Full House Resorts, Inc.

Q1 2021 Earnings Conference Call

5/10/2021

spk05: Good day and welcome to the Full House Resorts First Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Louis Fengers, Chief Financial Officer of Full House Resorts. You may begin.
spk01: 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 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 all that, I want to start today. Dan's back with us this quarter, so that's the good news. We had a relatively busy quarter, mostly on the balance sheet side. Operations continued, as you've seen, over the last two quarters. That gives us 10 months now of reset operations. And as we stated pretty strongly last quarter, we expect those changes to be sustainable. Looking at the income statement, consolidated revenues for the first quarter were up pretty strongly, about 37% to $42 million. We were closed for the last two weeks of the quarter last year, so that's part of the reason for the strong gain. However, even if you compare our recent first quarter to a more normal quarter, like the first quarter of 2019, revenues still climbed about 4%. that was due to strength in Mississippi, as well as the continuing launch of our sports skins, which we'll talk about in just a second. Adjusted EBITDA improved to $10.8 million. That's an increase of more than $12 million versus the first quarter of 2019. And again, we went through a lot of the reasons why last quarter, so I won't go through all of them again here today. But they do largely come down to labor efficiencies, marketing efficiencies, and more refined operating hours for our amenities where we're making sure that our hours match demand. And again, I will continue to reinforce we think all of that is sustainable. I don't know of any first quarter over the last many years where EBITDA has been stronger than where it was in this current first quarter. On a trailing nine-month basis, our adjusted EBITDA is sitting at more than $33 million. That's a great spot to be sitting at as we step out of our seasonally weaker fourth and first quarters. and into our stronger or typically stronger second and third quarters. For all of you astute press release readers out there, you'll see we switched up the operating segments on you. We broke out our six sports contracts in Colorado and Indiana into their own segment, which is named Contracted Sports Wagering. That includes the on-site sports books at Bronco Billy's and Rising Star, the three online sports skins in Colorado, and the three online sports skins in Indiana. We felt it was wise to break out that segment for a few reasons. One is that investors seem to be valuing sports betting generally in a much different fashion than traditional brick-and-mortar casinos. Very specifically, it feels like companies in that business are being rewarded with much higher EBITDA multiples. And secondly, the cash flow that we get from that segment is real cash flow. There's no maintenance capex attached to it. We don't have to pay for a leaking roof. We don't have to pay to replace slot machines. There really aren't many cash needs on that segment at all, and that's probably part of the reason why we put a richer multiple on it. Regardless, we have given you all that increased transparency by breaking out the contracted sports wagering segment. That segment did increase from about $400,000 in last year's first quarter to nearly $1 million in the current period. That's due to more skins being live. We had three of our six skins live in the first quarter of 2021. and added more very recently in the second quarter. About five weeks ago, our fourth skin launched. That was Wynn launching in Indiana. And then about two weeks ago, our fifth skin launched, and that was Churchill Downs launching with their twin Spires skin in Colorado. We have one skin left to go, which is Smarkets in Indiana, and we hope to see them go live in the next few months. Regarding the balance sheet, we were very active in the first quarter. We issued $310 million of new senior secure notes Those are seven-year notes due in 2028. They're our debut issue with the high-yield markets. By the way, they're trading quite well. The proceeds were used for several purposes. The first was to refinance $7 million of our senior secure notes due 2024, including a modest call premium. The old notes were floating rate notes at Libro plus 700 with a 4 of 1%. So they were effectively 8% floating rate notes that were likely to go higher in the future. Our current floating, they're fixed with an interest rate of 8.25%. As I did mention last quarter, is that our new notes don't have a quarterly leverage test that we have to meet, which is a pretty big advantage versus what we used to have. We did use $4 million of our bond proceeds to take out all of our outstanding warrants. Those warrants gave the holders the ability to purchase about a million shares of our stock at an exercise price of $1.67 per share. With those gone, it's a pretty clean and straightforward balance sheet now. The most important use of our proceeds was to fund our Chamonix growth project in Cripple Creek, Colorado. We have $180 million, about $180 million of remaining costs to complete that project. There was only about $100,000 to spend by the end of the first quarter for what it's worth. And through May 1st, we've invested about $2.1 million of the $180 million into the project. And if you take a look at the webcam, actually, if you look a few hours ago, you would have seen the demolition of one of the existing buildings live. It was kind of fun to watch. But I'll let Dan give you a fuller update on that project very shortly. And then the balance of the proceeds for that bond offering was to pay for deal expenses, and we put about $8 million of cash under the balance sheet. While we have been pretty laser-focused on our Chamonix project, we do have two potential future projects on the horizon, both in Waukegan, Illinois, and at our existing Silver Slipper property. And so because of that, in late March, we issued $46 million in new equity. This equity issuance strengthens our balance sheet even further, especially as we prepare for the day when we can formally present our project to the Illinois Gaming Board, which If you recall last October, we did sign a commitment letter with a multibillion-dollar private equity firm to fund our Waukegan project, but it would have required us to contribute $25 million of cash as equity. This equity deal that we just did was our way of showing that there should be no doubt as to our ability to build what we think is the most exciting vision of the three projects that remain in that process and is something that we think the locals of Waukegan will be amazingly proud of. A nice side benefit of that equity offering, too, is it should result in much more liquidity in the stock now. And then on the last day of the quarter, we entered into a $15 million revolving credit facility. There are two quarterly covenants in that facility to note, but they're both relatively minor. One is a minimum liquidity covenant. We need to have at least $20 million of unrestricted cash for just two quarters, the first quarter that we just finished, as well as the second quarter of 2021. I think we should be able to handle that pretty handily for what it's worth. The other is what is effectively a minimum EBITDA covenant. We need to have EBITDA on a trillion 12-month basis that exceeds the utilized portion of our credit facility. And so to dumb that down a little bit, we currently don't have anything drawn on the credit facility So we need to have at least zero EBITDA. If we drew down the full $15 million of the revolver, we would need to have at least $15 million of EBITDA on a trailing 12-month basis. I don't really envision us using very much of that credit facility for what it's worth. It's really there to provide us with additional liquidity should we ever need it and to help facilitate things like ordinary letters of credit that we might need to post. And so all of that leads to our overall liquidity position. In addition to that undrawn revolver, we have $278 million of cash at the end of the quarter. That includes almost $180 million in that restricted account for Chamonix. And I feel like I said this last quarter, but it is true all over again. That's more cash than we've ever had in our histories at this company. I rattled off a few things, Dan. I'm sure you have some things to add in there, so feel free.
spk03: Yeah, I did a lot of things. Louis did it off notes, and a little freewheeling here, but I'll add a little color to what he said. He covered almost everything. In Mississippi, part of why we're doing so well is we refurbished the casino in 2019, upgrading the casino and the buffet quite a bit. It was always nice. We made it nicer. And then there was no Mardi Gras this year in New Orleans. And Normally, that's a strong period for us because people in New Orleans get out of town because it's such mayhem, and some of them come to us. So the fact that there was no Mardi Gras might have actually worked against us, and despite that, we did well. Third, I'll mention that back in October, we had some damage from a hurricane. That's been repaired for the most part, but as a result of those repairs, we're repainting the building. And for the most part, that's being paid for by the insurance coverage. And the painting, the building will have a different look. We picked up a completely different color scheme. We thought as long as we're painting it, if we change the color scheme to actually we pick the colors off the shutters in Santa Monica Hotel, it will effectively refurbish the outside, if you will. And that's underway as we speak. So we've been working on this expansion And the property was not designed really to be expanded and it's a little bit landlocked. So it's a little complicated. We figured out the best way to expand it was on a pier out over the water. So you build a pier like the Santa Monica Pier and you put a hotel tower on it. It's actually not that hard. Everything down there is muddy so everything has to be built on pilings anyway. So the pile driver can be on a barge just as easily as it can be on a truck. And the Gulf of Mexico is quite shallow, so it doesn't really matter. You obviously have to design fire exiting in certain ways and so on, but we've done that. So going out over the Gulf of Mexico, and then we will need more parking. And under our lease, we have a lot of wetlands that we would like to be able to fill in and create more surface parking. And so those things require some approvals. So the bottom of the Gulf of Mexico out to some miles offshore is actually controlled by the state of Mississippi. So we have been working with them, and we think we have a draft agreement that we think everybody's in agreement with, but they're jumping through hoops at the State House to execute it, that would give us a 35-year lease at about $100,000 a year to lease a small swath of the bottom of the Gulf of Mexico, allowing us to build a pier. And then to fill in wetlands is also kind of a process, and we've done it many times in Lake Charles and other places. But basically, if you're going to fill in a place where two ducks might get friendly, you have to go find another spot where ducks might be even happier to get friendly and put it into trust forever as a great duck habitat or whatever habitat. And so we've identified land that we think works for that swap. We've negotiated a deal for that. And so we're trying to execute all of this, which would put us in a position to build that expansion. It would have about 150 guest rooms, one new restaurant, and then meeting room space and a small spa. This property doesn't have any meeting room space at all. So it's very awkward when it's like New Year's Eve. You don't really have a place to have a party or anything. And that also makes it a little more challenging to fill the hotel Even the hotel we have midweek is a little more challenging because normally you use the meeting room space to help fill things midweek. All of this has to be elevated 30 feet. So we think we can do this for approximately $75 million, and we're kind of getting things ready to be able to do that. And the numbers work pretty well because you're not building a new casino. You're just adding more people to the casino you have now. And so the returns on that end up being pretty good. In Indiana, we also did pretty well with the million one of income. Historically, this property doesn't make a lot in the first quarter. It's seasonal. And last year, it lost money in the first quarter. And so we're pretty happy with how it's going. And that was despite some pretty bad weather there in February. I hate to cite weather, because there's weather every year, usually. But we're pretty pleased with that. Our general manager there has decided to move on with Indian Tribe in the Midwest. And so we're promoting Angie, who's been our director of finance there and EVP. And she'll become the general manager. And then Jim McCracken, who's been our casino manager, will become the assistant GM. Both are internal promotions. Both are competent people who've been with us for a while. Angie worked at the Silver Slipper for many years before going up to Indiana. Pleased that she'll be our first female GM. It's past time for that to happen. And she's very competent and very hardworking, and we're excited about that. So kind of the news in Indiana is basically some management changes, and we're happy with that. And frankly, Angie and Jim and the team there have been a big part of why this property is making more money now than it has in a long time, and we want to keep that up. It's kind of a new style of operating where we focus more on casino customers that matter and less on people who just want to eat cheap at the buffet. So in Colorado, similar. Now there we had a good first quarter, best first quarter the property's had in a very long time, maybe forever. And that's despite the fact that the parking has been pretty much ripped up as we're building Chamonix in the early stages. And so they've had to scramble and offer valet parking at the front of the property. We bought a couple of shuttle buses. We've leased a surface lot as you come into town, and we're waiting for city council approval to allow us to use that. We'll get that approval, but there's a process that it takes. And so at the moment, we have very limited parking other than what we can do through valet, where we can park you kind of remotely. And yet the property continues to do well. We did buy Carr Manor, which is a B&B with about 15 rooms. It's actually pretty nice. It was a school at one time, and the couple that bought it and fixed it up did a good job. And so that's been popular with our customers, and it's helping us upset the fact that we've torn down quite a bit. If you do... go to either the Bronco Billy's website or the Chamonix, Colorado website. They both lead to two webcams that we have up that show them. If you look carefully on the one, you'll see a backhoe working its way down a street. That's relocating utilities along the street because right now a lot of utilities cross the property, and you obviously don't want utilities underneath the building because if you have some problem, you can't get to them. And then... There's three buildings we have to demolish. One we did a few weeks ago. The second we did this morning, and that's actually the westernmost piece of the Bronco Billy's Casino. It was a building that was not actually historical. It was built back 30 years ago, which in local terms is a modern, recent building. So we were permitted to tear that down, and we chose to, to allow us to build a new building without posts and so on as part of Chamonix. And so that came down this morning. There's one other one, which is an old apartment building that will come down shortly. And so we're underway. In about two weeks, you're going to see a lot of foundation work out there. The work you see now is very important and has to be done first. It's not very impressive to see a guy out there with a backhoe relocating a storm sewer, but unless you do that, you can't do the other stuff. And so that's all coming along. And then... In Nevada, we actually had a pretty good quarter despite everything. That's been kind of the most COVID-challenging place because the ski areas this winter all had restricted capacity because of COVID. The Hyatt has very little meeting and convention business because of COVID. And then the Navy pilots and their crews have been locked down on the Naval Air Station. Despite that, we made some good money in northern Nevada. I think as people get vaccinated and people start traveling again, the Hyatt numbers will get better. Hopefully the local business that is the other half of our business there will stay strong, and eventually the Navy will allow their people to leave base, and that will be good for us. So I'm pretty optimistic about northern Nevada coming out of it. Contracted sports wagering, you know, our guaranteed minimums are about $7 million. a year, which would be a little less than $2 million a quarter. So you can see we had $1 million in the first quarter. And there were $6 million of market access fees that were paid up front. That gets capitalized and amortized over the life of the contract. So we really should have about $2 million of contracted sports wagering income per quarter. And we're almost there at the end of the second quarter. and we only have one more license to open, so it's coming along. And the big jump in corporate I'll mention is with the poor earnings last year and the good earnings this year, we accrued for bonuses, not just for me, mine's in my contract, but throughout the company there's some bonus accruals, and that's a big chunk of that increase there, which as long as we're showing results that's good, I think that's only fair. The Waukegan is exciting. I spent this morning working with it. The Illinois Gaming Board put out a request for proposals for an investment bank to help give them advice as to whether the different proposals can be financed and what they might do and so on. They had done this once before and nobody responded. I'm not sure why. I guess I could guess that maybe They defined something that only Goldman Sachs would satisfy, and they had a fee that Goldman Sachs wasn't interested in or something. But they got no responses. So they came back with a new RFP, and they've said that they did have responses. And the gaming board, director of the gaming board, had indicated that he thought that they would reach a decision six months from when they hire an investment bank. So they haven't hired one yet, but we think it's close, at least that we know of. And so if you extrapolate that, that would be fourth quarter where they would be making a decision. So we continue to kind of work on the details of what this would look like and how it would work and how it could be exciting. And so over time, our project, frankly, gets a little better. It's essentially the same project, but we've found little improvements we can make. And then... If we were chosen, then you have to negotiate a development agreement with the state, which doesn't happen overnight. But from the moment that's done, we would be open with a temporary facility in six to nine months and then get going with a permanent facility that would take a couple years to build. So it's late next year at the earliest that we would be up with a temporary casino. So we're watching this process pretty closely. It's taken much longer than they had originally forecast it would. And I mention all that because this expansion of Mississippi is coming along pretty quickly, and I don't want to have that on hold indefinitely for Chicago. We've been kind of hesitant to have three things under construction at the same time, just because we're not that big a company. But, you know, Colorado's going pretty quickly. That'll be open in two years, and it wouldn't bother me a lot if we were just doing the groundwork on, like building the pier in Mississippi before Colorado was open. If they overlapped some, it wouldn't be the worst thing in the world. So we're kind of going along multiple paths here, willing to go as quickly as possible in Illinois if we were chosen, but also looking at Mississippi and saying, we don't want to leave this on hold forever. We could go quickly there, too. And financially, we really could do all of these things. Yeah. The balance sheet's in pretty good shape, and we're sitting on how much cash today?
spk02: $280 million.
spk03: $280 million of cash today. So we're in pretty good shape. I guess that's it. Am I missing anything? I guess we'll take questions. Maybe that'll point out other things I might have missed.
spk05: Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Once again, that is star 1 if you would like to ask a question. And we'll take our first question from Ryan Sigdahl with Craig Halliman Capital. Please go ahead.
spk04: Good afternoon. Nice quarter. And Dan, glad to have you back on here and hear you're doing better.
spk03: For those who might not know, I crashed on a bike getting some exercise and broke my collarbone, so I missed the last earnings call. But I'm back. I no longer have my arm in a sling and have not yet gotten on a bicycle, but I'm getting there.
spk01: No jumping jacks yet, but we'll get them there by the end of the week.
spk03: I did use my Peloton this morning.
spk04: Well, good to hear. And I always appreciate the caller. I'm curious how trends have been in April. and thus far in May, on gaming revenue and then margins as well. I know you said structural margin improvement. You expect that to hold. But can you comment a little bit what you've seen thus far post-quarter?
spk03: Yeah, it's been strong. I will tell you, when we did that equity offering with you guys, if you recall, we very carefully told people that we were comfortable with estimates that had us at $10 million VBDIT in the first quarter. And we did that deal maybe two weeks before the end of the quarter, so you still don't know. But then the stimulus checks came out, and we ended the quarter with a flourish. And you can see that in the results, because if 10 weeks into the quarter you think you're going to do 10, and you end the quarter with 10.8, something happened. And that continued into April. We're hoping the government will send out stimulus checks every month forever. That would be fabulous, right? Of course, that won't happen. But we did have a, you know, it has continued into April. And we've stayed strong. We haven't seen a slack yet. And so, you know, I would not expect the results of April to be continued through the year, though. Because we don't have stimulus checks all the time. I think we get back to a more normal pace of, you know, like if this quarter had been $10 million, that would have been on track for like something in the low 40s for the year. And I think that would be, if you were to take like, the last week of March and the first week of April and extrapolate it, you'd have us at $60 or $70 million a year. That's just not likely to happen. It varies a little bit from property to property, but in general, business has stayed strong and we're sticking to the new model. Even though governments have loosened up on some of the rules and in some places we're allowed now to have more slot machines and We no longer have to require face coverings in certain markets and so on. But the basic thing of being very careful on what we spend on payroll and on marketing costs, that's not changing. And so we've been able to hold similar revenues to the past with much less cost. And that's why you see the improvement you see. And that's continuing.
spk01: If it's helpful, Ryan, generally Mississippi and Indiana continue to do well. Colorado is dealing with the parking issues that Dan mentioned, although has been dealing with those issues pretty well. Now, part of that is having people valet cars versus no valet at all before. Part of that's running shuttle buses from a distant parking lot to the property. So there are some incremental costs there and a little bit of construction disruption that we're trying to manage through. And in Nevada, Stockman's, knock on wood, but the county that Stockman's is in has been, it feels like it's largely out of the woods with the pandemic. And so it feels like the restrictions on that base are probably going to start easing sooner versus later. And what we hear from the Hyatt over at Grand Lodge is that that could very well be a very robust situation. summer season for them. So while Nevada is lagged, knock on wood, there are hopefully some signs that we'll start to see that go the other way in the next month or two.
spk03: By the way, if you look at the website in Colorado and see the building where the steam shovel out there is clearing out today, that was actually part of the Bronco Billy's casino. It was probably 15% of it that we have now torn down. And so now, you know, we have plenty of slot machines to do the revenues we're doing, and it's not, you know, what a casino revenue is based on the number of people in the place, not based on the square footage. So I don't think that will have an impact on us, but, you know, we did tear down part of the casino, so that's a function.
spk04: Good. Helpful. You mentioned it, Dan, that Certain properties, thinking Mississippi, restrictions have lifted, no more face masks, et cetera. Have you seen a change at the Silver Slipper traffic kind of pre and post those restrictions lifting?
spk03: The biggest change we're seeing, which is heartening actually, is our oldest clientele, 60 and over, which has always been our most important segment and really at every one of our properties. We were off about 30% in the number of visits and what they were spending per visit. It was off pretty sharply at the height of the pandemic, and it now seems to be coming back. And so our task is to try to hold on to the younger clientele who were new to us and during the pandemic offset the absence of seniors and then try to hold on to them and get the seniors back. And so far we seem to be doing that reasonably well. It's a little hard to figure out when the government suddenly shoves a lot of money out and all that stuff. But the biggest thing we see is as people are vaccinated, older people are willing to come back. They were the ones who were most at risk and most frightened about going out, so most careful. So I think we're doing better.
spk04: And then in Colorado, with Amendment 77 passing, have you added new games to Bronco Billy's? And then secondly, on Bronco Billy's, it sounds like some construction, et cetera. Should we expect probably Q1 to be the high watermark there, just given those challenges? Or do you think it can grow right through that sequentially?
spk03: No, it's a seasonal property. So the third quarter is seasonally the most important quarter. And so I expect our third quarter to be well above that. I mean, that property will probably make something like $8 million this year and did $1.7 in the first quarter. And frankly, the surface lots we're getting are very large surface lots right as you're coming into town. And we'll have signers there saying, you know, park here, self-park for Bronco Billy's. And we bought two shuttle buses. And so we think we can offset this. But these were surface lots that were used once before. For odd technical reasons, you had to get city council approval to use them again. No question we'll get that approval, but it's a process. Technically, what the process is, is there's zoning in town, and casinos are not supposed to have surface lots outside of the casino zone unless it's been approved by city council. So even though this was used once before, it's outside of the casino zone, and so we need city council's approval, which means you've got to post it in the newspaper sometime in advance, etc., etc. So that process is ongoing, and I believe we have access to those lots within the next week or so, and that will help quite a bit. And then people actually, frankly, get excited about the new place, and the fact that they can accumulate points at Bronco Billy's and redeem them at Chamonix when it opens is a is a big plus. So I think Bronco Billy's will do fine. The disruption is probably was worse in this quarter than it will be in the future quarters. And, and so I'm, I'm not, I'm not overly, I mean, let me put this, I'm not really concerned, but I am attentive. In other words, we're the ones looking at it. I was the one who, you know, months ago said, we need to figure out how to do valet parking. We need to find surface lots. We need to, Do this, do that, do this, do that. I went out and bought car manners so they have a place to put their guests. So we are being attentive to do things to offset the disruption. And if we didn't do those things, we'd be hurt. And most of those things cost us some money, but not big numbers. I mean, you can do the math. If you have two valet parkers, three valet parkers, and a couple shuttle bus drivers a bunch of hours a week, it's... low hundreds of thousands of dollars a year, not for a place making $8 million a year. It's not that big a deal.
spk04: That's it for me. I'll hop back in the queue. Thanks, guys. Good luck.
spk05: Thanks, Ryan. Thank you. We'll take our next question from Chad Binion with Macquarie. Please go ahead.
spk06: Good afternoon, Dan and Lewis. Congrats on the quarter. I wanted to start with construction costs on Chamonix, just given the inflation and the cost of materials. Can you just remind us, I believe most of the project is pre-funded, but can you just kind of frame out this $180 million, what is static versus dynamic, and how we should think about that? Thanks.
spk03: Well, it is all pre-funded. It's about $180 million from here to completion. And in there, there's a contingency, which was $12 million? $10 million? Besides contingency in that. Now, we're early in the process, and we had assumed that there would be challenges in material costs and challenges in labor. Unemployment rate in Colorado is quite low. And we're an hour up into the mountains. And so when I see different states talk about scaling back on the surplus unemployment benefits, that might actually help us find labor. But those are challenges, and we're dealing with some of those. And we're early enough in the process that you're trying to find changes that you can make to upset that. So for example, Our engineers discovered we could use micropiles instead of spread footings. That saved us some money to offset some of those other things, but it's quite early in the process. Now, as a practical matter, let's suppose we blow through the contingency and go 10% over, so it ends up being a $200 million project instead of a $180 million project. We will generate $20 million of free cash flow while it's being built. and we're sitting on a bunch of extra cash from the other equity offerings. And I'm not saying we're going to have an overrun. We're fighting those battles now. But it's kind of nice to know that if we can't find solutions and we did have a small overrun, we have liquidity to fund it. But we are fighting our way through that now with issues like, well, what sort of furniture do we have in this place? Do we have expensive woven carpets or maybe a less expensive carpet and so on. So that's just part of the process and we've gone through it with every project I've ever done from a little place in Argentina to Bellagio. There are places in Bellagio that we're going to have like marble mosaics and it ended up being carpeted and the customer doesn't really know. But that's where we are and so I'm pretty sure we're going to be at that number. And we're working to get to that number.
spk01: So $19 million for contingency, Dan, which is about 15% of the hard construction cost. That's right.
spk03: So, you know, there are some challenges. I mean, you know, for example, when you find the price of wood is up a lot. And so in some places we're going to use light gauge steel instead of wood. So you go to look for those things. You may have been assuming that you're going to use some wood in certain areas and We explored for a while using modular construction where you could build some of the hotel rooms in a factory in another city and truck them in and stack them into place. That's a new development that I know Marriott in particular is trying to use more and more for their budget hotels. And we spent a fair amount of time looking at that and concluded that with the transportation cost to get it up to Cripple Creek, At the end of the day, we didn't think we saved enough money to go through the trouble. And so we're kind of back to not doing modular. But we explored that pretty hard, thinking it might save us money, and concluded that it probably doesn't.
spk06: Great. Thank you. And then in the camp of something that could come in on the right side of expectations, Louis, thanks for breaking out the annual online gaming in your income statement. That certainly helps us. Just want to talk about, without getting into the economics of the deals that you have with your skins partners, certainly the expectations for sports betting and iGaming, I think, have increased recently by most analysts, particularly on the iGaming side. Is there a chance if that rate continues to rise that you could actually be generating more than the $7 million of guaranteed revenues based on what you're seeing with your partners and what you're seeing with analyst estimates increasing within that segment.
spk03: Yeah, you have two questions within there, really. Each of our deals is slightly different. We get slightly different percentages on each, and then subject to a minimum guarantee. So I will tell you, one of them has a higher percentage of revenues that we would get, and another one is lower. So for us to exceed the minimum guarantee, you kind of root for the guy with the high percentage to get a significant market share and exceed the minimum guarantee. Now, our skins were all introduced a little late. FanDuel and DraftKings have the dominant market share. So at this point, our guys have lower market shares. But we know that each of our three partners have different marketing plans that they haven't really ramped up yet. And so, you know, Wynn, for example, is a great brand right there. And we think when they take the gloves off and start competing, they'll start getting some market share. Smarkets has a very unique way of operating in Europe. They know how to do this. They haven't taken the gloves off yet, right? And so we'll see. But I wouldn't anticipate us exceeding the minimum guarantee for the next year, maybe not even the year after that. We may down the road, but I don't think it's in the next few quarters. Now, on the flip side, as we negotiated these deals, every one of them wanted to have lock-up iGaming, and we said, no. We said we can negotiate that when the time comes. That's actually a bigger market in New Jersey where they've had both. iGaming is 2x what mobile sports betting is. And that's something we could actually do on our own because you're not – in mobile sports betting – There's an awful lot of bets bet on individual games. So if you had the Denver Broncos against the Cowboys in the Super Bowl, we'd have a lot of bets on the Broncos and not on the Cowboys, and we could get screwed. And so we chose not to do that on its own. When you have iGaming, that's just playing a slot machine online. That's the business we're already in. It's a large number of independent statistical events. Now, if it happens online, as it did with sports betting, and we think that's possible, you'd have three skins in each of Indiana and Colorado. And maybe we do two of those with some of our existing partners, and one of them we keep for ourselves. But that would be over and above the $7 million a year, and it could be substantially more than $7 million a year if that happens. And the other thing is in Illinois, if we were chosen, Well, Illinois has a much bigger population than either Indiana or Colorado. So if we're chosen there, Illinois is also going to have mobile sports betting and probably iGaming somewhere in the not-too-distant future. And so that would be a pretty big positive on that contracted wagering line that's apart from the project in Waukegan itself. Now, Mississippi will probably eventually also have mobile sports betting. The population of Mississippi is only a couple million people. There's a lot of casinos there. And the same thing with Nevada. We could do it today in Nevada. We haven't. We're a pretty small company. There's a lot of big companies in Nevada. And the population of Nevada is only 2.7 million people. And so the big opportunities are Colorado's 5.5 million people and growing fast. Indiana is 5 million people, and Illinois is 15, 12 million people. Alex, what's the population of Illinois? So a lot bigger. Yeah, and it's a much bigger deal.
spk06: Great. Thanks. Congrats on all the work in the quarter. Thanks, guys. Thanks, John.
spk05: Thank you. And once again, that's Star 1. If you would like to ask a question, we'll hear our next question from John Decree from Union Gaming. Please go ahead.
spk02: Hi, everyone. Dan, good to hear you again on the call, and thanks for taking the questions. Just one from me. I think you've covered quite a bit of ground. But, Dan, I was hoping you could maybe elaborate a little bit more on the puts and takes and on demand that you've seen in March and April. I know you've talked about stimulus checks, and that's an obvious one. But I was wondering if you could characterize familiar faces in that older demographic that you've seen. I think a lot of your peers have said that that customer is starting to come back, but there's still an opportunity. You're still seeing an opportunity in maybe converting unrated play to rated play. So as you think ahead in stimulus checks,
spk03: Wayne where do you see some of the other demand drivers coming as it relates to pent up demand I think the biggest thing is the seniors coming back and I would characterize that as you just did that it's starting to come back it still has a ways to go but it is starting to come back and it's starting to come back pretty solidly and we do that just by we have it in the database 85% of our play is tracked And so it's pretty easy to look at what are the people who are 60 and over, are we seeing them more often than we were last quarter than we were in the third quarter? How does that compare to 2019? We're not yet back to the 2019 levels, but we're doing better than we were at the low part of the pandemic, low in terms of that segment. And then we have had a focus for a while now of making sure that younger people who show up We get them to sign up on our databases. And so we've installed marketing kiosks in Indiana. They're not yet up in Colorado, but they're coming. Looking at them for Northern Nevada. And we've had them for a while at the Silver Slipper. Similar to what Stations Casinos has out here that incentivize you to sign up. You can literally walk up to the machine, put in your driver's license, get a card. In some states, not in Indiana yet, but in some states, they make it very easy to get a card. Allows us to have less payroll at the player club because the kiosks handle it. And so that's all kind of part of trying to do that. And some of this other stuff, I mean, we're doing well. And we're not marketing as much as we did. We're not spending as much on marketing. Now, it's much more targeted. And I think that's helped us a lot. But I also think there's other things like the working from home, the studying from home. Like in Las Vegas, the weekends are busy, but midweek is still empty because there's no meetings and conventions. It was interesting doing these roadshows for the debt deal and the equity deal because historically you would have chartered some airplane, you would have been all over the country, limos, buying you guys the crummy chicken lunches at some expensive hotel. And it was really grueling that you would do. And in the new world, we sat here and did 12 Zoom calls a day. And it was far more efficient for us and far more efficient, I think, for the portfolio managers than the shenanigans we used to go through. And now that everybody's getting vaccinated, I don't think you'll go back to the traditional roadshows, right? Because Everybody saved money and was more efficient with their time, and you got the job done. Well, that makes you wonder. I think some of these conventions, the employees looked at them as boondoggles, and they justified it to their management that, hey, we need to send out a team to operate this booth in Las Vegas because it will help our sales. And what they're really thinking is we want to go get drunk. And so now as the pandemic is over, and you're the person at Microsoft in charge of that travel budget, you might be a lot more hesitant to loosen up and let people go. And so I think that's going to be the most difficult segment to come back here, and it may take years for it to come back. And yet that person who might want to go to a convention because they want to gamble once in a while, They can't go to that convention. And it's like, well, they can go up to Cripple Creek and gamble, or they can go to the Silver Slipper and gamble. And it's the same slot machines, the same table games, the same experience. Also, I think people working at home. And, you know, I joke about the person on a Zoom meeting sitting in a slot machine, but it is entirely possible. And you can put a false, well, I'll tell you, if you've been on a Zoom meeting with me, you see a backdrop that looks like my office with a very clean desk. I cleaned my desk up and took a picture of that and that's my backdrop. And so you wonder how many people have a backdrop like that and they're actually sitting in a slot machine in rising sun and you don't know. But you also do know that if they're not commuting, they have a new found hour and a half in their day on average. And yet at the end of the day, you wanna get out of the house at some point. And so having these regional casinos that are convenient to people, You know, it's like, oh, hey, you know, I've been in this house all day. I need to get out. I need to go somewhere. Well, where can you go that's open 24 hours a day, seven days a week? Well, go to our casino. And so I think that has been a function. So, you know, I don't know what else to say. I mean, our business has been good. Frankly, recently our business has been really, really good. But I'm hesitant to, like, project that because I don't think stimulus checks are going to come out every month. So. We may offer some stimulus cocktails and hope that it catches on, but I don't know.
spk02: I appreciate all the color. Dan, I think you've all given us some good ideas on how to handle our next couple Zoom calls, so maybe we'll see you sooner than later.
spk01: We saved the slot machine for you, John, over at Bronco.
spk02: Wonderful. I'm looking forward to it. Thanks, everybody.
spk05: Again, at this time, that does appear to be the conclusion of our question and answer session. I'd like to turn the conference back over to Dan for any additional closing remarks.
spk03: No, that's all. We're going to keep plugging along. I think this is one of those things I've learned in my life. If you go to work every day and you try to make more good decisions than bad, you eventually build a pretty good company, and I think we're well on our way there. So we're just going to keep doing what we're doing. Thank you, everybody.
spk05: Thank you. That does conclude today's conference. We thank you for your participation. You may now
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