if you're using any speakerphone. Please make sure. Your mute button is turned off to allow your signal to reach our equipment.
Once again star one for questions and our first question will come from Steve for Lesinski Stifel.
Hey, good afternoon guys.
So it sounds like you know just because the virus started to spread and we got into this so called crisis.
You guys actually did go work to see if it made sense to terminate the Caesars deal.
<unk> I guess is you've got into that analysis did it turned out to be an absolute no brainer to go through with it or was it a closer decision and I hope that question makes sense.
Yeah. It was a no brainer I mean at where we are.
We will analyze every possible scenario and opportunity to drive value for shareholders.
Yeah. This is it's not a difficult decision to pursue the Caesars transaction when I went how I would describe it is.
The downside is similar in a standalone DNA.
Combination environment.
Be upside does not compare.
Standalone versus combining Caesars.
Okay. Thanks, that's very clear and then Tom you guys have been somewhat of the pioneer is on the marketing and advertising side of equation and wanted to get your take on.
You know, how you're thinking about marketing to your customer base as these assets start to open back up and do you open up a little bit more and start going deeper into your database or you still just kind of focus on your best customers.
So we're going to focus on it has to customers, it's never going to make sense to.
Pursue unprofitable revenue and I've sent.
Particularly in the regional markets as you reopened winter.
Pasadena limitations I think it's going to be more game of ensuring that your best customers are the ones door.
On a Friday and Saturday night.
And we have plans to.
You know to do that somebody I, if you're thinking that there's going to be.
Some sort of increase marketing cost and mark.
Hi, highly Scott the comfort that kids.
Okay, and then last one from me real quick did did you give any kind of if I missed I apologize but.
What you think you guys will burn from a cash perspective with the combined company.
Well, you just heard Caesars, saying they burn.
What is it Steve eight and a half million a day.
It was in there that we burn a million seven a day.
On a combined basis, you should have the two and then.
So track twitching thing synergies would be.
Okay. Thanks I appreciate it.
Our next from Deutsche Bank as Carlo Santarelli.
Hey, guys. How are you and thank you for your comments Tom.
[laughter] you guys came into this transaction [noise], obviously haven't done a lot of work on the synergy side and clearly the synergies are not really a focus that at this stage in terms of talking about them. The way we were nine months ago.
But 400 million was kind of the target on the cost side right. Now if you just look at kind of Caesars operational expenses.
It's it's effectively $7 billion a day have been taken out of their operations, which translates to about $2 billion on an annual basis to the extent you can and and if you think about eight at the demand environment that may be you foresee with social distancing and some of the pent up demand that's there and some of the.
Liquidity, that's in the in the system or the gaming consumers pockets at this stage coming out at the stimulus and whatnot, how much but would you say if that that two and a half billion on an annual run rate basis does come back into the Caesars cost side of equation.
Yeah, So what I would say Carla as our cost target, whereas.
400 million as you said it.
So that wouldn't be.
84% of that two and a half billion would come back.
I will take the earned.
Okay Fair enough and then just in terms of you talked a lot about the financial crisis, and correct me, if I'm wrong, but but my recollection coming into the financial crisis was that in general.
Regional consumer as well as the Las Vegas consumer was a lot more.
Prone to unresponsive to.
Promos marketing et cetera, more so on the promo side over the last few years, certainly they've been weaned off of that.
If if if that you believe that's true how do you think that this period, where presumably promos are curtailed even further I. What do you think the differences between kind of that methodology, then or what was that the excluding stand relative to the experience today as it pertains to the promotional environment leading into the event.
Yeah, I haven't whenever it says you've had a sea change.
In the business, where do you have people come in and say.
Yes this spend.
Is there causation in this manner.
And.
As people got into doing the math, what they found was.
In many cases, there was not if they may lead to.
Additional spend it was just coincidental.
And I don't think back then.
There are people.
Doing rigorous analysis it that it was.
This is the way that we've always got it.
And here's how we're going to keep doing it so I think it's an entirely different.
Environment, and I think you've got a.
On a much more.
You've got a disciplined group.
Operator is generally.
That all had their eyes open and I would you know.
Speak to it akin to.
Slot replacement back that slot replacement back then was much more there was much more velocity and flat replacement pre crisis.
What happened was people didnt have the money to replace slots and then they realized.
Gee, we didn't read to replaces as often as we thought we did and that lesson was never on learned.
Thank you have seen the same you'll see the same thing and marketing this time.
Thanks, very much time at pretty good.
Next question comes from Jared Cheyenne Wolfe research.
Hi, good afternoon, everybody. Thanks for taking my questions and Tom. Thanks for all that helpful. Commentary can you just talk a little bit about the conversations you're having with the state governments right now and what they're telling you and I understand obviously everything is shut down or you know.
Burger approvals are kind of on the back burner right now, but can you just maybe help us understand.
What is taking so long and why you're confident that ended June is a reasonable timeline.
Yeah, I mean, and what I would say Jared is there it's.
The FTC process is.
Yes. It is running that's normal course, where.
You have markets, where they have concerns that we have addressed but when you addressed them.
You either have your buyer approved.
And.
The crisis.
The coded.
Crisis put.
Our buyer.
In jeopardy of not being approved by the FTC.
And that's really what delayed the process is we needed to go and.
Find a replacement buyer and have done that and that's.
Yeah, that's no fault because any regulatory agency.
Each of the agencies that we deal with it.
On a timely basis all of them of course wants to see what are your numbers look like.
In this environment versus what we were talking about.
Going into this crisis it took us sometime to put that together on a bottoms up basis.
So that it was rigorous yeah, we could feel good about the numbers that we are putting forward and the regulators could feel good that there are proving a transaction that is financially stable.
And there was a period of time, where.
It didn't make sense to work on those numbers or put those numbers and went there was no.
Real light at the under the tunnel in terms of when you were going to open in what opening was going to look like.
As that became clearer it became easier to do the work and submit the necessary.
Financial modeling to the regulators so that should put us in the pipeline for the June closings with everything got there isn't April but again these are.
Government agencies that are there I don't know her.
Dealing with the crisis throughout their state so is it possible that something.
Slips among its its possible I would say we feel very good about June.
To be honest with you June or July.
Yeah, we're happy to just get declines.
Great. Thank you and then just switching gears here, Tom you touched a little bit on the sport thing I casino segments. How is your thinking changed if at all on the potential to monetize that segment in the near term I think before you were thinking shortly after closing I mean, if that's still kind of how you're thinking about that.
What I would tell you is it doesn't change.
We are looking at the same opportunities we were looking at.
Pre closing.
It's kind of thing when you see.
The valuation that we see out there.
On the one pure play to run out and do something.
We want to make sure that we make a.
The decision that's right for the long term.
Yes, we are in the very early inning.
What sports and ideally.
Yes. This crisis could have the impact of accelerating this centers.
States look for tax revenue.
We want to make sure we make.
The right decision for the company.
But all of the options remain the same as Dave or they are those anywhere.
I hear me upside remains the same this not horse.
Great. Thank you and one more quick one and if I may can you just talked about how you're viewing the ticking fee and if there's any wiggle room to renegotiate turns just given the environment is obviously very differently now.
Yeah look we.
We entered a merger contract with Caesars.
We had kind of too.
On our contract likely on or older contracts.
If we were to go.
Try to renegotiate.
You already or do you are doing is adding car.
For it on certain result.
And in disc and the scope of a 17.3 billion dollar transaction and the upside that we see.
You know the 250 million they wind up paying the picking fees.
Nobody is going to remember here.
Okay. Thank you very much.
Well now go to Barry Jonas Suntrust.
Hey, Tom I'm curious to get any maybe higher level thoughts you have about where industry consolidation could go from here and with that maybe any longer term changes to target leverage ratios given the situation. We're all in now thanks.
On the leverage point I mean, I, we told you before.
The crisis, our intention was to drives leverage low.
This.
This crisis.
Has done nothing but solidify that in my mind, but that's.
Yeah, that's where you want to be so we want to.
We want to drive leverage lower you should expect us to be using the bulk of our free cash flow to pay down debt [laughter].
In closing or in a post closing.
Okay, and M&A perspective, as we said before.
Be highly unlikely that we see anything.
Domestically that fits in our portfolio post transaction, that's material to the combined company.
And internationally.
Yeah.
We are unlikely to pursue anything until.
After the concession renewal process.
He has over in Macau and even then we would evaluate at that time, we have no problem.
<unk> largest domestic gaming company and see.
Plenty of opportunity.
Within our shores.
Great and then I guess with Dod industry consolidation do you think I mean, I guess, what I'm getting out as you are.
Are we going to see more consolidation on a go forward basis or do you think the industry will pause given.
The levels of leverage that.
So we're out now.
I think you'll see.
A little bit or has it can see across the space.
You know one thing I'd tell you is.
You know putting together the deal with.
Twin River, which was largely.
Brett Younker Insoo Kim.
No I applaud.
Sue and his team.
You know for.
You know boldness in a situation, where there's dislocation that's a rare management team that's willing to do that you know we think we've been willing to do that over the years, but unfortunately.
Crises life is.
You know tend to.
Yes, the people hiding under their desks or wishing it was three months ago.
It's the rare breed.
You are willing to go in and seize opportunities situation like this and so I would expect that you'd see relatively muted activity for the.
Next few quarters.
Great. Thanks, so much.
Our next question is from David Katz Jefferies.
Hi, good afternoon, everyone. Thanks for your commentary Tom I wanted to.
Go back to some of the comments you made earlier about choosers, specifically around Las Vegas.
You touched on it a bit going back to the older version of Caesars, but you know traded as Heres entertainment.
A good portion of what they did in Las Vegas was rather than you know event and group business you know, what's driving rewards players to the strip.
Obviously, one of the concerns today is the willingness and ability for people to fly.
And you know what your congregate and large groups, which does help you know that the strip in total and certainly would help you know Caesars if you could help us break down the mix of business across the portfolio you know pre crisis, you know on opening and.
How you expect to manage that mix and you know deal specifically with those two issues flying.
Large groups.
And now using total awards as a tool that would be helpful. As we looked at the the strip longer term.
Yeah, So what I would tell you David as you know we aren't aren't combined.
So I don't have real time.
Ability to have answers to those specific questions. What I would tell you is.
Caesars yield management business is extraordinarily impressive.
They use side over the last year and a half or so.
In the in the market pre crisis.
Half of Vegas is businesses driving.
I have to fly in roughly.
What I would tell you is the opportunity is.
Everybody is going to set the prices aren't expedia right and.
Yeah, when invasion to blogs, you'll be at the high end and everybody else slotting and.
Into their slot and rather than take your what do you know.
Whatever you think that high end well be.
Let's say, it's $100 just to pick around number.
You know somebody can still a rumor hundred dollars, though T.A. They don't know the customer Caesars can go into their database and it by the customer that they know it's worth $200.
And put them into room now that's not 80 hour and that's going to be a piece of the business cash piece of the business.
But the database that Caesars already has is unrivaled in the business and we're getting had our 12 billion.
So.
It's going to be a very powerful tool in an environment like there.
Where you don't have that big group business and you'd like cannot rely.
On.
But he.
Rolling the dice excuse the pun not whoever is going to pay you.
Your rate through XP.
Caesars has.
[laughter] bigger opportunity at a broader pipeline there.
And anybody in that market full stop.
And that's gonna be get huge advantage for us.
Immediately upon closing.
I'm not irrespective of whether people are flying.
Business I'm sure.
Her.
Okay.
Perfect. Thank you very much.
Thanks, Dan.
Harry Curtis from Instinet is that next.
Hello, everyone.
Two quick questions I.
I think the focus so far.
Rightly has been on a on a on reopening with perhaps up to 50% of capacity have you spoken with any of the gain gaming regulators about what the hurdles are oh, what they're going to want to see before.
They will.
Allow you to gradually lift that capacity.
Yeah. The area I mean, I would say generally speaking.
It's gonna be related to.
The case experience.
Well Mark.
In the broader state local and state area.
Casinos or a piece of whats opening Louisiana announced phase one reopening today, where casinos are a piece of it so while it's it's very important to us.
In terms of what happens at the casinos, we are just a piece.
The reopening in any market. So it's all going to be driven by the broader public health concerns.
What they see in terms of kind of stick and case experience and hospital out in those well counties.
So in other words FA follow the follow the data that's right.
Oh, Okay and then the second question is you referenced the phase.
As a potential kind of longer term.
Change in the in the traditional.
Casino business model and.
Are you sensing other opportunities.
Where.
Where the lower margin business is.
As an opportunity to.
To kind of moved to the regional casino business in it in a different direction.
I think there you know there our technology opportunities where.
Yeah, if you look at our business were.
Yeah, we're one of the few businesses around that still predominantly cash handling business.
You've got.
You're handling cashier handling chips.
That may be viewed differently in the future and you've seen.
Kind of stadium style you table.
A few markets, but not widespread.
There's an opportunity there you know we.
I still a big.
Physical mail business.
And I would tell you that.
Yep.
Even my parents in this environment are.
Yeah zooming in on.
Faced timing and not hi, paragould phones yeah.
I think you're going to see more around that business moves to email. So there's specific pockets of the business.
Were.
And my personal opinion.
Opinion, the sector was antiquated going into this.
Some of that was.
Due to regulatory that may be re thought.
I don't like this in some of its just because it was still.
This is the way, we do business and I would expect all of that sort of all of those sort of items to be examine and as we move forward.
So you raised an interesting question about a chips and.
It's.
So it's a it's an issue with respect to health.
It also.
Has bearing on on cards on on tables.
Oh, well how are you in the CDC are.
Going to deal with with said the movement of cards in chips across tables and maximize.
Maximize.
Health considerations.
Well the start with the C. D. C is not talking to me so.
Maybe on the CDC or not.
Huh.
But group, having conversations but what I'd tell you is in the beginning it's gonna be all about.
Sanitation, it's going to be recycling cards quicker.
Can be dealing face up.
Gains were you may not have been dealing face up before.
Right and chipset is going to be you're going after sanitizer chips.
Much more often than you did in the past.
But I think it's it's going to create a.
It's going to create momentum or is there a better way to solve the.
If we think about do we want people passing chips in cars back and forth at all.
Hi, it's just a yeah. It was it was a side question, but I just had an intelligent and division the answer but thank you appreciate it.
Sure.
Yes Pulitzer from Jpmorgan has been next question.
Hey, good afternoon, Tom and thanks, Thanks for all the detail you provided.
So most of my questions have been answered, but I guess as far as it as far as or regional properties are you thinking about the space in opening.
Is it feasible to open maybe it's feasible to open all of your property used or do you think there's a scenario where maybe some some of your smaller or less profitable properties don't Rio.
I'd expect that everything reopens.
It's gonna be what pieces of each property, we often that's going to be a different answer.
Particularly on the table side.
With.
Capacity restrictions.
All right got it thanks, so much that for me.
Yep.
Next question is from Shaun Kelley Bank of America.
Hi, good afternoon, everyone.
Just wanted to do two things one Tom was you really helpful. In the the cash burn comparison on could you give us like maybe just starting point B a pro forma you know at 331 or as we look forward to 630 for kind of just combined company liquidity.
The other ingredient W pretty helpful. As you think about the balance sheet and starting position here.
So that's difficult to do because we've got so many variables.
In play, but you should presume.
We would have.
You know substantially all if not all of our 2 billion dollar.
Revolver availability available to.
But there is yeah. It depends on when do we close what would it be how many places open before then what's the experience between now and that there's a lot of variables in there as well as when we get to our financing but.
A good cost is you've got.
Something in the neighborhood $2 billion of liquidating a class.
Great. That's it that's a good starting point. Thank you and then on second would be just yeah theres. Some some you know near but probably more medium term capex projects that you guys have talked about you know pretty pretty in pretty normal course, <unk> Lake Charles and the expansion opportunity there.
On a further Ron you got Pompano and then you've got what you're looking at on on the Cesar side in terms of the the land based facility in New Orleans somebody additional expanded capacity there or is there any need to re look at those I mean, I know that New Orleans, as I think somewhat contractual or committed but is there.
Is there anything you need to relook at that and how can you you spaced out that timing to kind of balance the free cash flow profile, where you want to be on the balance sheet versus maybe the timing of some of those projects.
Yeah, I mean, Shawn Lynch exactly why don't you is we will have you seen our parents has contractual elements as far as timing.
The rest of what you're talking about our.
100% discretionary.
And what I tell you is we'll do you were saying what our return expectations, what's our capital availability liquidity situation and what sort of leverage situation and what I tell you is early on we're going to err on the side and.
The leverage.
Great and that's helpful. And then lastly from me would just be Youve already tackle this from a a couple of perspective, so we need to make you repeat what you've already said, but just just directionally you know, it's a really anything the changes as it relates to your operating strategy as a result of lit let's just assume.
Quickly kind of drill down on the capacity constraints right. So I think weve tackle this as it relates to cleaning costs or this or that but if we just think about it from the perspective of yeah, youre blocking and tackling operating strategy. What you hope to employee at Caesars is there any real change and all that that is meaningful to you as you.
Think about some of the just the capacity you know handcuffs that'll be onto a little while as it relates to social dispensing and alike or when you think about the nature of the customer here is it. It you know he and the way you're going to target. The business is that not a particular concerning to you.
What I'm, saying anything in terms of the capacity issue, we I touched on it a little bit earlier, it's going to be if.
Yes, the capacity limitations, there such you'll be at capacity.
It's how do you ensure that the best customer is.
In the property.
<unk> to optimize your cash flow and that's something we'll be working through.
Generally on the operating side, it's kinda flipped on its here.
In terms of.
Our as we were coming into Caesars, we were looking at a fully operating it staff company and saying okay.
Okay, what do we need and went to what do we need what do we not need what do we need glass.
And that had been the approach as we go to analyzing sees as well now on both sides you have very little in the way.
Cost.
And so what you're looking at is.
Being thoughtful and analytical and optimizing.
How and when and how much cost you bring back.
So it's a totally different.
Animal you know looking to achieve ultimately are saying well go back summarizing.
Free cash flow, but.
We certainly never thought we'd be in a position where you're looking at.
Almost a blank sheet of paper across fixed.
Yeah, I don't think anybody else did either so.
Sorry, I watched the time.
Operator, we have time for one more.
Okay, well take our final question today from Thomas Allen Morgan Stanley.
Thank you just in terms of the comment and then your prepared remarks talk about the cures Act should help out by a couple hundred million dollars benefit you just talked about the building luxor. Thanks.
Most of those are related to.
Payroll tax credits and relief.
And then theres, some but associated with no well, but it's mainly.
Payroll and payroll tax right and I'm sorry.
Perfect and then just on the capacity question a lot of your remote asking about are there any numbers you can give us to help us feel more comfortable with kind of the potential capacity organizations that limit so you're going to go into play such as like.
25% of customers generate 50% of revenue or you know typically had reasonable properties. There only typically running at 60% capacity anywhere I mean any metrics like that because I was thinking about more.
I mean, what I would say as in most of your properties.
Youre casino floor.
Outside of.
Friday, and Saturday night, it's very rarely gonna be operating north of 50% capacity utilization.
Friday, and Saturday night is where you're going to have.
In a typical viral where people are working that's where you're going to didnt need more than 50%.
And then and then how much your your revenue typically generated from Friday Saturday nights, and then any sense of how you did it but can you ship those customers over that wildly different by property I would tell you.
Yeah destination markets, you're probably.
You know arena is probably 70 30 weekends.
But.
Sorry out it was probably.
60, 40 or less.
Helpful. Thank you.
Alright, thanks, everyone.
Ladies and gentlemen that does conclude today's conference we would like to thank you all for your participation today you may now disconnect.
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