Full House Resorts, Inc.

Greetings and welcome to the Full House Resorts second quarter 2024 earnings conference 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 and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Louis Fanger, CFO. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to our second 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 with that said, I'll kick it off and let Dan fill in the gaps here. We'll start just with a quick comment. We do have some slides on the website. We recently had about 35 investors here at Chamonix in Colorado, where Dan and I are today, to show off the place. quite a beautiful property, as we heard from not just the investors that saw it, but pretty much everyone that's walked through the door. We continued the phased opening of the property during the second quarter. 980 Prime, which is our high-end steakhouse, opened in April. The rooftop pool and portions of the spa opened in May. The balance of the spa is imminent. It should be in the next two and a half weeks or so. And then we have a jewelry store that should open up before the end of the third quarter. And with all of that done, the core Chamonix project will be complete. There's one other item that we do want to focus on, not quite yet, but there's an old restaurant, an old steakhouse that was at the old Bronco Billy's. We are eventually turning that into an Italian restaurant. But for the core project, we'll be essentially done here in the next quarter. At the property... We did generate positive EBITDA. We certainly are looking for a lot more than what we made here in the most recent quarter. It was about $600,000 of positive EBITDA. But a lot of promising signs coming out of that opening. If you look back in January, we sold 2,100 rooms at Chamonix. That's ramped up pretty massively as the months have gone by, as you and we would expect. In June, we were around 5,900 rooms sold. And here in July, we closed out with a little over 6,500 rooms sold. Gaming revenues at Chamonix more than doubled versus a year ago. And maybe an interesting thing to look at is if you look at the city of Cripple Creek, revenues there grew by about $4.5 million. We grew by about $5.6 million. And so we made up all of the city's growth and then some. If you look at the state's revenue growth, they grew by $9.6 million. And so, again, we made up a massive... a significant majority of the whole state's revenue growth during the quarter. Our market share in Cripple Creek has climbed from about 21% in January to almost 26% in June. The database continues to expand. A year ago, we were collecting about 1,000, sometimes 1,500 sign-ups every month. In June, that number was up to 4,000. In July, it's up to over 5,000 new sign-ups into the database. And that's important as we continue to try to just get word out on the property. One of the more promising things that we've seen here so far is 21% of our signups are coming from the Denver market. We've long talked about how Colorado Springs will be the bread and butter for our business here. And so because of that, we've always talked about the million people that that are in Colorado Springs, Canyon City, Pueblo, Woodland Park, all those cities that are right around us. What we haven't really talked about is Denver, especially those southern suburbs of Denver, which with Denver traffic, a lot of those southern suburbs are closer to us than they are to Blackhawk. And so that area is really gravy for us as we think about the longer-term potential for this property. The fact that they're making up 21% of our new registrations into the database is a pretty promising sign. On the opportunity side, table games continues to be an area that we target for improvement. Year-to-date gaming revenues so far on the table games side have been about 5% to 6% of total gaming revenues. That should be 20% or higher. And part of that, quite frankly, is we've been in a town that for the past 25 or 30 years has been seen as a casino destination with nothing inspiring. And what we are bringing for the first time is true luxury product, what we think is the nicest casino in the state, beautiful rooms, a phenomenal restaurant, but we still have to overcome 25 years of branding. And so we're still in the early innings of changing that mentality. American Place, in the second quarter, we had some summer seasonality that if you look back several years, you'll see it year in, year out. June, July, August, it is there. Revenues for us in the quarter were up about 34%. EBITDA was up 84%. And so we've got a relatively fixed expense line there. And so as revenues continue to climb, you should see an outsized bottom line impact. Sports skins, I'll just highlight for you really quick. We had a little bit of activity there. We did lose one skin during the quarter here in Colorado, and so we did have the acceleration of some market access fees in the second quarter. We also had two skins that previously were post-paying their annual minimums, and we had not received payment for those annual minimums. And so for the last several quarters, what we had been doing was effectively creating a credit reserve against the receivables balance there. We settled that here in the third quarter. As a part of that settlement, we will receive a $2.05 million payment during the third quarter. We also agreed to reduce the annual payment amount, but we also are now getting that amount prepaid versus postpaid. At Grand Lodge, we did extend our lease. That was due to expire at the end of this year. We're pushing that out 10 years to December 31st of 2034. And I think that's really all that I had, Dan, so feel free to fill in some gaps there.

Yeah, I don't want to be repetitive with what Louis said, but I would characterize it a little differently. First off, I want to make clear when Louis says we sold that many rooms, he means room nights. And if you do the math, we're running... in July, like 65% occupancy, which is filled on weekends and not filled during the week. And we have a big push now to try to make sure we fill every night of the week, and we'll eventually get there. And that's typical of a new casino. But if you went back and looked a year ago, we were talking about American Place having opened in February, and we were gradually extending the hours of operations. It took us a while to get approval to run higher table minimums. We were finishing elements like the race and sports book open later. The steakhouse didn't actually open until February of this year. We were building employee base and a customer list. And since we lapped February of last year, the revenues have been running up 30% to 40% above the prior year. Expenses don't rise nearly as much, and so the income is up significantly And that's really the story of the second quarter. It was American Place made really good money in the second quarter. It's now one of the more profitable casinos in Illinois. And we think that will just continue to be the case. And we have until August of 2027 that we can operate the temporary casino. We intend to have the permanent casino done before that, which means breaking ground roughly a year from now. And we have at least a year, probably more like 18 months, to put the financing in place. And we're confident we'll be able to do that. But I think if you think of where we were a year ago at American Place, that's kind of where we are now in Colorado. And so we are still opening things, like Lewis said, the spa. And you get the things open. And we now have four masseuses. They're very busy when we have them. We need about eight or 10. So we're trying to hire people. We are hiring casino hosts. We've hired some. We want to hire more. Sales and marketing reps. We have a new head of table games who we hired from Fontainebleau, who had a long history with Harrah's, and he's terrific. We're hiring salon people. So there's all this stuff as we build and stabilize our employee base, but we're also building the mailing list and all of that. And so... A year from now, hopefully we're saying the same things, that the revenues here are up 30% to 40%, and expenses are not up as much, and we're making pretty good money. And that would be the normal maturation of a casino, and we're doing well. The silver slipper, by the way, had a rough first quarter, but a much better second quarter. We mentioned that John Ferrucci is retiring. He's run it really since inception. And that's a well-earned retirement. And we've opted to promote Angie from Rising Sun to go back to the Silver Slipper where she started. But she's now been running Rising Sun for quite some time. And that will be a nice, smooth transition. There's always some benefit of having a new set of eyes. So while John is her mentor, really, But bringing new energy and a new set of eyes, we think the silver slipper will continue to do well. It used to be it was our dominant earnings contributor. And it will continue to be a significant earnings contributor. But at this point, it's just one leg in a three-legged stool. And so we will have Colorado, Mississippi, and Illinois as being the bulk of the company. and then, of course, we make decent money at Grand Lodge with very little investment, and then we have Fallon and Rising Sun hanging in there, and then the sports stuff. Liquidity-wise, we're in good shape. We're gradually using up the restricted cash to complete the last things here in Colorado. We're almost done. Lewis mentioned a few things he The parking lots are still temporary paved. We will finish that this fall. Otherwise, Lewis covered it all. I guess that's it. I think we're in good shape. The earnings are good. We're producing quite a bit of cash, and we're watching for an opportunity, not immediately, but somewhere out there when the bonds, the The bonds become callable at, I think, 102 in February. They're callable at a higher premium today. And somewhere between February of 2025 and maybe February of 2026 is when we would look to perhaps issue a new bond and pay off the old bond and use some incremental money to go build the permanent American place, which we anticipate to cost about $325 million. There's other ways we can finance it, but it's our guess that that will be the least expensive way to do it. We can always turn to the REITs, as some of our competition have, but ultimately that's very expensive capital that you can't repay. And so we still own either all of our real estate or where we have leases. In every significant case, we have the right to buy out the lease. And so we have kind of a more... traditional balance sheet than a lot of our competition does. Anyway, that's it. Happy to take questions.