Good day, ladies and gentlemen, and welcome to the Eldorado Resorts 2020 first quarter earnings conference call. Today's conference is being recorded. At this time, I would like to hand the call over to Mr. Joe Jaffoni, investor relations. Please go ahead, sir.
Thank you, Lisa, and good afternoon, everyone, and welcome to Eldorado Resorts' 2020 first quarter conference call. Joining us today from the company are Chief Executive Officer, Tom Reeg, President and Chief Operating Officer, Anthony Carano, Chief Financial Officer, Bret Yunker, and VP Corporate Finance, Brian Agnew. On today's call, we'll review the company's ongoing progress against its key strategic priorities, including the status of Eldorado's proposed acquisition of Caesars Entertainment. We will then open the call to participants for questions. This afternoon, Eldorado Resorts issued a press release announcing its first quarter financial results for the period ended March 31st, 2020. The release is available in the Investor Relations section of the company's website at www.eldoradoresorts.com.
Before we get started today, I'd like to remind everyone that this call is being recorded and 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 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.
Eldorado Resorts undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after today's call. During today's call, the company may discuss 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 a reconciliation of the differences between each non-GAAP financial measure and then the comparable GAAP financial measure can be found on the company's website at www.eldoradoresorts.com by selecting the press release regarding the company's 2020 first quarter financial results. Thank 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 the first quarter earnings call. I'd start by saying I hope that we find each of you and yours healthy at this point. We are obviously living through extraordinary times. It was an eventful quarter for us. We lost a team member to the virus, which is horrible. We're living through things we wouldn't have ever expected to, but we're pulling together and working through it, and we look forward to the 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've been associated with, they really don't matter now. For 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. March started to slow as news of the virus spreading traveled. We started to get the closings. March turned out to be a very difficult month for us and for everyone. On a same-store basis, in the first quarter, revenue was down 17.5% to $473 million. EBITDA was a little over $102 million, down 33%. I'm going to talk about what we did as 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 they were able to get help from the government.
We paid our employees through April 10th and then let them take PTO after that, so most of our employees were paid for a month post-closing, and we continue to pay their benefits through June 30th. We did furlough the vast majority of our employees on April 11th. That was probably the worst single day of my career. We drew down our revolver, finished the quarter with about $670 million of cash on the balance sheet. We looked to the Caesars transaction and 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 the best option for us is to continue and close the Caesars transaction. All of the upside that we underwrote is still available to us in Caesars. It's really the timing of the realization that's been pushed back.
Once we made that decision and started to move again down the path of closing, we were in the middle of the FTC approval process. We remain in the FTC approval process. We had a buyer for our Shreveport and Tahoe assets that we were concerned was going to be problematic for the FTC to approve. When you have a remedy in an FTC situation, they need to approve your buyer. It was more risk than we wanted to take, so we looked for a substitute buyer, and we found Twin River willing to step in and buy Shreveport and Tahoe. They were separately talking to Caesars about Bally's Atlantic City, which was an asset that we were ultimately likely to sell as well. That transaction was announced a few weeks ago, which puts us on the path for FTC approval.
We have Indiana, New Jersey, Indiana's both racing and gaming, New Jersey gaming, Nevada gaming, that are necessary for us to reach closing. We're optimistic that we will have all of the necessary approvals to close by the end of June. I would tell you that we're dealing with multiple governmental entities on a state and federal level that have had varying degrees of disruption related to the virus. It is certainly possible that one of them could slip to July. I would say that's a fairly slim possibility. We're hopeful that we will close by the end of June. That's our expectation at this time. Our committed financing remains in place. We would expect that to come to market between now and closing.
We have ample liquidity post-closing and no covenant issues either in our traditional debt or our lease financing post-closing on a pro forma basis. With those decisions made and started to be implemented, we've started to look toward reopening. We are, of course, with our various state regulatory bodies, and the states in general, looking to what's the safest way to reopen, what precautions will be put in place. [audio distortion] Shortly before this call, Louisiana is allowing casinos to open as soon as this weekend. That will be the first state that will reopen for us. We would expect substantially all of the combined portfolio will be allowed to open in the next several weeks. We're moving forward to reopening.
As I look at what's out there, what strikes me is when you read the research reports that are put out there on the various companies, including us, there's a fairly uniform view on how things will shake out in terms of recovery, pace of recovery, and regional before Strip, and the pace of the recovery in both of them. Frankly, my experience in markets is when everybody thinks the same thing, they tend to be wrong. No offense to those of you on the phone that will end up asking questions, but that's been my experience. You start to think about which way could you be wrong? In the negative area where you could be wrong is that the health situation could turn out to be worse than we anticipated. You could see a spike in the fall and the winter that leads to more restrictions.
There, you're looking to how much liquidity will you have. We'd expect we'll have the better part of a year, if not more, at closing on a pro forma basis with no revenue. We feel good about that. If you look to you don't have a negative health outcome and states start to reopen as is expected now, what I would tell you is I would expect the entire sector is going to surprise you on margins post-opening. Everyone in the business has been able to examine their operating structures in a way that's really never been possible. I can tell you that 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 and in the 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 places have opened, and social distancing has been eased, there's been enthusiastic recommitment by consumers. I would hope that's the case in our business. I tell you, as we reopen, we're mindful that our employees that have gotten through the unemployment system in the states where they live are making, in some cases, more than they make as employees, in a lot of cases, nearly as much with the supplemental employment insurance that the federal government 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 is to bring employees back and then find out demand is not there, and we don't have the hours for them, and we've taken them off unemployment. I think you heard Penn say the same thing. I didn't see many of you catch that 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, but what about the extra cleaning that you're going to have to do, and that will add some incremental cost. If you think about the way places will open and the pieces of the business that are likely to open very slowly, if at all, and I'm thinking about buffets.
I think it's going to be a long time before customers are willing to eat at buffets where they're grabbing food from pans that other customers have been grabbing food from. What I would tell you from our standpoint, we've been vocal in the past that buffets are an inefficient way to market to customers. They're very costly. You lose a lot of money there. Simply not having buffets open in your properties is going to dramatically offset any increase in cleaning costs. What I would tell you is, on a pro forma basis for closing the transaction, that we believe that as a company, we will be free cash flow positive. Covering all of our expenses, financial and operating, will be free cash flow positive at about 60% of 2019 revenues. I don't think that level of efficiency is being assumed in what I see.
Then you look to, how about demand? I've been reading about COVID versus financial crisis. I tell you, those are two very different events. Here we have an unemployment spike that was certainly unimaginable to me. I'm sure it was unimaginable to everybody on this call. It is cushioned somewhat by these excess payments, and we're going to see it drop rapidly as the U.S. reopens. If you look at the regions, the regional properties, and I heard Keith and Josh on the Boyd call point this out. In the financial crisis, what you had was, you didn't have a visitation problem, you had a spend problem. That's the worst scenario for a casino operator because there you are at your highest labor levels and the customer's just not spending. Your cost structure is as high as it can be, and the spending is not there.
What I'd tell you in this case, we're looking at a demand shock. As demand comes back, as I've said, we're going to be careful as we add labor to make sure that 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 COVID. I'm sorry, the financial crisis. Then, as I said, if you think about how regionals will open, you're going to be heavy slots, you're going to be lighter tables, you're going to have no buffets, 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. As we came into the crisis, the first two months of the year was the strongest I had seen the consumer in all the time that I've been at Eldorado.
How much of that comes back? We'll all find that out together. Again, I think the consensus in the market could prove to be conservative. If you look at Vegas, I'll pause to give you a little history lesson of Vegas for those of you who weren't around for the crisis. As we entered the crisis, Palazzo opened on December 30th, 2007, 3,000 rooms. Less than three months later, Bear Stearns collapsed, and JP Morgan bought them. Six months after that, Lehman filed for bankruptcy, and we were in free fall. In December of 2008, Encore opened with 2,000 rooms. December 2009, CityCenter opened with 6,000 rooms. In December 2010, Cosmo opened with 3,000 rooms. You had a demand shock and a supply shock at the same time. There were over 14,000 rooms added to the Vegas Strip during the financial crisis, an increase of about 15%.
If you listen to the call that Caesars just had, where they're going to phase reopenings in Las Vegas, you heard MGM's going to open Bellagio and New York, New York. The Vegas Strip could open with as much as 50,000 rooms offline. Almost about half the capacity of the market might not be there. Again, from a margin perspective, at lower volumes, I think you're going to be surprised at what the sector can generate. As demand picks up, you're going to see properties open as they can generate profitable results. That is an extremely different situation versus the financial crisis. Caesars and MGM in the crisis entered with significant near-term debt maturities. There was no avenue to monetize real estate. There was no path to online sports, to sports outside of Nevada, or to online gaming. All of those are different in this crisis.
You've got capital markets are wide open. The REIT avenue is available. The sports iGaming opportunity is ahead of us. All of this makes us optimistic about as we reopen, as we move forward as a business in the United States. If you look at the pro forma company and think about the Strip as it reopens, the group business seems to be clearly a laggard in terms of recovery. Caesars is the least exposed to the group business of anybody on the Strip. Caesars Rewards allows Caesars to identify customers by how much EBITDA they're going to generate in an occupied room versus going to OTA 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 entertainment business that was set to prosecute a giant synergy opportunity as we moved into this, and now we've been able to dig deeper as we've examined the business over the last couple of months on both sides. I look at sports and iGaming; I look at the valuation of DraftKings. They've got a great business. I look at their presentation and look at the numbers in there. They don't look dissimilar to what our combined Caesars and William Hill platform is projected to generate over the same time frame. We feel very good about that as well. As we get to closing here, we see ample liquidity, capital markets wide open. We own half of our real estate; that's a lever that we can pull.
There are a number of levers of cash flow streams in Caesars that you could monetize if you were looking to raise liquidity going forward. We expect to be free cash flow positive at about 60% of 2019 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. That's the plus side of losing as much money as the virus has caused both sides to lose as it extends your NOL opportunity. There is cash flow enhancement through the CARES Act in the combined company that should approach a couple hundred million dollars. I'd just say again, the Caesars opportunity that we underwrote is still there. What we've got is a delay in realization. We are excited as we look forward to getting reopened, to closing the transaction, and to getting on our way.
With that, I'll open the line to questions.
Thank you, sir. Ladies and gentlemen, if you would like to ask a question today, please press star one on your telephone keypad. If you're using a speakerphone, please make sure your mute button is turned off to allow your signal to reach our equipment. Once again, star one for questions. Our first question will come from Steve Wieczynski, Stifel.
Yeah. Hey, good afternoon, guys. Tom, it sounds like as this virus started to spread and we got into this so-called crisis, you guys actually did the work to see if it made sense to terminate the Caesars deal. I guess as you got into that analysis, did it turn out to be an absolute no-brainer to go through with it, or was it a closer decision than that? I hope that question makes sense.
It was a no-brainer. We will analyze every possible scenario and opportunity to drive value for shareholders. It's not a difficult decision to pursue the Caesars transaction. How I would describe it is the downside is similar in a standalone and in a combination environment. The upside does not compare standalone versus combining with Caesars.
Okay, thanks. That's very clear. Then Tom, you guys have been somewhat of the pioneers on the marketing and the advertising side of the equation and wanted to get your take on how you're thinking about marketing to your customer base as these assets start to open back up. Do you open up a little bit more and start going deeper into your database, or are you still just going to focus on your best customers?
We're going to focus on our best customers. It's never going to make sense to pursue unprofitable revenue. I think, particularly in the regional markets, as you reopen with capacity limitations, I think it's going to be more a game of ensuring that your best customers are the ones getting in the door on a Friday and Saturday night. We have plans to do that. If you're thinking that there's going to be some sort of increased marketing costs or marketing wars, I'm highly skeptical that that's the case.
Okay, last one for me real quick. Did you give any kind of, and if I missed it, I apologize, but what you think you guys will burn from a cash perspective with the combined company?
Well, you just heard Caesars say they burn, what is it, Steve? $8.5 million a day was in their deck. We burn $1.7 million a day. On a combined basis, you should add the two and then subtract what you think synergies would be.
Okay. Thanks, Tom. Appreciate it.
Up next from Deutsche Bank is Carlo Santarelli.
Hey, guys. How are you? Thank you for your comments, Tom. You guys came into this transaction obviously having done a lot of work on the synergy side, and clearly the synergies are not really a focus at this stage in terms of talking about them the way we were nine months ago. $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 effectively $7 million a day have been taken out of their operations, which translates to about $2.5 billion on an annual basis.
To the extent you can, if you think about the demand environment that maybe you foresee with social distancing and some of the pent-up demand that's there and some of the liquidity that's in the system or the gaming consumers' pockets at this stage coming out of the stimulus and whatnot, how much would you say if that $2.5 billion on an annual run rate basis does come back into the Caesars cost side of the equation?
Yeah. What I would say, Carlo, is our cost target was $400 million, as you said. That would mean 84% of that $2.5 billion would come back. I would take the under.
Okay. Fair enough. Then just in terms of, you talked a lot about the financial crisis, correct me if I'm wrong, but my recollection coming into the financial crisis was that in general, the regional consumer as well as the Las Vegas consumer was a lot more prone to and responsive 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 in fact you believe that's true, how do you think then this period where presumably promos are curtailed even further, what do you think the difference is between kind of that methodology then or the experience then relative to the experience today as it pertains to the promotional environment leading into the event?
Yeah. What I would say is you've had a sea change in the business where you had people come in and say, "Is there a causation in this spend?" As people got into doing the math, what they found was in many cases, there was not. It didn't lead to additional spend. It was just coincidental. I don't think back then there were people doing rigorous analysis of that. It was, "This is the way that we've always done it, and here's how we're going to keep doing it." I think it's an entirely different environment, and I think you've got a disciplined group of operators generally that have all had their eyes open. I would speak to it akin to slot replacement back then. There was much more velocity in slot replacement pre-crisis.
What happened was people didn't have the money to replace slots. They realized, "Well, gee, we didn't need to replace it as often as we thought we did." That lesson was never unlearned. I think you'll see the same thing in marketing this time around.
Thanks very much, Tom. I appreciate it.
Next question comes from Jared Shojaian, Wolfe Research.
Hi, good afternoon, everybody. Thanks for taking my questions, and Tom, thanks for all the 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? I understand obviously everything is shut down. Merger approvals are kind of on the back burner right now. Can you just maybe help us understand what is taking so long and why you're confident that end of June is a reasonable timeline?
Yeah. What I would say, Jared, is the FTC process is running its normal course, where you have markets where they have concerns that we have addressed, but when you address them, you need to have your buyer approved. The COVID crisis put our buyer in jeopardy of not being approved by the FTC. That's really what delayed the process, is we needed to go and find a replacement buyer and have them vetted. That's no fault of any regulatory agency. Each of the agencies that we deal with have been dealing with us on a timely basis. All of them, of course, want to see what your numbers look like in this environment versus what we were talking about going into this crisis.
It took us some time to put that together on a bottoms-up basis so that it was rigorous, and we could feel good about the numbers that we are putting forward, and the regulators could feel good that they're approving a transaction that is financially stable. There was a period of time where it didn't make sense to work on those numbers or put those numbers in when there was no real light at the end of the tunnel in terms of when you were going to open and 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. That should put us in the pipeline for a June closing, since everything got there in April.
Again, these are government agencies that are dealing with a crisis throughout their state. Is it possible that something slips a month? It's possible. I would say we feel very good about June, but to be honest with you, June or July, we're happy to just get it closed.
Great. Thank you. Just switching gears here, Tom, you touched a little bit on the sports and iCasino segments. How has 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. Is that still how you're thinking about that?
What I would tell you is it doesn't change, that we are looking at the same opportunities we were looking at pre-closing. It's tempting 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 decision that's right for the long term. We are in the very early innings of sports and iGaming. This crisis could have the impact of accelerating this as states look for tax revenue. We want to make sure we make the right decision for the company. All of the options remain the same as they were prior, and the upside remains the same, if not more so.
Great. Thank you. One more quick one, if I may. Can you just talk about how you're viewing the ticking fee and if there's any wiggle room to renegotiate terms, just given the environment is obviously very different right now?
Yeah, look, we entered a merger contract with Caesars. We intend to honor our contract like we honor all of our contracts. If we were to go try to renegotiate, all you're doing is adding time for an uncertain result. In the scope of a $17.3 billion transaction and the upside that we see, the $250 million that we'll end up paying in ticking fees, nobody's going to remember a year from now.
Okay. Thank you very much.
We'll now go to Barry Jonas, SunTrust.
Hey, Tom. 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, we told you before the crisis, our intention was to drive leverage low. This crisis has done nothing but solidify that in my mind. That's where you want to be. We want to drive leverage lower. You should expect us to be using the bulk of our free cash flow to pay down debt. At closing or post-closing, from an M&A perspective, as we've said before, it'd be highly unlikely that we see anything domestically that fits in our portfolio post-transaction that's material to the combined company. Internationally, we are unlikely to pursue anything until after the concession renewal process is over in Macau. Even then, we would evaluate at that time. We have no problem being the largest domestic gaming company and see plenty of opportunity within our shores.
Great. I guess with that industry consolidation, I guess what I'm getting at is, are we going to see more consolidation on a go-forward basis? Do you think the industry will pause given the levels of leverage that we're at now?
I think you'll see a little bit of hesitancy across the space. One thing I would tell you is putting together the deal with Twin River, which was largely Bret Yunker and Soo Kim. I applaud Sue and his team for boldness in a situation where there's dislocation. That's a rare management team that's willing to do that. We think we've been willing to do that over the years. Unfortunately, crises like these tend to lead to people hiding under their desks or wishing it was three months ago. It's the rare breed that's willing to go in and seize opportunity in a situation like this. 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. Afternoon, everyone. Thanks for your commentary. Tom, I wanted to go back to some of the comments you made earlier about Caesars, specifically around Las Vegas. You touched on it a bit, going back to the older version of Caesars that traded as Harrah's Entertainment. A good portion of what they did in Las Vegas was, rather than event and group business, was driving rewards players to the Strip. Obviously, one of the concerns today is the willingness and ability for people to fly and to congregate in large groups which does help the Strip in total and certainly would help Caesars.
If you could help us break down the mix of business across the portfolio pre-crisis, on opening, and how you expect to manage that mix and deal specifically with those two issues, flying and large groups, and using Total Rewards as a tool, that would be helpful as we look at the Strip longer term.
Yeah. What I would tell you, David, is we are not combined yet, 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. You saw it over the last year and a half or so in the market pre-crisis. Half of Vegas's business is drive-in, half is fly-in, roughly. What I would tell you is the opportunity is everybody's going to set their prices on Expedia, right? Wynn and Venetian and Bellagio will be at the high end, and everybody will slot in into their slot. Rather than take whatever you think that high end will be, let's say it's $100, just to pick a round number. If somebody can fill a room $100 OTA, they don't know the customer.
Caesars can go into their database and invite a customer that they know is worth $200 and put them in the room. Now, that's not ADR, and that's going to be a piece of the business, cash will be a piece of the business. The database that Caesars already has is unrivaled in the business, and we're going to add our 12 million to the mix. It's going to be a very powerful tool in an environment like this where you don't have that big group business and you'd like to not rely on the roll of the dice, excuse the pun, on whoever's going to pay you your rate through Expedia. Caesars has a bigger opportunity to and a broader pipeline there than anybody in that market, full stop. That's going to be a huge advantage for us immediately upon closing.
That's irrespective of whether people are flying business-
Correct
leisure, et cetera.
Correct.
Okay. Perfect. Thank you very much.
Thanks, David.
Harry Curtis from Instinet is up next.
Hello, everyone. Two quick questions. I think the focus so far, rightly, has been on reopening with perhaps up to 50% of capacity. Have you spoken with any of the gaming regulators about what the hurdles are or what they're going to want to see before they will allow you to gradually lift that capacity?
Yeah, Harry. I would say, generally speaking, it's going to be related to the case experience in the individual market, in the broader local and state area. Casinos are a piece of what's opening. Louisiana announced phase one reopening today, where casinos are a piece of it. While it's very important to us in terms of what happens in the casinos, we are just a piece of the reopening in any market. It's all going to be driven by the broader public health concerns and what they see in terms of testing and case experience and hospital load in those localities.
In other words, follow the data.
That's right.
Yeah. Okay. The second question is you referenced buffets as a potential kind of longer-term change in the traditional casino business model. Are you sensing other opportunities where the lower margin business is an opportunity to kind of move the regional casino business in a different direction?
I think there are technology opportunities where, if you look at our business, we're one of the few businesses around that's still predominantly cash-handling business. You're handling cash, you're handling chips. That may be viewed differently in the future. You've seen kind of stadium style e-tables in a few markets, but not widespread. There's an opportunity there. We are still a big physical mail man, and I would tell you that even my parents in this environment are Zooming and FaceTiming and on iPads and phones, and I think you're going to see more of that business move to email. There's specific pockets of the business where, in my personal opinion, the sector was antiquated going into this.
Some of that was due to regulatory that may be rethought in an environment like this, and some of it's just because it was still, "This is the way we do business." I'd expect all of those sort of items to be examined as we move forward.
You raised an interesting question about chips, and it's an issue with respect to health, that also has bearing on cards on tables. How are you and the CDC going to deal with the movement of cards and chips across tables and maximize health considerations?
To start with, the CDC's not talking to me, so me and the CDC are not a group having conversations. What I tell you is, in the beginning, it's going to be all about sanitation. It's going to be recycling cards quicker. It's going to be dealing face up in games where you may not have been dealing face up before. Chips, you're going to have to sanitize your chips much more often than you did in the past. I think it's going to create momentum for, is there a better way to solve this? If we think about, do we want people passing chips and cards back and forth.
Right. It was a side question that I just hadn't envisioned the answer. Thank you. Appreciate it.
Sure.
Dan Politzer from JPMorgan has the next question.
Hey, good afternoon, Tom, and thanks for all the detail you provided. Most of my questions have been answered, but I guess as far as your regional properties, as you think about the phased-in opening, is it feasible to open all of your properties, or do you think there's a scenario where maybe some of your smaller or less profitable properties don't reopen?
I'd expect everything reopens. It's going to be what pieces of each property reopen. That's going to be a different answer, particularly on the table side, with capacity restrictions.
All right. Got it. Thanks so much. That's it for me.
Yep.
The next question is from Shaun Kelley, Bank of America.
Hi, good afternoon, everyone. Just wanted to do two things. One, Tom, you were really helpful in the cash burn comparison. Could you give us maybe a starting point, be it pro forma at 3/31 or as we look forward to 6/30 for kind of just combined company liquidity? That would sort of be the other ingredient that would be pretty helpful as we think about the balance sheet and starting position here.
That's difficult to do because we've got so many variables in play, but you should presume we would have substantially all, if not all, of our $2 billion of revolver availability available to us. It depends on when do we close, how many places opened before then? What's the experience between now and then? 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 of $2 billion of liquidity at closing.
Great. That's a good starting point. Thank you. Then second would be just, there's some near but probably more medium term CapEx projects that you guys have talked about in pretty normal course, be it Lake Charles and the expansion opportunity there. I think on the further run, you've got Pompano, and then you've got what you're looking at on the Caesars side in terms of the land-based facility in New Orleans, some of the additional expanded capacity there. Is there any need to re-look at those? I know that New Orleans is, I think, somewhat contractual or committed, but is there any need to re-look at that? How can you space out that timing to kind of balance the free cash flow profile and where you want to be on the balance sheet versus maybe the timing of some of those projects?
Shaun, that's exactly what we'll do is we will, as you said, Paris has contractual elements as far as timing. The rest of what you're talking about are 100% discretionary. What I'd tell you is we'll be weighing what are our return expectations, what's our capital availability and liquidity situation, and what's our leverage situation. What I'd tell you is early on, we're going to err on the side of de-leveraging.
Great. That's helpful. Last thing from me would just be, you've already tackled this from a couple perspectives, so not meaning to make you repeat what you've already said, but just directionally, is there really anything that changes as it relates to your operating strategy? Let's just specifically kind of drill down on the capacity constraints, right? I think we've tackled this as it relates to cleaning costs or this or that. If we just think about it from the perspective of your blocking and tackling operating strategy, what you hope to employ at Caesars, is there any real change at all that is meaningful to you as you think about some of just the capacity handcuffs that'll be on for a little while as it relates to social distancing and the like?
When you think about the nature of the customer here and the way you're going to target the business, is that not a particular concern to you?
What I would say is in terms of the capacity issue, I touched on it a little bit earlier. It's going to be if the capacity limitations are such that you'll be at capacity, it's how do you ensure that the best customer is in the property to optimize your cash flow. That's something we'll be working through. Generally, on the operating side, it's kind of flipped on its ear in terms of as we were coming into Caesars, we were looking at a fully operating and staffed company and saying, "Okay, what do we need? What do we not need? What do we need less of?" That had been the approach as we've been analyzing Caesars. Now on both sides, you have very little in the way of cost.
What you're looking at is being thoughtful and analytical and optimizing how and when and how much cost you bring back. It's a totally different animal looking to achieve ultimately the same goal of maximizing free cash flow. We certainly never thought we'd be in a position where you're looking at almost a blank sheet of paper across 60 properties.
Yeah, I don't think anybody else did either. Thank you very much for the time.
Operator, we have time for one more.
Okay, we'll take our final question today from Thomas Allen, Morgan Stanley.
Thank you. Just in terms of the comment in your prepared remarks, Tom, about the CARES Act could help out by a $200 million benefit. Can you just talk about the building blocks there? Thanks.
Most of those are related to payroll tax credits and relief, and then there's some associated with NOLs, but it's mainly payroll related. Payroll tax related, I'm sorry.
Perfect. Helpful. Then just on the capacity question that a lot of people have been asking about, are there any numbers you can give us to help us feel more comfortable with kind of the potential capacity limits that are going to go into play, such as like, 25% of customers generate 50% of revenue or, typically on regional properties, they're only typically running at 60% capacity anyway. Any metrics like that could help us think about it more?
What I would say is in most of your properties, your casino floor outside of Friday and Saturday night is very rarely going to be operating north of 50% capacity utilization. Friday and Saturday night is where you're going to have in a typical environment where people are working, that's where you're going to need more than 50% of your floor.
How much of your revenue do you typically generate from Friday, Saturday nights? Any sense of how easy it is, like, can you shift those customers over?
That's wildly different by property. I would tell you, destination markets, Reno is probably 70/30 weekends, but Scioto is probably 60/40 or less.
Helpful. Thank you.
All right. 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.