Full House Resorts, Inc.

Greetings. Welcome to Full House Resorts fourth quarter earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Louis Fanger, CFO. Thank you. You may begin.

Thank you and good afternoon, everyone. Welcome to our fourth quarter earnings call. As always, before we begin, we remind you that today's conference call may contain forward-looking statements that we're making under the safe harbor provision of federal security laws. I would also like to remind you that the company's actual results could differ materially from the anticipated results in these forward-looking statements. Please see today's press release under the caption forward-looking statements for the discussion of risks that may affect our results Also, we may make reference to non-GAAP measures such as adjusted EBITDA for a reconciliation of those measures. Please see our website as well as the various press releases that we issue. And lastly, we're also broadcasting this conference call at fullhouseresorts.com where you can find today's earnings release as well as all of our SEC filings. And with that said, I'll give a few comments and then Dan will chip in with any cleanup here But as we said in our earnings release, we're at a transition point now with our company. We borrowed in large part to fund two large casino projects. Our legacy properties have historically carried the burden of that debt, largely covering interest expense on their own. Post-COVID, business at our legacy properties feels like it has largely settled down to around $30 or $35 million or so of adjusted EBITDA per year, again, largely covering our annual interest expense. With American Place and Chamonix both now open and construction capex winding down, we are now set up for significant free cash flow generation. We have long said we expect $100 million of incremental earnings in total from our temporary American Place facility and Chamonix after they have ramped up, and we continue to believe strongly in those figures. Those amounts are on top of the $30-plus million generated by our legacy properties. And so when you start looking at those figures, hopefully you also see that our company is transitioning now into a large free cash flow generator. Somewhat related, we recently received all of the necessary approvals to operate our temporary American Place facility until August 2027. That is an important development that many have missed. For casino construction projects, you'll typically spend 40 to 50% of your project budget in the six months before opening. That means we won't invest we won't start investing large dollars into the permanent American Place facility until the second half of 2026 and into 2027. That's important for two reasons. First, contrary to what we have heard from many investors recently, it means we do not need to be in the debt markets right now. We don't expect the need to finance the permanent American Place casino for a few years. That additional time should be our friend. Over the next few years, the debt markets have the potential to show continued improvement with a potential for interest rate cuts between now and that future financing day. It also means that our two newest casinos will have time to season, allowing their EBITDA to ramp up into the full potential that we expect from them. If we hit the EBITDA levels that we expect, gross debt to EBITDA should be around three times, which is a low figure historically for any gaming company. And most importantly, the August 2027 extension offers us more time to generate even more positive free cash flow, allowing us to self-fund a large portion of our permanent American Place facility. Going back to American Place for a second, our temporary American Place facility has recently kicked into a new gear recently. In December, American Place reported gaming revenue of $8.2 million. That record will be short-lived. For February, you'll see a figure north of $9 million. At American Place's anniversary party a few weeks ago, we did double the coin-in of opening night and had coin-in that was about 50% higher than our previous record for a single day. March is also off to a good start. At Chamonix, we purposely crafted a phased opening. Despite some brutal snowstorms recently, two things are clear to us so far. One is that there is no high-quality gaming product in the Colorado Springs market akin to what we offer at Chamonix. and two, guests are clamoring for something nice in town. It appears that our rooms will be very easy to fill on weekends when we can easily fill those rooms above 80 and even 90% occupancy. For the midweek period, group business will be important. Group business will start to come into play over the coming months now that meeting planners can see the beautiful facilities that we've created and can be assured that construction will not interfere with their meeting plans. We also have our high-end steakhouse on the verge of opening. Chef Barry is renowned for his Barry's Prime Steakhouse and Nine Steakhouse in Las Vegas, and he'll be bringing his culinary talents to Chamonix around the end of the month. Once that's open, while we won't have our full breadth of amenities, we will have the most important elements, our casino, our parking garage, all of our hotel rooms, and our high-end restaurant. We can then turn on our marketing heading into the summer months. which is seasonally the strongest period for the Cripple Creek gaming market. That's what I had, Dan. You want to do some cleanup there, or should we do Q&A?

You did a lot of stuff, but let me just touch a couple things. We've been very focused on getting Colorado open. Meanwhile, Illinois continues to mature, which is nice. I was actually editing our 10K today, and there's all this historic language in there about Mississippi being our most important property, and it's no longer the case. It's still important, but we actually make more money in Illinois now, and pretty soon Colorado's going to give it a run for its money. But getting Colorado completed in a small town in the backside of Pikes Peak has been a challenge, but it's mostly done now. The high-end restaurant will open later this month, and then there's a jewelry store shortly thereafter, and we have one significant bar, one Italian restaurant that's going to be a little later, and the spa. So it's coming, but it's not done yet. But in effect, we've been saying for quite some time that the company is going to at least triple in size, and that's what it's in the process of doing. It's also kind of reassuring because when we issued the bonds and then we did the add-on for the temporary casino, we basically borrowed all the money in advance of construction. So we've been paying the interest expense on all this stuff without having it open. And every month, the total cash balance, including the restricted cash balance, would decline. And so you're playing this game of trying to make sure you have enough money to complete construction and everything. And now it's kind of at an inflection point, and it's starting to go up. And if you play with the math a little bit, you can see our free cash flow per share. I mean, after interest expense, and we're pretty well sheltered for taxes, not only with tax laws carry-forwards, but with a lot of depreciation from the new stuff we've built. So effectively, we pay little or no income taxes. So our free cash flow per share is about $1 headed for $2. And we should be able to generate quite a bit of cash in the next three years in order to build American Place the Permanent. The commitment to the state was $500 million, of which we've invested about $175 million to date. So we have three and a quarter to go, and that's a permanent casino with a small high-end hotel and a bunch of food and beverage facilities. So figure half size of Durango Station, if you will. We can probably generate about half of that internally, and so we need to fund $150 million of debt. We won't do that this year. The money actually isn't needed until a later date. The Pottawatomie lawsuit won't be resolved until the fourth quarter of this year or the first quarter of next year. We think it's just a nuisance lawsuit designed to forestall us from building, but they are trying to get the city or state to kind of restart the selection process and give them another shot at it. Now, there were, I think, five proposals, and the outside independent consultant ranked theirs as the least attractive of all five proposals. on like eight of nine different measures or something. And I was there, and their proposal was pretty bad. Nevertheless, you have a lawsuit out there saying, you know, we think whether Full House should have this license is debatable. We're pretty sure we'll win. If we don't, we would have certain legal rights that we would pursue. But in the meantime, we continue to operate the temporary. and won't seek the additional financing for the permanent until it's resolved. And so it's probably a year from now we're looking at that. But at that point, our EBDIT will be three or four times what our interest expense is. We'll actually be under levered compared to most casino companies. So the task of raising $150 million for the balance of the American Place would not be difficult. In fact, it'd be prone to do it. We'd have to probably refinance the bonds anyway, which are due in 2028, I believe. They're now callable. But you may not increase the size of the bond deal. You might just want to create a carve-out to allow a term loan or a bank facility because once the permanent American Place is open, we're going to be paying down debt very, very fast. So anyway, that's my additional thoughts. A little bit redundant with what Louis said, but happy to take questions.