Full House Resorts, Inc.

Greetings and welcome to the Full House Resorts 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 call, please press star then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Lewis Banger, CFO of Full House Resorts. Thank you. Please go ahead.

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 captioned 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 that said, There's a lot of good stuff to talk about from the quarter. The biggest of all is American Place in Waukegan. We had a really good first quarter there. We've been setting record after record for monthly property gaming revenues recently. We hit our property record in December. We beat it in February, and we beat it again in March, and we don't think we're done growing yet. April gaming revenues were put out yesterday by the state of Illinois. and we rose 39% versus April of 2023. From an EBITDA point of view, we are now consistently generating about $3 million of EBITDA per month. We did roughly that in each of February, March, and again in April. That puts us on a current run rate of $36 million per year of EBITDA, which is about double the $18 million of EBITDA that we generated at American Place during 2023. That's a good prologue for what we expect to happen over at Chamonix, since its opening parallels the opening of American Place in many ways. The most obvious is that, much like the early days of American Place, Chamonix isn't fully open yet. It's being opened in phases, and during the first quarter, our full 300 guest room hotel gradually came online and is fully open today. A couple of weeks ago, on April 19th, we opened our high-end steakhouse, 980 Prime. Our goal was to create a restaurant that could draw people from all over Colorado. And early reviews have been very good. It's a very good experience. The service is very on point. The food is delicious. And just like the new steakhouse at American Place was important for our best guests, the same will be very true over at Chamonix. The next amenity to open will be the pool and spa, which we're expecting in the next few weeks. Now, we did have Some weather complications in the quarter. The rough winter weather that you've heard about on everyone else's earnings call certainly applies to us here. The weekends are our most important part of the week. Unfortunately, the winter snow kept falling on weekends. In Colorado, we had three snow-affected weekends in January, three more in February, and two in March. There was a snowstorm in March that cut off electricity to the entire town of Cripple Creek for three days. And so with all of those affected weekends, it certainly was not a normal quarter, but it did allow us time to fix some of the opening kinks that we needed to work through. In terms of profitability at Chamonix, we're on the right track. We lost money in the early days when we carried a lot of excess costs. That improved as the first quarter progressed. For the first quarter, our adjusted property EBITDA was a loss of about $400,000. We have not closed the books yet for April. but it looks like that should be a break-even month. As we go into the summer, our amenities should be largely complete. We should have much better weather, and our targeted marketing plan should start to kick in. All of that should continue to propel Chamonix forward and result in a pretty meaningful positive EBITDA contribution. Elsewhere in the portfolio, that same winter weather affected us. I'll keep it short on the rest, but if you look at our core customer outside of those weather events, it feels like there's been stability in terms of their spend with us. And perhaps a bright spot elsewhere, I know in the past we've specifically called out some costs like property insurance at Silver Slipper. That over the last few years has just grown outrageously. Some good news there, we just wrapped up our property insurance renewal, and those costs will actually go down by 19% starting on May 15th. That's about $900,000 in savings over the coming 12 months. That's my quick highlights, Dan. Anything you want to add?

Well, I'll address American Place first. Obviously, everything's going in the right direction. I don't know that we can keep the pace going for the rest of the year, up 40% of revenues, but we've had two months in a row now up 40%, and I think we will be up strongly as the year goes on. Obviously, the comparisons get more difficult as the year goes on, but I think we'll be up strongly and And we're also running margins above 30%, which is obviously a good thing. And just to put it in perspective, we're doing almost the same revenues as the downtown Chicago property. It opened in September, didn't have any impact on us at all, and that's still the case. And our gaming tax rate is a full 10 points lower than theirs. And so we're in pretty good shape. And the requirement to build the permanent, we have until, we can operate the temporary until August of 2027, which is a special bill that the legislature approved for us. I assume Valleys will probably have to seek something similar because they have a pretty short timeline. Anyway, the, and our, commitment going forward is about $325 million to build the permanent, and we're designing the permanent to fit that number. A lot of what we invested in the temporary will be used for the permanent, like the construction of the parking lots and storm sewers and so on. Anyway, so we're very happy with American Place. We always knew we were the closest casino to a million people, and that eventually we they would find their way into our tent. It's not very impressive from the outside, but once you go in, it's arguably one of the nicest casinos in the state. So I think we're in good shape there. Louis mentioned that at Chamonix we're opening in stages, and then he said the hotel gradually came online during the first quarter. Well, that's part of it. We now have all the guest rooms done, and any given night there might be a handful that are out of service trying to fix something. But in effect, we have all 300 rooms. But the occupancy also builds gradually. And so we've been running pretty decent occupancy on weekends, but it drops off during the week, absent blizzards and stuff. So like most regional casinos, we're now preparing to roll out programs designed to help build the midweek business, you know, like... If you're staying with us two nights on a weekend, you can stay one more night on a Thursday or a Friday at a much improved rate or even free. And that sort of thing to try to build occupancy midweek. That will take some time. But the seasonality helps. I mean, we open this in the deadest part of the year. We're now coming up on summer. Summers are beautiful up in the mountains of Colorado. And so... I think we will be able to fill our hotel just about every night in July and August, and so we should be quite profitable during the summer. And we're focused on getting meetings and groups in in the fall so that when the normal vacationers start to go away, we have a lot of very good meeting space to help fill the hotel during the slower season. The Silver Slipper and Rising Star were off a little bit. Some of that was weather, and fortunately, they're not as important. I mean, American Place earns more than everything else in the company combined these days, and eventually Chamonix probably will as well. But that's not that we're overlooking it. We're also looking at programs at those places to get them back to where we want them to be. Northern Nevada, we have a lease on the Grand Lodge Casino that expires at year end. We've had some indications from Hyatt that they would like to extend it. Yet again, it's been extended several times. So we're trying to get that inked. And then we still have the small casino in Fallon, which is there. So that's kind of where we are. We're still finishing. So we've got a jewelry store. We've got one more kind of unique location. speakeasy bar to get done. The spa will be open just before Memorial Day. We won't have all the treatment rooms, but we'll have enough treatment rooms that we can offer massages and the pool and the weight room and the locker rooms and all that's done. The salon is being put together as we speak, so people get a haircut and stuff. I guess that's it. We're at the point where, as a company, we'll start We are already producing positive cash flow, and I think that will build significantly as we go ahead. I mean, you know, if you take our interest expense, about $35 million, $36 million a year, American Place alone should earn that, and everything else does in the mid-20s plus Chaminade, everything else excluding Chaminade. does something in the mid-20s, and then Chamonix will come on. And I will point out that it's not unusual. A lot of times I find investors think you open the doors of a casino and it's an instant slam-dunk profit generator, and that's really never the case. Even Bellagio, the first quarter or two, were far less than what we expected, and then it kicked in, and it's been... making $500 million a year for 20-odd years now. And the same with La Berge and Boer Vage and all these other regional casinos. And so the good news is Chamonix is beautiful. It's getting all sorts of great accolades. Even we hosted the Hotel Association of Colorado, which had the GMs and presidents of all the different top hotels from Vail and Aspen and and Denver and Colorado Springs all were at our place and had dinner at our new restaurant. And without saying names, the president of several of the prominent high-end hotels in the state came and told us that we thought that we had the best restaurant in the state, even better than their own. And so we're very proud of our team for that, and now we just need to fill it with people, and we will. Anyway, that's it. We're just trying to finish those things out. Very early stages on, not very early, but we're early in the designs of the permanent in Waukegan. Frankly, we've been pretty focused on Chamonix. We have until August of 2027, as I mentioned. And that's not even a requirement of to open the permanent. That's just the outside data which we can operate the temporary, and you really don't want there to be a gap. You want to be able to move customers and employees seamlessly to the new place. So that means we really have to start construction about two years ahead of that, so August of 2025, which means we have 15 to 18 months to raise the money before we start construction. But even that is not... requirement because the early stages of construction aren't a whole lot of money. There's probably six months of construction we could do just out of free cash flow. We have a couple of years to figure out the financing. Our bonds have come back. They're not quite back to par, but they're well off their bottom. Our guess is at the right time, we go to the high-yield market and refinance our debt. But it's not imminent. And let's get Colorado making good money. And then people will see that we're actually less levered than most casino companies. And at that point, we should be able to refinance the debt on favorable terms with the extra money to build American Place. So that's the strategy. That's the plan. So on that, happy to take any questions.