CZR

Caesars Entertainment Corporation (CZR)

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Caesars Entertainment (CZR)

JPMorgan Chase & Co.'s Global High Yield & Leveraged Finance Conference

February 26, 2013 3:20 pm ET

Executives

Donald A. Colvin - Chief Financial Officer and Executive Vice President

Eric Hession - Vice President of Finance and Treasurer

Presentation

Unknown Analyst

Good afternoon, everyone. Thanks so much for joining us. We, of course, have Caesars Entertainment here. And those presenting will be Donald Colvin, the new CFO who joined in November, as well as Eric Hession. They'll do a hopefully brief presentation and then we'll open it up to Q&A.

Donald A. Colvin

Thanks a lot, and we've taken your hand [ph], I think we'll cut our presentation down to about 60 slides. So without lingering, let me read the forward-looking statement, go to the next one, and then go to the next one. So we did a summary chart here, the key to our success, and I think you can see it's made on 3 pillars: our brands, our distribution channel and our customers. And we've always been renowned for a Total Rewards loyalty program and that's something that sets us apart from our competition.

And in this presentation, I'll give an outline of what we think is going to move the needle for the company, what we're proud of and where we see the opportunities going forward.

So as you look at where we stand, we are a leader in the gaming and entertainment industry. We are #1 and #2 in almost every U.S. market. World Series of Poker is a world-leading poker brand. And as we move to online gaming, it's something that will help us tremendously, and the Slotomania is a social game with more than 85 million downloads, so again placing us in a great pole position to benefit from online real-money gaming.

We have a very robust entertaining and hospitality offering, 43,000 hotel rooms, 440 restaurants, bars and clubs and 290 retail shops. And just on the restaurants, some of them have been winning awards recently, and we just opened up, in the last few days, the Nobu restaurant and Caesars Palace.

Unprecedented scale. Yes, we have a lot of debt, but we also have a lot of EBITDA, approximately $1.9 billion of adjusted EBITDA in 2012, 53 properties across 13 states and 7 countries, 68,000 employees, 3 million square feet of casino gaming space, 2 million square feet of convention space, a broad and loyal customer base, 100-plus million annual visitors and 45 million Total Reward customers. And I can also say we are building the highest observation wheel in the world, bigger than the London Eye in the center of Vegas, and next to that, over $200,000 of retail space next to our High Roller wheel. So these are the things that get us exciting.

You can see here, very geographically diverse distribution channel. Obviously, a very strong position in Vegas, but also strong in other regions too, as you can see. And with a presence in Europe and Africa, South America, and we're also trying, as I call it, to catch the elusive big tuna in Asia, and we announced, with great satisfaction, our partnership with Lippo for an application in South Korea, which I'm told eventually could be that big tuna. So not only North America and Europe, but hopefully, one day, also in Asia.

So looking at our financial results, you can see here, as we showed on a previous chart, we finished last year with just under $2 billion in EBITDA, revenue, just under $9 billion. If you look at what the market threw us last year, I think it's been a satisfactory performance, we didn't have any help from the top line but we were able to aggressively implement cost reduction programs that despite all the troubles and travails, the hurricanes and what else, we still were able to hold up our EBITDA, and we will continue to benefit from these strong cost reduction actions, as we go through this year.

And if you look in the fourth quarter, it was rather disappointing on the backs of a hurricane which hit our Atlantic City property, but we believe that's behind us. As I look into this year, I see it having a slightly different profile than last year. I think last year, 2012 started strongly and finished rather sadly. I think this year, we're going to see a slower start and a stronger finish. And why a stronger finish? Because we should see the benefit of all of the investments we're making, particularly in Vegas, and some of the new properties we're opening plus the added harvest from our cost reductions and the full annualization of a lot of the properties or sites that opened at the of last year, the restaurants and the bars, et cetera, and the Nobu Tower too. So all that should position us well, with the Linq shopping area, to exit the year with a much stronger momentum than we entered the year. And so I think that's how we have been characterizing this year, one full of hope and promise. While we're not counting on a strong top line growth, we were counting on the investments that we've made, the investments we will make and the cost reductions that we will execute to drive improved performance.

So what are the drivers of value creation? So reinvigorating and expanding the core, a strong development pipeline in place and some upside opportunities. So if you look at this, and I've already talked about the Linq, room renovation in The Quad and also in Bally's, and new initiatives in -- to strengthen our customer loyalty and our marketing programs to get closer to our customers. Big data initiatives, where we can use more efficiently and effectively the data we receive from our customers, interfacing into smartphones, et cetera. These should certainly drive a lot more attractive behavior from the customers and allow us to capture a stronger share of their wallet.

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