Full House Resorts, Inc.

Good afternoon and welcome to the Full House Resorts third quarter earnings call. At this time all participants are in listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference please press star then zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Louis Fanger, Chief Financial Officer of Full House Resorts. Please go ahead, Phil.

Thank you. Good afternoon, everyone. Welcome to our third 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 we also have a presentation today on the website. If you go to investors.fullhouseresorts.com, click on the lower banner, click Company Info and then Presentations, and it'll take you to that presentation. Maybe the most fun piece of that is on page four. There are two video links for an ad that we're about to start running this week for Chamonix as well as a drone fly-through of the property. And then 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 that said, you ready to go, Dan?

Yeah, I'm ready. Okay. All right, everybody, look at – there's kind of no way around it. It was not a good quarter, and I'm not happy about it. Colorado in particular was disappointing. Just reminding everybody, it was partly open in the first quarter. It opened just before New Year's and was only part of the hotel. And then it was more open in the second quarter. But in the third quarter, it was mostly open. I mean, most of the spa opened early in the quarter. The only thing left from a customer perspective today is some fancy lights and curbing in the parking lots. Everything else that a customer would see is open. Now, the expenses are up, not surprisingly. You know, back in 2023, for example, the total expenses in the four quarters were 4.3, 4.2, 4.8, and 5.0. That was really just bronco billies with a little bit of chamonix right at the end. And then as we opened The new property jumped in the first quarter to 9.1 and then 10.3 in Q2 and then 13.7 in Q3. The bad news is that while revenues have been growing, they've been growing only as fast as the expenses. So the revenues back in 2023, Q1 was 3.7, 4.1, 4.7, 4.5. And we weren't making a lot of money in 2023 because we had a lot of construction disruptions, so it was understandable. And then in 2024, the revenue has been 8.7, 10.8, and 13.0, which is good growth, but only as fast as the expenses have grown. And this results in little income and, in fact, a small loss in the quarter. The good news is that when you look at the magnitude of the markets, and particularly the results of comparable casinos in Blackhawk, our revenues have considerable room to grow, while the growth of our daily operating expenses is largely behind us. I mean, there's some things like gaming taxes that grow with revenues, but things like payroll should not grow going forward, and our revenues should be able to grow. And that should bode well for profits in 2025. And we also made some marketing expenses that didn't help the corner. You know, when we opened, we had an active kind of traditional advertising program around that opening. There was kind of a cute ad that was filmed in the midst of construction. And then we essentially went dark in the spring and summer as we were focused on getting the rest of the building open and building occupancy. And occupancy has built significantly. And in the third quarter, it reached over 80% in September. when it was back at 50% in the spring. And when it was at 50%, we were like, OK, let's get the occupancy up and let's be targeted about it. And part of what we did is we started offering a program where we purchased mailing lists and provided free rooms on midweek days and rooms that would otherwise be sitting empty. And that did help build the occupancy. Well, it turns out that all mailing lists are not created equal. So there's one mailing list that we bought that was reasonably successful. It was a well-defined list, 15,000 people on it. And recognize the way this happens, you pay somebody to mail the people on their list. They don't give you the names generally. And then you find out who responds to that, and then you find out the names. Well, somebody had a well-defined list, 15,000 people with a propensity to visit Colorado casinos. It cost us about $1. per person to mail it to them. And we offered a free night, midweek stay, which is when we would otherwise have generally had empty rooms. That particular mailing list, about 3% took us up on the offer. So 462 people out of 15,000. And that's not unusual. 3% took us up on the offer. So since you're mailing out 30 offers at $1 each, to get one person, you have like $30 customer acquisition cost. And of those 462 people, 380 actually played. So you have an even higher customer acquisition cost if you get down to people who are actually playing. Now, there may be some people who we make them have a card to get the free roam. Maybe some people played without having their card. So maybe the actual play was a little better than that. But in general, I think People do use their cards. And then on that particular mailing list, the average win per person was $180. Now, that more than covers the customer acquisition costs and the gaming taxes and the cost to clean a room that would otherwise sit empty. So it's not hugely profitable, and after all, it's only 300 or 400 names. But it added 380 people to our mailing list who we didn't otherwise know, and now we don't have the customer acquisition cost to go back to them. And that's frankly how one builds a business. Now, we had another larger mailing list that we bought that was less successful. It had 176,000 people on it. And it was kind of a black box. Somebody said, you know, these are people who have a proclivity to gamble, but they won't tell us how they know that. And you guys have all experienced this where you Maybe you subscribe to a newspaper or something, and then it's got a little questionnaire of what things interest you, and people click, you know, casinos. And therefore, somebody comes to us and says, hey, here's a list of people who are interested in casinos. We don't know exactly what it is. They didn't charge us much for the mailing list, and they wouldn't tell us the criteria. Now, honestly, we should have tested it with a small subgroup, but we didn't. We were eager to try to get the hotel filled. So we sent out 176,000 offers at about $1 mailing, so $176,000, again offering a free midweek stay. We only got 0.8% took us up on the offer. So it cost us over $100 to get a person to come to our casino, customer acquisition cost. Then, frankly, of those, only half gambled. And so the customer acquisition cost was like $200. And those that gambled, they only lost $48, which barely pays for cleaning the room. So that particular mailing list was a bust. And it counted for a few hundred thousand dollars. It was 1,382 room nights, which is over several weeks. It wasn't all one month, which is somewhere 5 or 10 points of our occupancy. Maybe most of those rooms would have otherwise been empty because it was midweek. But in some cases, they may have displaced more profitable customers. So that particular promotion was a bust. Now, going forward, we will continue to do some mailing lists, but we're going to be a lot more careful about how we do it. And we're also resuming an advertising program. And Lewis mentioned there's an ad that starts up today. We didn't want to compete with the high ad rates of the political season, so we started with it today. And we also had a very successful grand opening weekend this past weekend for our VIP players with Jay Leno and all sorts of things going on, and it went very well. And you can see the ad. We also have a link, I think it's in there as well, to a Drone video and this is something we did an American place where you hire somebody to fly a drone through the property It's too long a video to put on television or something But you put it on the website and it's interesting to watch and that goes viral It's not all that expensive to make And and yet we can get well we had tens of thousands of views at the American place so that we get something here and we also just hired a a new VP of advertising for the entire company, somebody who's got over 20 years of experience in the industry. And she starts next week, and she will help us make sure we're targeting the advertising correctly and not wasting dollars. We're also seeking to hire more casino hosts and more sales and marketing people. Now, a casino host is almost like a stockbroker. They bring with them customers they know and knowledge how to expand that list. And then sales and marketing people reach out to book meetings and conventions, which is very important to filling midweek periods profitably. We have had some conventions, like we had the Veterans of Foreign Wars from Colorado. We had Funeral Home Directors Convention, which, believe it or not, when they're not conducting funerals, they like to gamble. And we've had a couple of DART championships, which have done okay. We will have much more over time. We have great meeting room space. But honestly, it's hard to get people to book meetings and conventions before you're open because nobody's quite sure if you're really going to be as nice as you say you will be. And over time, we will book those, and that's part of also building the business. And then you'll notice on the stuff that Lewis Post, we're adding about 5,000 people a month to our mailing list, and that's important over the long term. Like most casino companies, we tend to group our casinos into regions. I guess it's just become the norm. It makes it a little more complicated for our competition to figure out what we're doing. But this quarter, however, for transparency, I want to provide some additional numbers so that you guys all understand. And we don't tend to do this every quarter, but I'll do it this quarter. In Colorado, for example, our EBITDA, depending on where you went to business school, is how you say it, in the quarter was a loss of $0.7 million versus a profit of $0.1 million last year, which reflects everything I just explained. Now, in that segment, we also have the Grand Lodge Casino within the Hyatt and Incline Village at Lake Tahoe. Larry Ellison purchased that hotel a couple of years ago. and it is still run by Hyatt, with us leasing the casino and renting the casino. Ellison's indicated he intends to refurbish the hotel, apparently extensively, and the first phase is to demolish most of the property's banquet and meeting room space, which is in a separate building from where we are, down along the beach. And so, as a result, the hotel canceled and put off a lot of its meeting and group business this summer, and did a lot less of that business than it normally did. Ironically, the owners pushed off their construction plans. I don't know whether they redesigned them or didn't get the permits. But it was too late to recoup that segment of the business. And so the hotel itself had weaker occupancy than normal over the summer. And some of those groups are people who tend to gamble. And so principally due to that, our EBITDA was $1.8 million versus $2.2 in the third quarter at that property. It's now having a very nice October. But that's what went on there. And I think it's a temporary thing that both the Hyatt and our casino there have been very consistent over the years, absent a snowstorm here or there in the winter. And I think they will eventually refurbish the hotel and make it even nicer than it is today. And hopefully we're still running the casino and it will do well. But that was what went on in the quarter. The other major segment we have has the Silver Slipper, Rising Star, and American Place. Now, the Silver Slipper did not have a great quarter, largely due to an active hurricane season. I mean, this time of year, I feel like you watch those storms come across the Gulf of Mexico, and they always seem to curve, and it feels like God's bowling, and I'm the 10-pin every time. But we weren't actually hit by a hurricane, fortunately, but the several storms went to each side of us. And when it does, it affects our customers' ability and willingness to come to us. And so the EBITDA in the quarter was 2.6 versus 3.6. So we were off a million dollars there. Now, this property has been capably run for many years since it opened by John Ferrucci, who's an industry veteran. He's retiring. And just this week, we relocated Angie Truber. Trubner Webner, if I say it right.

Trubner Web, Dan.

Trubner Web. She's from East Germany originally, but we transferred her from Rising Star to the Silver Slipper. She started her career with us at the Silver Slipper in the finance area. We promoted her several years ago when we realized how smart she was to be the finance director of Rising Star. And then she became the GM at Rising Star. And frankly, she did a very good job at that geographically difficult property. And so she brings a fresh set of eyes to the silver slipper. And we do a lot of things right there, both on revenues and expenses. But I'm also pretty confident that a fresh set of eyes will find ways to do some things better. And now replacing her at Rising Star, we hired Jeff Mitchie from a major tribal casino in Arizona. Jeff had worked with Lewis and I many years ago. when he was the assistant general manager at Belterra, which is 10 miles away from Rising Star. And, in fact, before he worked at Belterra, he worked at Rising Star. And so for several years, he was the finance director and senior operations person at the large Hard Rock Casino in downtown Cincinnati. So he knows the area very well. He's actually been commuting for a few years from Cincinnati, where his family lives, stayed to Tucson, and so we were happy to get him back with us and bring him back to the tri-state area. Now, he's also operated a number of casinos in this area, and he's operated casinos much bigger than Rising Star, and he knows how to open a new casino, which could be important if we get the approval to move Rising Sun to Fort Wayne. So let me digress for that for a moment. Rising Star was the first casino in the tri-state area when it opened like 30 years ago, and it was very successful. But over the interim 30 years, newer casinos have opened in every direction from it, often closer to where the customers live. So today is the oldest and most geographically challenged casino in Indiana. It makes money, but not a whole lot, like $4 or $5 million a year. In the recent past, the Indiana legislature has allowed two other first-generation casinos to relocate from where they originally had riverboats to better locations. One became the Hard Rock Casino on Interstate 84 in Gary, and it's now the number one casino in the state. It went from being one of the lowest revenue ones to the largest. The other is the Church of Downs Casino that opened a few months ago in Terre Haute, and it's also been very successful. So the state has benefited significantly in terms of tax revenues and employment. from the relocation of those casinos. So we have recently proposed, and it's been in the press, to relocate our casino on Rising Sun to a suburb of Fort Wayne, Indiana, and the name of that suburb is New Haven. Now, Fort Wayne has about 650,000 people. It's the second largest city in the state and currently has no nearby casino. And we intend to do this in a way that is generous to Rising Sun and the employees in Rising Sun. For example, we will make Rising Sun more than hold on the taxes we pay to them. We're the largest taxpayer in the community. And frankly, the casino in Fort Wayne would do enough better that we can continue to pay tax revenues to Rising Sun and be a big source of tax revenues in New Haven. Now, we recently opened a website on the proposal, which is allinonnewhaven.com. Now, recognize that this takes legislative approval, and state legislatures can be notoriously unpredictable. There's absolutely no certainty we'd get this. It may take more than one legislative session to get it. Sometimes it takes two or three, if it ever does get approval. But if you don't try, you don't get it. Now, we just had the grand opening in Chamonix. We began working on that project in 2017, so it took us seven years. It's taken us a similar period of time with American Place. These things take a long time to get approved, get designed, get everything in place, and get them built. So it's important to be realistic about it. Because otherwise, you guys are going to think we're crazy. I mean, we're working to get Chamonix profitable. It just opened. We're trying to figure out how to finance and build the permanent American place. And oh my god, you have another casino. Well, the other casino, if it happens, is going to follow the opening of the permanent American place. And so it's a long ways down the road. And from bondholder perspective, this strategy probably results in a series of refinances. So for example, the existing bonds mature in 2028. So we would be looking at figuring out how to refinance in the not too distant future anyway. Well, to finance the permanent American place, we hope to call and replace that bond issue, perhaps in mid 2025, when we hope to have demonstrated the success of Chamonix. And we realize we have to prove that success before we can really go to the bond market in a good way. So if we get permission to relocate Rising Star, it probably results in calling that subsequent bond issue, maybe in 2028 or 2029, to arrange financing for a new casino in Fort Wayne because bondholders are pretty smart. They usually have covenants in it that force you to pay them a call premium every few years. And that's just part of that business, and that's fine. And so hopefully we are in improving credit throughout the period with each bond refinancing done on better terms. That's exactly what I did with Mirage Resorts in the 1990s and what we did with Pinnacle Entertainment in the first 10 years of this century. So on that, let me segue to American Place, which is the bright spot in the quarter. And if you're going to have one place up and the rest of them not so strong, it's good to have it be the most important casino we have. And so despite being in a temporary structure, it made $7.7 million of EBIT, which is a 13.3% increase over the third quarter of last year. It had a 17.6% increase in revenues. It's done that pretty steadily all year. Q3 was its best quarter to date. It continues to build a mailing list and improve margins month after month. There was another very positive development regarding American Place that has nothing to do with this, actually. We get asked all the time, how can we be confident that the permanent American Place will do much better than the temporary one? aren't we investing in the ballpark of $300 million to address the same people? And we answered, look, the permanent will be significantly nicer, have better curb appeal, and those same people will gamble more or more people will come. Well, there's a very analogous situation in Rockford, Illinois, where the Seminole Indian tribe about three years ago opened a temporary casino, pretty much like ours. It was a little smaller than ours, but it was... In some ways, like its restaurants were probably better. Our casino floor is probably better. And they just opened their permanent casino at the end of August. And in the month of September, their revenues more than doubled. And I understand they've continued to be strong in October. And most of that seems to be growth in that market. They did penalize Grand Victoria a little bit. I think they were up $7 million, and Grand Victoria was down like $2. Grand Victoria would be the closest casino to Rockford. It had no impact on us. We're a couple hours away. It had no impact that we could tell on rivers. Grand Vic is a very older riverboat, and there are some people who live in between Elgin, Illinois, and Rockford. So those people came out of their driveway, and some of them turned right instead of left. But for the most part, the permanent casino significantly grew the revenues for the Hard Rock And Rockford, by comparison, is a metropolitan area with about 450,000 people. So it's kind of its own Midwestern place that is two-thirds the size of Fort Wayne, just to put it in perspective. And they're doing $10 or $11 million a month in revenues at this point in a facility that's pretty comparable to what we intend to build as our permanent. both in terms of cost and quality. They did a good job. Their theme is to hang Taylor Swift's old uniform up and people gawk at it. We'll have a little more interesting theme than that, but they do a good job. They're probably the best-run travel gaming operations in the country, and we're rooting for them because we think they're a good template for us. Now, I will also note that we actually are doing pretty well in October and November with some swings in wind percentage and there's some seasonality. But I'm hoping to have a fourth quarter that at least looks better than the third quarter. And then I think we're set up to have a pretty good 2025. I'd also note there's some other noise in the corner. We sold Fallon in a two-stage transaction. We're now between the stages. We sold the real estate for $7 million. And when they get licensed, we'll sell them the operating company for two. Fallon is very small. It didn't fit in the portfolio. We hardly ever got there. We got a good price for it. And there was a couple million dollar gain in the quarter. The prior year's results, and that's, you know, of course, a non-cash. Well, it is cash. It's a gain. And the prior year's results included the accelerated recognition of of deferred revenue from market access fees. Now, back when sports gaming was new and a lot of people were trying to get into it and before it concentrated down to a few major players, everybody was trying to get in. We didn't go and try to develop it ourselves, which would have been very expensive and difficult. So we licensed other people to operate under our licenses. but they had to pay a market access fee up front. So Wynn, for example, paid us a market access fee so they could operate online sports betting in Indiana and Colorado. And when Wynn decided to, and when we got that market access fee, we had to put it on the balance sheet as deferred revenue, even though we got it in cash up front, and it would come into the income statement over time. Well, when Wynn decided to pull the plug on that business and exit, It accelerated the recognition of that deferred revenue. It's a non-cash item at that point because we got the cash earlier, but that was a factor almost $6 million in last year's number. And the way GAAP works, we can't say, oh, that was extraordinary. And so if you just look at it on the surface, it makes the comparison look worse than it actually was. Lewis, did I miss anything? I went through a lot of stuff.

You did, Dan. Let me give you a quick peek into October for what it's worth. So Dan hinted at American Place. We actually did have a pretty decent month at American Place. Slot volumes were up about 13% versus last year's October. Table game volumes were up 46%. That's the really good news there. Hold was off pretty meaningfully, unfortunately. So the slot hold was off about 50 basis points. Table hold off 450 basis points from the prior year and 230 basis points from what we would have normally expected.

And so when you put... But we very seldom show you a monthly number. And by the time you get to the end of the quarter, it's usually normalized. They do.

They do. My only point in all that, Dan, was going to be we're still going to be up. pretty decently over the prior year with gaming revenue despite all that. So it's a month when you see these other revenue numbers that come out in a week or so. Just know that that number, while higher than the prior year, should have been up even more. Rising Star revenues and EBITDA are both up pretty meaningfully versus last year. And as Dan mentioned, we have a new general manager. That'll start there.

I forgot to mention that we have a new general manager. There's another thing that happened in September I forgot to mention. When the news came out that we were going to try to move to Fort Wayne, it unnerved both our employees and our customers. And we had to go to our employees and say, hey, calm down. This is not at all certain. And even if it happens, it's five years away. So don't quit on us here. And by the way, if we do get to move... and we end up closing Rising Sun and we move, those employees get first crack at the new place. And if they don't go, we will have nice stay bonuses for them and kind of a severance thing for staying with us until the end. And so they will actually benefit when they see the size of those stay bonuses. A lot of those employees are going to be rooting for us to move. But on the customer side, we actually got phone calls from people saying, hey, I have a reservation this weekend. Should I be worried? Are you closing? And we're like, no, we're not closing. And, well, if I gamble there, what am I going to do with my points? And so we've had to go back and calm people down. But September took an immediate hit when that hit the newspaper, and it's kind of come back. So I'm sorry.

No, no, no, no. That's perfect, Ian. So nice rebound there in October versus prior year and certainly versus the September that just ended and the new GM that will start there in a week. Silver slipper admissions are up about 2% or 3%. Spend for guests is down a little bit. Although, as Dan mentioned, we also have a brand new GM, Angie, that's moving down there from Rising Star. And then over at Grand Lodge, both slots and tables are up pretty meaningfully over the prior year period. So up about 10% on the slot side and 20% on tables. So October is actually shaking out to be pretty decent. The only other thing I had there, Dan, was that Stockman sale. You know, if you assume an EBITDA figure there of about $800,000, that's 11 and a half times EBITDA multiple. It's a very strong multiple. And so we were quite pleased with that sale. And the guys buying it are... Smart guys, good guys.

They're smart guys who operate small casinos like that. So it's in their wheelhouse and it's not in our wheelhouse. So it's a pretty logical transaction. So...

So do you want to do questions, Dan? Sure. So let's open up for Q&A.

Thank you, Sal. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star and then 1 now. A confirmation tone will indicate your line is in the question queue. You may press star and then 2 if you would like to remove your question from the queue. Again, if you would like to ask a question, please press star and then 1 now. The first question we have comes from David Bain of B-Riley Securities. Please go ahead.

Thank you. Thanks, Dan and Liz, for all the info. It seems like we're at trough margins for Chamonix and revenue grows basically on a relatively fixed cost base from here through the initiatives you spoke to. You seem to infer, I think, Dan, in the beginning that 2025 is really when we see more of a meaningful margin ramp. I'm just wondering if you guys could kind of big picture However you feel comfortable with that progression, is it like, you know, low single digits in one queue or single digits to, you know, double and two queue? Just any thoughts around how you would envision that and, you know, to help us sort of think about things as we enter the new year.

Okay. Well, first off, I think we've built the nicest casino in the state. Now, I will tell you, Monarch is also very nice. And both Denver and Colorado Springs are still gambling a lot less per capita than places like the state of Washington where the casinos are also some distance away on Indian reservations up in the mountains, or even California where it's tribal gaming. And so I think there's a lot more growth in the market. I often cite Monarch as our competition, which it really is at the high end. But I think we will both do well going forward. If you look at their numbers, they have 500 rooms. And they didn't get there overnight. It took them a while. And they don't break out Reno. But guys like you back into it and give me an estimate, and I can get it. I used to be an analyst myself, so I can get a pretty good estimate. They seem to be earning upwards of at least 100 million, maybe 120 million of EBDIT. on about $300 million of revenue, which is about the margin you'd expect in a regional market. And they're about a 30% market share in Blackhawk. And I believe Ameristar is pretty close to those numbers. They're probably number two now, but they're not far behind that. And they also have about 500 gas gyms. We only have 300 gas gyms. So we don't expect to get to those numbers. But can we get to half those numbers? We should be able to, over time, and recognize the people who live on the south side of Denver, like Castle Rock and even Centennial and Parker, they're about equal distance from us to Blackhawk. In fact, about 20% of our new signups are from the Denver area. And then Colorado Springs is closer to us than to Blackhawk, so that will always be our number one market. And then Pueblo, which is a city of 200,000 people, is a pretty important market for us. But when you look at the revenue numbers they gave you, we're nowhere close to what we think we can be. And so we have to grow it. Now, how fast can we grow it? I don't know, but we're about to run this advertising campaign. We just had a grand opening. I'm trying to hire more hosts. I would like to get there tomorrow, but that won't happen. It might take us two or three years. And so you can kind of play with a graph. But I think, you know, granted, there's some seasonality that you have to deal with. But absent seasonality, we should be able to show steady revenue growth for the next two or three years that exceeds our expense growth, resulting in higher margins, so that at maturity, maybe we're making $50 million a year on $150 million of revenue at, you know, in other words, being half of what... Monarch is. And by the way, to be clear, I think this is enough of an underserved market that while we're aiming for Monarch, I don't actually think we affect them negatively. They made a comment on their call that they think they're in the fifth or sixth inning of figuring out who the big casino customers are in Denver, because a lot of them go to Las Vegas, for example. If they're in the fifth or sixth inning, we're in the first inning. In fact, we're in the Is it the top half of the first inning?

We're still warming up. I'll tell you this, too, Dave. While traditionally winter is seasonally slower for that market, historically there haven't been any rooms in that town either. And if you look at what happens in Blackhawk with room product, a lot of that seasonality starts to go away. We have half of the room product now in town. And so I think that'll actually help us out with some of, offset a lot of the seasonality that you usually see. But on top of that, there's a lot that I think will be going on there over this coming winter. There's this thing that they do called Ice Castles that brings thousands and thousands of people on their own to town every year. It was, did it for the first time last winter as we were getting ready to open. And so we'll be back for its second year this year. We've got some marketing plans behind the scenes for some events that we're going to try to drive as well. Ice Fest is by far one of the biggest weeks in that market every year where they bring tens of thousands of people as well. And so there are a lot of other natural marketing events in the city beyond what we're doing that will help bring people together. over to see us for the first time. I think there are a lot of reasons to still be quite excited, but that ramp, as Dan kind of alluded to in his comments, it's always difficult to get it. It's quite easy to figure out what the long-term run rate is. It's always a little more difficult to figure out that ramp to it.

Yeah, and I went into a lot of detail on those direct mail programs because I wanted to kind of appreciate the sort of trial and error that happens in any new properties. I mean, there's things we tried at American Place when it first opened that it was like, oh, that didn't work, don't try that again. And then you gradually figure out what does work and you go back, like the one mailing list that did work, we'll probably go back and mail those people again. And now we know if we're going to buy a large mailing list and it's not clear somebody says, well, these have a propensity to gamble and they're not willing to tell us what it is. Well, let's try it out with 1,000 people, not 175,000 people and find out if it works. And so you get smarter at that. And even with the advertising, part of the reason we're hiring this new VP of advertising is it's important to, you know, it's a pretty complex algorithm. Like, do you want to be on streaming television do you want to be on Facebook do you want to be on a network television in Colorado Springs in Denver you know we're in Pueblo what program what time of day and so on and and and this is something that she's been doing for 20 years and she's very good at it and we're happy to have her and and and she'll bring a lot of benefit to us in Colorado but she'll also help us in all the other markets so right

No, that's helpful. And I mean, back on the marketing thing, then if we could just follow up on that, it seems like, you know, it's about showing folks the amenities, because I assume like in Colorado Springs through press and other outlets, they must know the properties there, but it may be helpful to give a sense of repeat business from new carded players. And maybe, you know, if there's been any change in frequency from legacy carded ones, if you have that offhand.

It all depends on how you define it.

Or even big picture?

Yeah, if you look at that big list that's on the slides that Lewis posted, it shows, what, 140,000 people in the mailing list? But that's a mailing list that has been accumulated since Bronco Billy's opened, and some of those people are dead. And so we cut it down into people we've seen in the last 36 months, people we've seen in the last year, and how often are we seeing them. Now that we have a hotel, of course we're seeing people more They tend to stay overnight. They tend to gamble more. But to get to where we need to be, we need to find more new people and get the new people to come. And so even the grand opening weekend was part of that. I mean, to some extent, we held a party for really good players from Morocco Billies, but a lot of the people were new who didn't know us before. And we want them to go home and tell their neighbors, usually a gambler hangs with gamblers, and go back and say, hey, we went up there. They had a surprise entertainer, and guess what? It was Jay Leno, who was terrific. And, you know, he was expensive, but the comedians are a lot cheaper than a big band. But he's one of the best comedians, and he's the sort of name that people will talk about. And we have a venue where we can sit 600 people for a show like that, an escalator away from the casino. Monarch doesn't. And Ameristar, they have a ballroom, but I don't think they could do it as well as we do. And so it's a little bit of a competitive edge. And so we purposely did that. And by the way, nobody in Cripple Creek could do anything close to that. And so we were able to entertain 600 people this weekend with entertainment, with great meals. We had horse-drawn carriages around Cripple Creek. We had tours of the District Museum, tours of the Bordello Museum. You could go visit a goat farm and milk a goat. Guess what? That was so popular we had to get an extra bus for it. We had sound bowls in the spa and all this stuff. And people asked me, well, how did it go? And I said, well, there were a lot of things that could go wrong operationally, and none of them did. We pulled that off. We actually had... if not the strongest weekend, it was very close. It was probably the strongest weekend since the New Year's Eve when we opened. And we may have topped that. I haven't gone back and looked. You know, when you consider the cost of Jay Leno and the cost of all that other stuff, did we make money? Probably not. You don't usually on a grand opening weekend. But you do it to get everyone's attention and get there. And then you get them to come back next weekend and the weekend after when you don't have to pay for Jay Leno. And...

so on and the you know if you were to look at the early reviews versus what you would see today it's a massive improvement now you know the the appreciation I think for the product that we built is absolutely there the repeat visitation is absolutely there if you look at the customers coming in the door today versus a year ago you know all the right things are happening behind the scenes so I am look there's there's there's there's a When we sit around the room and think about where that property can be in year two, year three, year four, nothing's changed. I mean, the excitement that we have for that building is as strong as it ever was, in large part because of the way customers have reacted to it.

The only thing that's changed is the population of Denver and Colorado Springs keeps growing. That's very true. And by the way, the other thing I should point out, this wasn't, when you think grand opening, this wasn't... like you might have with a big casino in Las Vegas with fireworks and all this. We didn't publicize this. It was only for 300 invited guests and their spouses. And we're not a very big place. We only have 300 hotel rooms. And so it was really just for the top echelon players. And that's intentional. You could not buy a ticket to CJ Leno. And so if you're a customer of, say, the Golden Nugget, you're like, if we sold tickets, Golden Nugget would go buy tickets and give it to their customers. We're not doing that. You want to come see Jay Leno, you've got to be our customer. And we will continue to do stuff like that.

I mean, clearly your confidence in Chamonix remains unchanged. And I just wanted to lastly congratulate you on the sales documents of the valuation. It seems great for shareholders and good for the buyer as well. Thank you.

On the sale of stocks. Yeah, yeah, yeah.

I was just congratulating you on a good transaction.

Oh, okay. Well, I mean, just so you know, I had a bunch of options I got when I took the job, just under a million options, and they were going to expire November 28th, and therefore I had to exercise them, and that incurs a whole big tax bill and the exercise prices, if that's what you're talking about.

He said Stockman. I'm talking about your stock. Oh, yeah, Stockman.

I'll let somebody else. My intent is to hold the shares. I had a 10B5 program. It sold some shares to pay my taxes, and the remaining shares I intend to hold. So it's like I didn't actually take any money out of the company. I just paid my taxes. But it ends up being with a filing that shows me as having sold shares.

But we do thank you on that. Awesome.

When you said congratulations on your stock, I thought, okay.

I'm sorry.

That's okay. Details of that are in our 10Q. So we're trying to make sure people understand I have not lost confidence in the company. I just had to pay a big tax bill.

Okay. Perfect. Thanks, guys. Thank you.

Thanks, Dave.

The next question we have comes from Jordan Bender of Citizens JMP. Please go ahead.

Good afternoon, everyone. Just one for me. When we think about the legacy portfolios, I guess, outside of Illinois and Colorado, without getting into guidance, can you just maybe give us a sense or the general outlook of what growth looks like next year? And then how should we think about your expense growth into 2025 as well. Thank you.

Okay. Well, the silver slipper, in my opinion, should be earning in the high teens, if not 20. It's not there now. It's somewhere 13, 14 million a year, maybe 15. And I'm hoping that Angie will get us back there. She's very good at coming up with marketing programs and controlling costs. And she did that. And I think she doubled the results in Rising Sun after she became GM. And so I have high hopes on that. I'm sure she's listening and probably swallowing hard. But that's where I think it should be. If you look at normal margins in a regional casino, that's what it should be doing. And, you know, we did have some storms this year and so on, but I also think a fresh set of eyes is going to help us. And then at Tahoe, we've always made about three to four million a year I think one year we got a little above four. Now, if Ellison, and it's always been kind of a short-term lease that gets renewed. Now, we just redid it as a 10-year lease that they can cancel on short notice. So it's still a short-term lease, if you will. But we've been running it now for at least 10 years. And the Pritzkers and Larry Ellison don't want to go get a gaming license. And so we have good relationships with them. We pay them pretty significant rent. And so it's a way for them to have a casino in their place and benefit from the economics of it and be competitive with other hotels at Lake Tahoe without having to get a casino license. So hopefully we're there for a long time. And if Larry Ellison really does fix the place up, it's already a very nice hotel. But he has a history of really improving the hotels he buys by a lot. And if he does that, it could be a source of growth. But because it's a short-term lease, it's hard to put much value on that. You know, hopefully we're there for a long time, but there's no certainty we will be. At Rising Star, frankly, you know, we struggle all the time to keep it profitable. I think we can keep doing that. And Jeff is also a very good manager and And we can at least tread water. It's hard to get upside when you have better casinos every direction. You have to do quirky things. Like we started that every year we put up all these Christmas decorations, give the keys to Santa Claus, and we call it the Christmas Casino for two months. So we actually make money in the fourth quarter when historically we used to lose money. But the big upside there is Fort Wayne. And if we can move it to Fort Wayne, you could have a casino that makes 30 or 40 million a year or even better instead of five. But that's a long time. So I look at that as like, well, why don't you sell it? Well, this could be the next big growth opportunity for the company down the road. And if you got into a situation where you did get the permit to go, but you couldn't arrange the financing, you could always sell the subsidiary and still generate shareholder value. But I think the timing would be such that we probably would be able to finance it pretty easily after American Place opens. Because once you, like even today, we've done all the construction. I mean, there's only $7 million in the restricted cash account for Chamonix, and we expect five of that to finish all the construction spending. And then we're done. And so now it's time to harvest some cash flow. And we're going to build up cash flow in the next few quarters. And then we'll go into the financing for the Permanent American Place. But the Permanent American Place has been on hold waiting for the, there's a lawsuit from the Potawatomi tribe against the Gaming Commission. And because of that lawsuit, we were able to get an extension of the period of time we can operate the temporary. If that lawsuit drags out, we could probably get another extension. And so you kind of, you know, we watch our, you know, liquidity pretty carefully. This is the tight spot. We've just finished all the construction, but our liquidity is good. We're sitting okay. We got an interest payment in February. I think we pretty much have the money today for it. We're going to generate cash flow between now and February. And then the next interest payment in August should be easy as Chamonix comes online And so, I don't know, how did I go down this rabbit hole?

Other properties, no, no, American Place, EBITDA will continue to gain in 2025. So the stretch would be to have EBITDA start with a four. I think if we're somewhere in the mid to upper 30s, we'll be pretty pleased. I'm trying to think of what one we didn't have in there.

I mean, the legacy properties, I mean, basically we're a three-legged stool. We've got Silver Slipper, Colorado, an American place, and Rising Sun is a growth opportunity outside of that. And Tahoe, you know, our return on our investment there is very good, and we'll continue to run it as long as they allow us to run it, and we'll run it as best we can. But essentially it's a three-legged stool with a couple little extras.

Yeah. In Colorado, I mean, if we're doing something between one and two million a month in the earlier part of the year, I think we'd be pretty happy.

Yeah, I mean, you know, I pay a lot of attention to Monarch because they're a successful company and a competitor of ours. They only have two places, and they focus on the two places, and they do a really good job at the two. And if we could do a really good job at our three, I'd be very happy. We don't have to diversify on your behalf. You can diversify on your own. And so our focus is on doing a really good job on the three stools we have and go from there. I appreciate it. Thank you very much.

Thank you. Thank you. The next question we have comes from Ryan Sigdahl of Craig Hallam Capital Group. Please go ahead.

Hey, good afternoon, Dan Lewis. Not to nitpick too much because American Place is performing really strongly here, but margins appear to be down year over year. Revenue grew faster than EBITDA. I guess anything to call out there, and then how should we think about the cost structure within that property specifically going forward?

I hadn't actually focused on the margins, but my guess is it would be because we opened the steakhouse. which is actually a big revenue driver, but of course has employees and food and beverage revenue, which is less profitable.

Our table business has been growing pretty robustly.

Oh, yeah. You know, I mean, we do pay attention to margins to some extent, but if you run the company based on margins, you know, like I could improve the margins of Rising Sun if I just closed the hotel and closed the golf course and closed the ferry boat and We'd have higher margins and less income. And so you try to maximize income. But the main thing that's changed at American Place over the past year is opening the high end restaurant, which we did back in February. And the minute we opened it, our casino revenue got a lot better. But operating a restaurant like that is a low margin business. So that may have affected the margins.

Yeah, we also had a, if you're looking at, if you're comparing it to the third quarter of last year, too, we had a $600,000 true-up that benefited us in last year's third quarter. So year over year, that's, we did not have that in this year's third quarter, so.

True-up was, oh, it was.

It was a reversal of something, we won't go into it, but.

Yeah, it was a true-up, yeah. It was a reversal of expenses you took earlier when it should have been capitalized, so.

Good. One quick follow-up on Chamonix. So varying degrees of success on the mailing list and marketing and strategy there. But I guess why not lean more into the convention business and really trying to drive people in to see the property through that?

Well, you know, frankly, the convention business should be pretty important. And we were a little slower on this than we should be. Normally, you would hire a pretty big sales and marketing force before you're even open. We had one person. We've recently added two more. We should have five. I mean, the Broadmoor has 900 rooms. They have about 18 people in sales and marketing. And the Broadmoor probably, I'm guessing the Broadmoor, this is the big five-star hotel in Colorado Springs. I think it's the largest five-star hotel outside of Las Vegas. And I think they run about 85% occupancy. And I'll bet about 75% of that occupancy is group meeting and convention business. And so, uh, you know, you look at that and say, okay, well, for us, uh, uh, we're just getting going. We're just starting the problem work, by the way, has been around a hundred years. So they've had time to build that, uh, uh, that book. And, and we're just starting and, and, uh, and we're building up that Salesforce. We've, uh, added, as I mentioned to other people in the last few months, And frankly, I'd like to hire two more. But it takes time. But that's the bread and butter in Las Vegas. I mean, not the bread and butter. Las Vegas could fill every weekend with people driving over from Los Angeles, and then they fill the midweek with meetings and conventions. So it's the same formula as the strip, really.

Thanks, Ryan.

Thanks, guys.

All right, Dan, we have two questions in the queue. Let's try to get through these real quick. Okay.

The next question we have comes from John Decree of CBRE. Please go ahead.

Hey, guys. I think most of my questions have been answered already, but maybe one on Chamonix and Cripple Creek overall. So it appears you haven't had much impact on the local market yet, in spite of ramping revenues. So curious, I know Dan, your plan has always been to expand the market with what you've built there. But is there some low-hanging fruit maybe in that market? Or are your competitors being incrementally more promotional maybe as you ramp up? And so we thought maybe you would have taken some customers, some more customers from your competition in that market. So curious on your kind of thoughts as to what's kind of happening in Triple Creek around your competitors.

For the last few months, we are over 100% of the growth in both Cripple Creek and the state. In other words, we look at our revenues and we look at the growth in the market and the growth in the state. And so now, I think if you take our numbers out, the casinos excluding us in Cripple Creek as a group are down some, not down dramatically, but down some. Now, it's not an analogous group. The Century Casino is right across the street from us, and Century, on their earnings call, said they're doing well in Cripple Creek. Well, of course they are. Our restaurants get jammed. We can't accommodate everybody for lunch, and they go across the street to Century because they have a decent restaurant for lunch. The Double Eagle, who's two blocks away from us, is probably not getting that sort of spillover, and I'm guessing they may be down. and the two partners who owned it have both passed away, so they're operationally in a bit of flux. The Golden Nugget, which acquired the Wildwood, you know, they brought in, they're a well-managed company. They brought in good management, and I think they're doing well, and we kind of welcome that, I think. And then Triple Crown's always been well-run, and so... You know, I don't think we're eviscerating anybody. I don't think we will eviscerate anybody. But we are more than 100% of the growth in the market.

Yeah, and, you know, you'll always get a little bit of an impact in the short term. But I think a year, two, three years from now, when everyone looks back, I think everyone in the market will say, wow, this market grew pretty much entirely because of this new opening.

Yeah, like we don't get all the details in Blackhawk. But I would guess that Monarch is doing very well, has had some impact on Ameristar and perhaps the horseshoe, but not all that much. I think they're all doing well. And I think we will do the same over time in Cripple Creek.

Yeah. Look, I will tell you, if the opposite happened, if we opened up and you saw massive declines at our competitors, that would have pointed to the fact that maybe this wasn't as under-saturated or marketed as we would have expected. The fact that we have grown this market so much without really any impact on the others just speaks to the deepness and the kind of underserved nature of both Colorado Springs and Denver especially, those southern suburbs.

It's actually our strategy. We want to go into underserved markets because you get a higher return on investment in an underserved market than you do if you're just competing for market share. And so Fort Wayne is the ultimate underserved market. It has no casino within an hour and a half of it. But even in Lake County in Waukegan, we've been able to generate the revenues we're generating. I think we're now one of the more higher revenue casinos in the state despite being in a tent. And we've had almost no impact on rivers or as near as we could tell the Pottawatomie tribe who would be our closest competitors or even the slot machines and pubs we've had very little impact on. We have grown the market because it's an underserved market, and we do that as a strategy. And I got asked the other day about why don't we try to get something on the strip, and I'm like, it's not an underserved market anymore. There's 63 Indian tribes in California with casinos, and this is a pretty mature market, and the returns on investment here are subpar unless you do something like stations with Durango, which was a a neighborhood that was underserved, and they went in with a very good product, and they're doing very well. But just about everything else in Las Vegas has not gotten a great return. And although we live here and our offices are here, we've kind of avoided it for that reason.

Very good. Thanks, guys. Appreciate that.

Thanks, John. Thank you. The last question we have comes from Chad Baynon of Macquarie. Please go ahead.

Hi, Chad. Afternoon, Daniel Lewis. Thanks for taking my question. First, I just wanted to go back to Silver Slipper on one of your competitors earnings calls. They talked about the extraordinary growth at Treasure Chest. And I believe historically there were some markets between Silver Slipper and Treasure Chest that were battleground zip codes. Have you seen any impact since that property went from barge to land base, and is that something that we should expect in the next couple quarters? Thanks.

Yeah, I actually went and looked at that. Treasure Chest is at the foot of the causeway that goes to Jefferson Parish from the North Shore of Lake Pontchartrain. It's a pretty long drive. Our customers tend to be a little more from the eastern part of the North Shore of Lake Pontchartrain And so they are doing much better in the land base than they did in the boat. The boat was a 30-year-old dump. But I think that the reason they were incentivized to do that, it's a little bit hidden. You have to dig a little bit to find it because it's overseen by the Racing Commission rather than the Gaming Commission. But Churchill was able to put slot machines in off-track betting parlors, and a lot of those were in Jefferson Parish. That is near, which is where Treasure Chest is. And so, was it a year and a half ago, Boomtown on the West Bank, which was part of Pinnacle that Lewis and I used to run, and Treasure Chest were both showing big revenue declines. And if you just looked at the numbers out of the Gaming Commission, you couldn't figure out what's going on, what's happened, why are they down so much? And it was so much so that I asked one of our people to go down there and sniff around and find out what it was. And he called back and he says, Churchill has snuck, I forget how many, 50 slot machines in each of 10 off-track betting parlors. You know, they're historical racing machines, which is a Trojan horse for a slot machine. And they were doing very well. In fact, I've heard some numbers that are very well. And Churchill kind of, I think, disguises it because they don't want people to understand what they're doing competitively. And they keep trying to figure out a way to do something similar in Slidell, and the courts have turned them down. And so Treasure Chest built a bigger place. I think they're getting back. I would expect that they are getting back some of that off-track betting business from Churchill. Because if you have a nicer land-based casino, why would you go to an OTB parlor with a handful of machines? But it's far enough away from us that it doesn't seem to be having any impact on us. I will tell you, the Hollywood casino near us has a new GM who used to work for us who's a good guy, and he keeps coming out with aggressive promotions. And I think that's had a bigger impact on us. I don't know that they've all been successful, but after years of dealing with kind of suboptimal GMs, now, damn it, we have a good GM down the street from us And so we're trying to up our management team as well. And I think that's a bigger impact than treasure chest. Okay.

Thank you very much, Dan. Lewis, quick last one, just as we think about the free cash flow build in the next couple of years, 2025, will there be much higher maintenance cap backs or any project cap backs for the permanent in-walk key gain, or will that all be 26 and 27 based on where things currently stand with the lawsuit?

So maintenance capex traditionally is closer to $3, $4 million a year. It's not a giant number. You know, with the new properties, maybe that number edges up a little bit, but it's still going to be a single-digit number, not, you know, 10 or 15. No, no, they are brand new. So most of what you would spend would be more on slot machines versus anything else. You know, for the permanent casino, ask me again in a quarter.

We've got that. It depends on the timing. I mean, if everything came together and you had the financing in June, you'd start spending money in July. But if it's September, you'd start spending money in October. So how much money we spend in calendar 2025 will depend on when we've been able to get Chamonix up and the bond market's right and everything comes together to get the funding for the permanent. But this is part of it. We watch this all the time. We have big investments in this company. And it's like managing the liquidity and looking at the spending and looking at the cash flow. And sometimes the answer doesn't fit calendar years. The answer is we won't start spending significant money on the permanent until we have the funding to complete the permanent. And we will get that funding when the markets are right and we can show good numbers to address the market right. And we have quite a bit of flexibility on when we start. And the same is true of Fort Wayne. We have a lot of flexibility if it ever happens.

And the other piece of that is maybe cash taxes. And with these two new properties open, we're not expecting to pay cash taxes here in 2024. And in fact, our NOL balance actually climbed with our 2023 financials, or sorry, income tax returns being filed. So we went up from, my gosh, Adam, was it 13 or 14 million, up to $27.5 million of NOLs. And so we'll continue to benefit from that with these two large new assets with some pretty big DNA tax yields.

I want to point out, a lot of people get focused on GAAP and you forget the fact that For tax purposes, when you build a new building, you get accelerated depreciation on an awful lot of the investment. So we end up generating some pretty nice tax losses on these new properties because it ends up a lot of the depreciation gets to be front-end loaded.

Perfect. Thank you both. Appreciate it.

Thank you. Okay. Thank you, everybody. Apologize for the quarter. We will do better.

Thank you. Ladies and gentlemen, we have reached the end of our question and answer session. I will now hand the call back to Daniel Lee for closing remarks.

I think you said it, yeah. I think I said it. Thank you, everybody. Thank you, everyone.

Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.