Full House Resorts, Inc.

Greetings and welcome to the Full House Resorts, Inc. First 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 our host, Louis Finger, CFO of Full House Resorts. Thank you, sir. 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 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 broadcasting this conference call at fullhouseresorts.com where you can find today's earnings release as well as all of our SEC filings. And so with all that said, I'll kick it off here and then turn it over to Dan for some cleanup. But the big change in the quarter you probably saw was we did change the segments. I think you guys are used to it by now. It's pretty consistent with what you see at a lot of other gaming companies. But we essentially have grouped, regrouped our segments by geography really a function of our growing scale and expansion, and we think it's the appropriate way for you to look at it because that's the way we look at it behind the scenes. The temporary opened quite strong. We had $3.6 million of EBIT down the quarter, 34% margins. That's in its first one and a half months of opening, so not a full quarter of results there. Results we think will continue to improve as we continue to expand the amenities and offerings at the property. On April 3rd, we were permitted to start to open tables at 10 a.m. instead of 2 p.m. previously. On that day, we were also permitted to increase the max table bets from $1,000 per hand to $2,000. On April 4th, or I'm sorry, April 5th, we opened Asia Azteca, our second restaurant for dinner service. Quite good food, by the way. I've been there many times and encourage you to do the same the next time you guys are up in the area. And then we managed to cross a few records here in April. Obviously, the property continues to ramp up. But in April, as an example, we had our best gaming day so far. It was the first time we crossed half a million dollars in daily gaming revenue. We had our best weekly table games revenue in the month of April. We had our second best weekly table games revenue in the month of April. About one and a half weeks ago, we had one of our best slot volume days since opening weekend. It was the first time we had a single hour where we crossed $400,000 in coin in. And all of that is as that property continues to ramp up behind the scenes. And so here this upcoming weekend, starting on May 12th, what we're expecting is to go 24 hours on weekends and then the removal of all table limits so you can bet whatever we set the bets at or maximum bets at. So some more change to come here in the near term. Current team count is sitting at over 500 people, and the database in real time is over 25,000 people and closing in on 30,000 people. So doing quite well. Circa Sports, the sports book itself, Circa got approved by the Gaming Commission. They're still waiting on their software to be approved, and they actually can't start operating until we receive our permanent operating license, which we hope to receive here at their upcoming meeting in June. But once that's all done, then sports can begin and we're expecting that to start perhaps in August of this year. Looking at the other properties, Silver Slipper, just wanted to flag that last quarter we noted some over-marketing by a competitor. As we exited the first quarter, that over-marketing went away and our market share returned to normal levels. We also were affected by some adverse hold, both on the table games and on the slot side in the current year period. Rising Star had a $2.1 million free play sale. We do that every year. It has fluctuated between quarters for what it's worth. So this year we did it in the first quarter. Last year we did it in the second quarter. And so just make sure for modeling purposes that you are adjusting your second quarters for that $2.1 million that's already in the results now. Outside of that, Rising Star had a pretty decent quarter, realizing that they're still absorbing the impact of that new Churchill Downs facility nearby. The other properties, not a whole lot to tell you. I'm sure you saw the stories about record snowfall up in Northern California and by Lake Tahoe and in Colorado as well. That all said, Dan, you want to do some cleanup or talk about Shawmany?

Yeah, a few things. First, I'll point out that we comfortably exceeded the expectations in the quarter. It was $10.1 million of adjusted EBDIT. I think the consensus was $7.5 million. I think the highest single estimate out there was about eight. Even if we take out the sale of replay, we met the highest estimate that's out there. And, of course, the star of the show was the temporary in Illinois, which was open almost exactly half the quarter, like Lewis said, and had EBDIT of $3.6 million. If you just take that and multiply it times two, that's 7.2, and multiply that times four, it's 29.6. which is about what our whole company earned last year, so pretty significant to us. And it's still only partially open. It had about 25 table games open in the first quarter. I think today it's about 28 at its maximum. The license permits 50. We have a request awaiting approval to expand to 38 games. We have the dealers to do so, so we're waiting for the Gaming Commission on that. We opened originally with limited hours of operation set by the Gaming Commission. We were only open from 8 in the morning until 4 in the morning, so we were closed four hours a day, and then we shrank that to two hours a day. Now, as of May 12th, it will be at our discretion, and we're going to be 24 hours a day on weekends initially, and then probably go to 24 hours a day every day shortly thereafter. The betting limits started out at $1,000 a wager in the first quarter. It's currently $2,000. As of May 12th, it's unlimited. It's at our discretion. And in the food and beverage area in the first quarter, we only had one restaurant open, and even then, only for dinner. In early April, we opened the second restaurant, initially for dinner five nights a week. We're gradually expanding the operating hours of the two restaurants. As the customer demand builds and as we hire more people The third restaurant we expect to open this summer It's a it's a it's a diner facility. That's Late getting to us, but that's actually okay because we're still building the business at the other two And our mailing list started with near zero people on it today. It's over 25,000 people and A property of this size, I would expect it to be 40,000 to 50,000 of kind of active people on the mailing list eventually. So we're about halfway there. That's important in making your, you can market much more efficiently once you know who gambles. You don't have to mass market as much. And then just employees, we opened with about 400. We're now over 500. We think we'll be 700 plus when fully operational. So we're making good progress there. And then, so going forward, it's going to be a full quarter, full operations, full hours of operation, marketing efficiencies. So we think it will build from where it is, but it's already a pretty good number. In a very big way, this quarter was a turning point for the company. You know, we borrowed quite a bit of money a couple years ago to go build all this stuff. And the interest expense on all of our debt adds up to about $9.5 million a quarter. Adjusted EBIT was $10 million. So we actually covered our interest expense of all $450 million of bonds and $27 million on the credit facility. And that's despite only having the temporary for half the quarter and getting less than zero from Colorado. And the cash we're sitting on is enough to finish Colorado and have it contribute to it as well. And so when you look at it, we're already producing modest amounts of free cash flow, and that's just going to get significantly bigger as the quarters go ahead. And so... You know, if you look at it and say, well, as we have full operation at the temper and as we get Chamonix open, we are going to shift very quickly from being one of the most levered casino companies to likely becoming one of the least levered casino companies over the period of about three quarters. Now, in Chamonix, we had indicated before that we thought the earliest parts would be completed in Q3. and that we may open in stages and be all open by year end. We've now made the decision to open the entire property all at once and do it on December 26th, the day after Christmas. A few things contributed to this. One is it makes for better opening. If everything's there, you get one shot at a first impression, and we'll be able to do that here. Second, There is a narrow historical building, 25-foot wide, that as we got into construction, we found that the roof of it had some structural issues. It's 25 feet wide. You'd think it'd have 25-foot beams, but when they built it in the 1890s, they had two 15-foot beams that were nailed together, basically. And so we had to bring in structural engineers and figure out how to support it. And so now the critical path runs through that building And that's important because if we tried to open earlier, we'd be opening with Chamonix separated from Bronco Billings because this is a building you have to go through to get from one to the other. And we think it's better to open in its entirety. And then, frankly, October, November, early December is a very seasonally slow period anyway. On New Year's Eve, on the other hand, is not. It's one of the biggest days of the year. And so we've decided to... focus on getting everything open all at once on the day after Christmas. Importantly, there's no regulatory issue here like we had in Illinois. We are already licensed in Colorado, and we're operating at Bronco Billy's. We have a core base of employees, which we didn't have in Illinois. So we don't think there will be any regulatory issue with us opening on December 26th. Importantly, we also entered into a partnership with Barry and Yassine of Barry's Prime, which is the restaurant, a very successful restaurant that's in Circa in downtown Las Vegas. Barry and Yassine were, for many years, the management team at the Nine Steakhouse at the Palms, which is one of the most successful parts of the Palms. Before that, Barry came from Ariel, And he actually started with Charlie Palmer in Manhattan at Ariel's and then was brought out to Las Vegas when Ariel's opened at Andaly Bay. And Ariel was very successful for about 25 years. It just recently closed. But these guys are kind of James Beard, Michelin star restaurant types. Barry's Prime was just ranked one of the top 100 restaurants in the country by TripAdvisor. And it's a fairly new restaurant, so it got there pretty quickly. Ariel had won James Beard Awards, I think, twice, and Michelin Star Awards several times. So our goal is to have the best restaurant in the state of Colorado. And in partnership with them, we think we'll get there. And so that's very important to the place. And as part of our secret, you know, the primary market for us is always going to be Colorado Springs, which is a million people close to us. Colorado Springs, Pueblo, and Canyon City had to be about a million people. But Denver is an important secondary market. It's about two hours away. It's closer to Black Hawk than to Cripple Creek, although the southern parts of Denver especially considering Denver traffic. The southern parts of the Denver metropolitan area are probably about equal distance, and if we can have better services and a more interesting casino than the ones in Black Hawk, we think we can get a significant secondary market from Denver. It's not unlike People who live in San Francisco are actually closer to Reno than they are to Las Vegas, but certainly many people from Northern California end up in Las Vegas. So that's what's going on there. Going ahead, Silver Slipper did not have its best quarter, but we've altered some of the marketing, and I think it's going to do better going forward. It wasn't a disaster, but it was a little soft. In Colorado, we're not making anything. We actually lost a little bit of money last year. And that's just because it's got no parking, it's got no hotels, half the place is under renovation. It's amazing. We're not losing more money, to be honest. And that will turn around when we get Chamonix open, which is now on the horizon. And then the Circa sportsbook deal in Illinois, which is $5 million a year to us, which it alone covers a good chunk of our interest expense. And Circa... There's a whole bunch of regulatory stuff that has to happen, but we think they'll be up and operating by August. We did get the entitlements to the Corps of Engineers to add a tower at the Silver Slipper, but we're a little busy these days, so it's certainly not imminent. We're actively doing the designs for the Permanent American Place, which we expect to open in about three years. I guess that's it.