Full House Resorts, Inc.

Greetings and welcome to the Full House Resourcing Fourth Quarter Earnings Call. At this time, all participants are in a listen only mode. A brief 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Deuce Fanger, Chief Financial Officer. 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 and 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 broadcasting this conference call at fullhouseresorts.com where you can find today's earnings release as well as all of our SEC filings. With all that said, Dan, you ready to begin?

Yeah, that's great. And usually Louis and I are not in the same place today, but we'll make it work. Obviously, the big news in this call will be about the temporary casino that we opened at American Place in Waukegan, Illinois. It opened at 8 p.m. on Wednesday, February 17th. It took us longer to get it open than we had hoped, but we did find the open at 8 p.m. Now, ignoring the partial day of that day, we had 15 days of operations through Saturday, so half a month. The Sunday numbers I should have shortly, but I didn't have when I did this. So the win for that half a month was $4.1 million. which is a run rate of $8.2 million a month or about $100 million a year. Just to put that in perspective, our whole company last year had $114 million of gaming revenue. So the temporary's run rate is about the same as the rest of the company combined. The trends also have been pretty positive. Now, the first week, when you get a lot of tourists coming in to see the place, we had 23,000 admissions. And the second week, we had 20,000 admissions. But the win per person in that first week was $80. And the win per person in the second week was $97, almost $98. And that's pretty typical of new places that the tourists all come in at first and then gradually build a base of people who are really there to play with the slot machines. If you work those numbers out, you'll see it was 1.7 million of win in the first week of operation. and uh uh oh that's just a slot one so then recognize that the place is only partly open um you know there was an uncertainty the opening date made us kind of uh reticent to promote and to hire people uh the process there is is a little bit unusual at least different than what i'm used to the, uh, you know, the, you start hiring people, you have to staff certain areas and you train and you train. And at some point the, uh, Illinois gaming board approves, uh, practice days. And in our case, we had two of them. Um, we'd had about 10 other ones, but, but formal practice days where you're being overseen by, um, the Illinois gaming board. And, uh, if you perform well enough during those practice days and we did, um, then you can open like literally the next day. But if not, there's more training and more practice days as happened to the casino that opened in Rockford a year and a half ago. So meanwhile, you're paying people and you've got no revenue and it's hard to promote exactly when you're going to open because you don't really know when you're actually going to open. And of course, it's also harder to hire people before you really open because people are wondering What's it like inside? Is this a place I want to work? And so on. To put it in perspective, our full compendium is about 800 people. That's about how many people we expect to employ at full capacity in the temporary. Today we have about 400. There's about 200 in the pipeline, meaning that they've applied, we've made them offers, and they're going through background checks and filling out the IGB form. gaming employee and non-gaming employee forms. Some of those 200 are going to fall out, so maybe it results in 100 new employees. So you can see if you're trying to get to 800 and you have 400, it's going to take a few weeks to get there. But we will get there. Now, as a result, there's a few things. One is we're not operating 24 hours a day. We're only operating from 8 in the morning to 4 in the morning. That's not actually an issue with the staffing. our cage has to get faster at the closing processes from one day to the next. It's pretty complicated to roll the accounting day over from today to tomorrow when the casino is operating. Somebody shows up to cash out their chips in the middle of it, which date is that going to and so on. You want them to be able to go pretty fast. For the moment, we and the IGB agreed that we would not operate from 4 in the morning until 8 in the morning, which gives them time to make sure they've done all the accounting processes they need to do and close out one day before we start the next. Now, obviously, lots of casinos operate 24 hours a day, so we'll eventually get to where we can do that as well. And that's the wee hours of the morning, so not really losing a lot of revenues at that point anyway. We are allowed to have 50 table games. At the moment, we only have 28 on the floor because we don't have enough dealers. And even then, we only operate the table games from 2 p.m. to 2 a.m. And again, it's a staffing issue. Now, we'll eventually be open 24 hours a day with the table games, and we will eventually have all 50 games open at peak periods. But, you know, it's tricky to find dealers because there was no casino in Lake County before. And the casino to our south, which is Rivers, and the casino to our north, which is Potawatomi, they're 45 minutes or 40 minutes each direction. And frankly, they're very successful casinos. The dealers make lots of money. And they probably live closer to those places than they do to us in many cases. So we've been training people. We run our own dealer school. And we've just recently reached out with a promotion where we're guaranteeing dealers $60,000 a year, including their tip income. Frankly, we think they'll make more than that. So the guarantee doesn't actually cost us anything, but it makes them more comfortable about taking a job with us. And second, if you're an experienced dealer and you're working at some remote casino, maybe a tribal casino up in Wisconsin or Minnesota or Michigan or something, and you want to relocate to Lake County, which is a pretty nice place to live, we'll pay up to $5,000 of relocation costs. So we're doing some pretty creative stuff to try to get dealers, and we will eventually have enough to operate table games full bore. In the slot area, we are... pretty well staffed on what we need in slots, but we've had over 100 machines out of service. One of the manufacturers kind of fell flat on us. And so out of 1000 slot machines, we opened with 800 and something and we're gradually getting to 1000, closing that gap. And the food and beverage area is a big deficiency. We have two large restaurants. One with 300 seats, one with 200 seats, and then we have a third restaurant that is going to be completed in April. It's basically a diner that's going to serve as our steakhouse. It's delivered in April. The staffing issues we have has us right now only operating one restaurant, and even that restaurant is only for dinner. And so we're really trying to fill this in quickly so we can get a second restaurant open within a few weeks and expand the food service offerings to at least two meals a day, and eventually maybe three meals a day in one of the restaurants. So at this point, we're only 50% staffed with limited operations, and we're still doing 100 million a year run rate. And of course, there's always some unusual costs around opening that'll go through the income statement, but If you're that understaffed and you're running that sort of revenue, I'm sure margins, apart from the unusual stuff, are very strong. One other thing to point out is we opened with really no mailing list. You would expect an active customer list in a market of this size to be at least 40,000 to 50,000 individuals, people that you mail to, who you send free play to, and they show up and gamble and so on. Well, at opening two weeks ago, we had essentially zero. Today, we have about 15,000. Some portion of the 15,000 are going to turn out not to be active. They just signed up to get a free buffet chat. And so maybe out of the 15,000, you know, five or 10,000 will turn out to be active. So we have a long ways to go in building the mailing list. But, you know, we're still achieving that 100 million a year run rate with little or no customer lists. So. So we're pretty happy with how we're doing. In Colorado, construction is progressing well. The large tower crane is coming down today. That's a sign of progress, meaning that the buildings are basically, the exteriors are all built. Inside, the plumbing and electrical has been installed in a lot of the building. The drywall is going up in a lot of the guest rooms and a lot of the public spaces. And the portions of this is going to be complete inside of five months, and others are going to take as much as 10 months. And we're going to open somewhere within that timeframe, meaning in the fall. Where within that may reflect on what needs to be completed to open. Now, the casino, obviously. Many, if not all, of the guest rooms we'd like to have. We'd like to have the high-end restaurant open, and the kitchen on that is a little behind. We want the parking garage. We want the meeting room space. The spa is a bit behind, and we may open without it. And so that's the game we're playing is trying to figure out what can we open, what's essential to be open to give good experience to the customers, Like, do they really care if there's 300 rooms or 250 rooms? They're only staying in one. They won't even know if there's 50 rooms on unfinished, but then you get into, uh, fire eggs and issues and, and stuff like that. So we're trying to work all that out and, uh, but we'll be open sometime in the fall. Um, we've learned from the experience at the temporary that it's very important to build the employee base at the same time as you build the building. Um, Unfortunately, the regulatory process of opening a casino in Colorado is different than it is in Illinois, so we will know a pretty date certain of opening. We also have a core compendium of experienced employees to open with, so we're not starting with zero. We're starting with a couple hundred people who are already working for us, and we already have a mailing list. Bronco Billy's been building a mailing list for its 25-year history, so If somebody is a gambler in Colorado Springs or Denver, we probably have a pretty good idea who they are. Big advantage over where we were in Illinois. Now, meanwhile, the construction of Chamonix has had a big impact on Bronco Billy's. Kind of no surprise there. Bronco Billy's used to have all sorts of parking. Today it has none. We offer valet parking and park three blocks away. Uh, there's no hotel rooms on, on site. Um, and, uh, perhaps most importantly, it has a lot less gaming capacity than it normally does. We actually made the situation a lot worse in the second half of 2022 because we closed the core part of the Bronco Billy's casino. Um, I think Bronco Billy's is, uh, eight different buildings, each 25 feet wide. And we closed the middle three. Um, and as well as its steakhouse, which is upstairs, in order to refurbish the casino and contemplation of Chamonix opening this year. So in the third and fourth quarters, Bronco Billy's was a fraction of what it normally is. And as a result, it didn't earn anything, when historically it was a significant earnings contributor. The casino space reopened in late December. It looks pretty nice. And the steakhouse is becoming an Italian restaurant and it won't be open for another six months or so. But it should be open at or before Chamonix opening. Meanwhile, on the balance sheet, we drew down the credit facility to pay the upfront gaming tax for the temporary. We also had to fund the pre-opening cost a little longer than expected, and opening later than expected meant we had less income. We had hoped to be earning some money in late January, early February. Now, Illinois gaming law is a little bit ambiguous. There's a, and that's not a fault of the gaming board. It's a fault of the legislature. I mean, that's what happens when legislatures create laws. Sometimes they're not always clear. There is a tax on gaming capacity amongst other taxes. There's all these different taxes we have to pay. Well, one of the, more important ones is based on how many slot machines you have, for example. We thought we were going to owe now, meaning next week, it's owed one month after you open, about $38 million in gaming taxes, and that we would owe another $12 million when we open the permanent casino in three years, because permanent has more gaming capacity. The gaming board is interpreting the law that all $50 million is owed now. From our reading of the law, we're not sure that's correct. So we're trying to figure this out. Since we owe the money in a week, we're trying to figure it out fast. And I know the casino that opened two years ago went ahead and paid the amount up front. But quite a few other casinos have the ability to expand, and they haven't had to pay it up front. So we're trying to figure it out. It's not the amount of money. It's the timing of the money. We thought we were going to pay $12 million three years from now. It's a much bigger factor for the Bally's Casino in downtown Chicago for them. It's a huge number. But anyway, to make sure that we have the money, if necessary, to pay that and to have more flexibility moving forward to finance the permanent American Place, we did an add-on to our senior secured bond issue, raising $35 million. We did it pretty quickly. And so today we're in a very liquid situation between the cash on hand And the profits from operations, we're now generating pretty good profits from operations, including from the temporary. And it's more than enough to complete Chamonix and to fund the initial construction of American Place. And that buys time for our new properties to prove themselves and for the bond market to continue to stabilize. Our existing bonds become callable in February of 2024. And we've long said that the Sometime after they become callable, we probably issue a new bond issue, take those out, and incorporate into it the money needed to build the permanent American place. But with this little add-on issue, we have flexibility probably all the way through 2025 to just be funding construction from our existing resources, and that buys us a pretty long runway to figure out the right timing and how to finance American place. And Lewis, let me turn that over to you.