Caesars Entertainment(CZR) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Third quarter net revenues totaled $2.24 billion, up 2.3% year-over-year, driven by growth across all business verticals and favorable hold in Las Vegas [10] - Adjusted EBITDA totaled $638 million, up 6.3% year-over-year, with adjusted EBITDA margins expanding 100 basis points to 28.5% [11] - Domestic marketing costs represented 20.1% of gross revenue, reflecting a 20 basis point improvement year-over-year, while labor costs represented 23.4% of gross revenue, reflecting a 60 basis point improvement [13] Business Line Data and Key Metrics Changes - Las Vegas net revenue totaled $973 million, up 6.9% year-over-year, with gaming revenues increasing 17% due to favorable hold and increased gaming volumes [18] - Other U.S. segments net revenues totaled $1.12 billion, down 0.5%, impacted by unfavorable hold and increased competition [22] - All other segments had net revenues of $144 million, down 4% year-over-year, primarily due to decreases in table games volumes at international properties [24] Market Data and Key Metrics Changes - Visitor volumes to Las Vegas increased 0.6%, convention attendance increased 8.3%, and deplane passengers increased 3.9% [25] - The company expects continued low single-digit revenue growth in the fourth quarter, in line with year-to-date hold normalized growth trends [25] - The company anticipates net revenues in the other U.S. segment to grow low single digits in the fourth quarter [28] Company Strategy and Development Direction - The company is focused on strengthening its portfolio of Las Vegas Strip properties and has agreed to sell the Rio for $516.3 million [14] - The company continues to grow its sports betting business, expanding to 29 locations in seven states, which is expected to drive increased visitation and customer engagement [16] - The company is targeting $75 million to $100 million in cost reductions by the time of the Eldorado merger closing [37] Management's Comments on Operating Environment and Future Outlook - Management views the overall demand environment as stable and modestly growing, led by non-gaming segments [26] - The company expects to see stronger demand from cash-paying customers and anticipates double-digit growth in room nights and high single-digit growth in group revenues for the fourth quarter [26] - Management acknowledges competitive headwinds from new gaming properties opening in Indiana and Illinois but expects less competitive disruption overall in the coming year [73] Other Important Information - The company ended the quarter with approximately $1.3 billion in cash and has a total revolver capacity of $1.2 billion with zero drawn [31] - The company expects to spend approximately $400 million to $420 million in maintenance CapEx and $275 million to $295 million for development-related CapEx in 2019 [34] Q&A Session Summary Question: Cost reduction efforts and timeline - Management has increased the target for cost reductions to between $75 million to $100 million, with various initiatives already in progress [37][39] Question: Impact of Southern Indiana boat to land transition - Management expects a 15% return from the transition, with cost savings and improved customer experience driving revenue growth [42][43] Question: EBITDA loss from the sale of the Rio - Management anticipates maintaining the majority of the EBITDA from the Rio, with business transferring to other properties [47] Question: Outlook for Atlantic City segment - Management expects to turn around the Atlantic City segment, with new marketing initiatives aimed at regaining market share [49] Question: Competitive landscape in regional markets - Management acknowledges competitive headwinds but sees growth potential in Indiana properties and anticipates less disruption overall in the coming year [73]