Full House Resorts, Inc.

Good day and welcome to the Full House Resorts, Inc. First Quarter Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Lewis Fanger, Chief Financial Officer of Full House Resorts. You may begin.

Thank you and good afternoon, everyone. Welcome to our First 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 State 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 captioned forward-looking statement for the discussion of risks that may affect our results. Also, we may make reference to non-GAAP measures such as adjusted EBITDA or reconciliation of those measures. Please see our website as well as the various press releases that we issued. and lastly, we're also broadcasting this conference call at poolhouseresorts.com where you can find today's earnings release as well as all of our SEC filings. And with that said, you ready, Dan?

Yeah. First quarter seems like a long time ago now. I mean, just addressing where we were in the first quarter, Silver Slipper was doing quite well. The Northern Nevada was doing okay. Rising Star and Colorado were doing better than they had in the second half of last year and trending positively. And then everything shut down in the middle of March. So the quarter is obviously very distorted by all of that. And I think the question now is getting stuff reopened. It's almost like having a development company where you've got a handful of employees and you're getting ready to opened five casinos and put a lot of people back to work. I guess very important, at the end of March, we had $24 million of cash and equivalents. Now, a good chunk of that is normally used in operations, and most of the rest came by stopping construction on the parking garage that we had underway in Colorado, and that is being used as kind of a cushion. In the first month that we were closed, which would have been from mid-March to mid-April, we've probably burned through about $5 million. A lot of that is severance as we've reduced the payroll. And our burn rate after that period is about $3 million a month, of which about $1 million is debt service on our debt, and most of the rest is actually stuff like real estate taxes and and so on. Payroll is about 20% of the $3 million. We've gotten payroll down pretty small at this point. We did just receive a $5.6 million loan under the CARES Act. It's a two-year loan at 1% interest that has incentives in it for us to hire back employees and we'll be helpful at getting Colorado and Indiana up and running. Those are the two properties we have that have less than 500 employees and a very specific provision that was in that CARES Act that allows subsidiaries like that to not look at the total parent in terms of number of employees. Silver Slipper has more than 500 employees but those two have less and they have hotels associated with them and so we qualified and frankly There's all this language about possible forgiveness. Those rules aren't really spelled out yet exactly how it works. It's possible that some of that loan would qualify for forgiveness, depending on what our payroll is over the next eight weeks, which in turn depends on when we're actually able to open. We have brought quite a few employees back to work already, trying to put them to work to get ready to open at those properties. In terms of actual opening, the first one to open, we think, is going to be the Silver Slipper, and that may be next week. The State Gaming Commission has said in advance of Memorial Day weekend, so that's coming up. We're not sure exactly which day. Some of this stuff has been a little strange. Again, Nevada suddenly said we could open restaurants, but not casinos. Well, we have a restaurant in Fallon. We had like 36 hours notice. We don't even think we can get food that fast. But we're now looking at getting that open now. It's just a coffee shop. It won't make a lot of money, but it might make a little money and gender some customer goodwill and get a handful of our employees back to work. But that also will make it easier when we open our casino because we're not trying to open both the restaurant and the casino on the same day. So that's coming in fallon. at Tahoe. The Hyatt, which our casino is in, is now saying they don't anticipate opening until early June. It's possible we could open the casino before the Hyatt, but that gets a little complicated. But I think we're in the time frame sometime between now and early June that we could be opening at Tahoe. In Colorado, the governor has indicated he did not expect the casinos to open in May. A lot of people interpreting that as being early June, but it might actually be mid-June. It's hard to say. And then in Indiana, they specifically did say June 14th should be the date that we count on. So in the next few weeks, we think we'll be opening all of our operations. And frankly, Red House is pretty busy trying to figure out exactly how to do it. We've done the marketing plans in both Colorado and at Rising Sun, which is a lot of work. where we have the CARES Act loans. We've got employees back to polish and buff the place and fix it up and get ready. Down at the Silver Slip Bird, they're doing some of that as well, getting ready for next week. We're installing like plexiglass panels between some slot machines that can slide in and out. So if you want to be separated from the person next to you, you can pull that panel out and we're hoping that that will allow us on some of the popular banks to keep all the machines going instead of having to turn off every other machine. It's not clear yet. It varies from state to state on what the different rules are going to be. We're trying to figure out how to make table games safer and so a lot of those rules we're trying to work out with the different gaming regulators and internal. So the first question is when do we open? The second question is under what rules? And we're still trying to figure that out. And I guess the third is whether customers are really going to show up. We've heard anecdotally that there's about a half a dozen tribal casinos that have opened in different places where they are allowed to do so. And so far they all seem to be doing pretty well. And I think Golden Gaming at their earnings call indicated that They have pubs up in Montana that have slot machines in them, some sort of a route operation. And they've opened and seem to be back to pre-pandemic business levels pretty quickly. So there's not a lot of data out there, but what data there is, it seems to indicate that business will recover pretty quickly. My guess is some of that is pent-up demand, and then maybe a few weeks later, the reality of the 15% unemployment rate might start to sink in. but there's a lot of different moving pieces in this. A lot of our customers are retired. If you're retired, you can't really be laid off and you've still got a $1,200 stimulus check. We have some of that going on as well. Now we are planning to open carefully. In most cases, we will not open all the restaurants. We will not open all the table games and we're going to trying to make sure that we have more customers than employees, if you will. So we're trying to open kind of on the lean side, and we can always build from there because we just want to be cautious just in case customers don't show up. So we hope they do, but we're planning for a more conservative scenario. Meanwhile, the mobile sports wagering is coming along. all three of our partners in Colorado have been licensed. They're awaiting approval of their apps. Smarkets has indicated they expect to be open this month, actually, in the next 10 days. And Raymond Churchill we think will be up and going sometime this summer, but we don't control or know exactly when that is. professional sports does seem to be trying to find ways to come back and of course that will help the sports betting. I think people want to get up and running with these sports skins anyway because they want to get market share and get people signed up on your stuff so I don't think anybody's dragging their feet waiting for professional sports but there's a lot of work that our partners have to do to get their apps approved by the different regulatory agencies and get licensed themselves and but they are licensed now in Colorado and Churchill, as it mentions in the release, has been up and running in Indiana and the other two are still seeking approval in Indiana and that's probably not very far off either. When all six are up and running, and we think that prior to the end of the third quarter and maybe even the end of the second quarter, when all six are up and running, Our minimum guarantees are about $7 million a year, or exactly $7 million a year. And there's no expenses. There are very few expenses related to that, so that's almost all income, and there's no maintenance capex or anything. So it's a pretty substantial thing for our company, and it's coming down soon, shortly.