Full House Resorts Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 8, 2023

There are 8 speakers on the call.

Operator

Greetings, and welcome to the Full House Resorts Third 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Louis Fenger, Chief Officer of Full House Resorts, please go ahead.

Speaker 1

Thank you, and good afternoon, everyone. Welcome to our Q3 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 provisions 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.

Speaker 1

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 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 then lastly, we do have some slides that we uploaded as well for you. If you go to investors. Fullhouseresorts.com, in the middle of the page, you'll see a banner with links.

Speaker 1

Click on company info and then presentations, And you'll see a link to the Q3 slides that we'll reference here. So with all that said, we'll get to your questions relatively quickly today because I know MGM is on deck in about 30 minutes. So, but with all that said, we had a very strong 3rd quarter. Revenues increased 73 percent to $71,500,000 That rise was helped out by the temporary, which opened back in February of this year and it continues to ramp up. Compared to the Q2 of this year, the temporary showed pretty meaningful sequential improvement.

Speaker 1

Revenues at the temporary improved about 18% from $20,000,000 in the Q2 of 2023 to almost $24,000,000 in this Q3. Adjusted property EBITDA rose 64 percent from $4,100,000 to $6,800,000 Circa did open their on-site Sportsbook after temporary in the Q3, but really the meaningful addition that we're waiting for is the high end restaurant, which is on-site and going through its final paces. The hiring Process has already begun and we expect to have that open at the end of this year. Elsewhere at the company, we had $5,800,000 of accelerated revenues from the termination of 2 of our sportsman agreements. Even adjusting for that though, we had a good quarter that exceeded consensus.

Speaker 1

Flipping forward in the slides To Slide 5, you can see our usual renderings of Chamonix. We're very excited for this opening. If you know the history of gaming, Then you know that the business model that has worked time and again is to find an underpenetrated gaming market without any differentiated product. And we think we found that in Cripple Creek. In our case, we have roughly 1,000,000 people in the broader Colorado Springs area The gaming spend per capita is about $170 per person per year.

Speaker 1

For casinos that are within an hour of their feet You tend to see a per capita number that is double or even higher than that, versus what you see currently in Cripple Creek's Casinos. The national average, which includes many states where casinos aren't convenient like Hawaii and Alaska and Utah, is 2 thirds higher than what we already see out of Cripple Creek as well. And so that stat alone is what gets us very excited for our upcoming opening. But on top of all that, we've built a destination that really is unlike any other casino in the state, let alone in Cripple Creek. It is just Beautiful on the inside.

Speaker 1

We think it will offer a compelling reason for Colorado residents to experience and in many cases Cripple Creek too for the very first time And then they continue to visit again and again. On slide 6, just a quick reminder of what we're building. It's a $250,000,000 project. It's a beautiful new casino. There's a hotel with the first 4 star product in the market.

Speaker 1

We're going to have a great steakhouse called 980 Prime, which is being run by the people behind Barry's down Prime at Circa and 9 Steakhouse in Las Vegas. There will be a rooftop pool, a spa, an integrated parking garage. It will be pretty grand. Our opening date remains December 26, which is just 7 weeks away. We did create a fun ad campaign.

Speaker 2

It meant to generate excitement in the

Speaker 1

area, while also giving a quick sneak peek It meant to generate excitement in the area, while also giving a quick sneak peek into the building. And at the very bottom of that slide, you'll see YouTube link, which you can click on to get to the 60 second ad. On TV in Colorado, we'll break it up in the shorter 15 second spots, but we'll also air the full thing digitally. Slide 7. You can see the valet arrival experience.

Speaker 1

In the middle is the valet drop off with the hotel rooms just above. On the left of that page is a jewelry store and then in the front of the building and also to the right will be casino space. Slide 8 is a sneak peek at our table games pit. By the way, these photos were taken about a week and a half ago, but they're already pretty stale. But nonetheless, in this photo, you can see the chandeliers being installed.

Speaker 1

Slide 9 is just me and us trying to show off the casino a A little bit without ruining the surprise for you, but you can see some of the ceiling detail here. It really is very different than what you'll see anywhere else in the market today. Slide 10 is a view from our ballroom. The chandeliers are now installed. The carpet's done.

Speaker 1

So we've got them covered for protection up until opening day. This is where we've been storing and testing all of our slot machines, all of which by the way have arrived on-site. Slot bases are a few days away from being installed and we'll follow that very shortly by the slot machines themselves in their actual locations throughout the casino. Slides 1112 are photos that we showed you last time, just giving you a sneak peek at some of the room product. Those are being shut off 1 by 1 as our furniture gets installed.

Speaker 1

And then Slide 13 shows some of the beautiful nature views that you get from many of our guest rooms. Outside of that, a quick look at liquidity. Our liquidity remains in a good spot. At the end of around $10,000,000 or a little bit more. Something that most people don't think about is our sports games and how those are prepaid.

Speaker 1

And so in this Q4, we're due to receive about $10,000,000 in cash related to our skins. That includes $3,600,000 already received in October from the terminated sports agreements and then there's another $5,000,000 due from circa in December, which is prepayment for Mobile operations in Illinois for all of 2024. We also have our we also have $13,000,000 available under our credit facility, All of which is available for us to draw. And that provides us even more cushion as we prepare what's going to be a pretty big and momentous opening for this company at the end of December. So with all that said, Dan, did I miss anything?

Speaker 1

Or do you want to do some Q and A? No. We'll

Speaker 2

do take some questions. And We'll stay here as long as possible, but we are trying to make it easy for people to go to the MGM call because we know many of you will want to do that. So But it was a great quarter. I'd be happy to talk about it for 2 hours. But so we're happy to take questions.

Operator

Thank you. We will now be conducting a question and answer A confirmation tone will indicate your line is in the question First question comes from Ryan Sigdahl with Craig Hallum Capital Group. Please go ahead.

Speaker 3

Hey, good afternoon guys. Just if you could break down Joaquin a little bit more, nice sequential revenue growth and margin uplift, but we're really seeing the efficiencies flow through and then Any directional help for Q4 relative to Q3 based on what you've seen thus far in the quarter?

Speaker 2

Let me take it. Just as we started this call, the numbers came out from Illinois for October and We haven't been open before. October is normally seasonally a little weaker than September. And in fact, I think it was down about 3,000,000 from September to October. And of course, Bally is open and did about 8 they did a little bit than we did.

Speaker 2

They have a lot more people around them. And we were off a little bit from September to October, not very much. We were still 7,300,000 And I think part of that seasonality part of it's also we had a pretty big advertising campaign When we first opened, that had kind of petered out and we have another one about to start, which is kind of emphasizes The excitement of the inside of the tent. So I think it's a 4th quarter is not This is not a highly seasonal market. We have some like Tahoe that is highly seasonal.

Speaker 2

But I think the 4th quarter Might be a little weaker than the Q3 in terms of revenues. Now we'll see. Does the new advertising Campaign build revenues. I hope it does. It's part of the reason we're doing it.

Speaker 2

We continue to build our mailing list, which helps our slot play. We're trying to get our steakhouse open. It's probably going to be late in the quarter, but we're trying to get it open. We know that that's pretty important, especially if your Table gameplay and high rollers. And hopefully, it's open late in December and helps us drive New Year's Eve.

Speaker 2

New Year's Eve is really important in December, which then makes it important for the quarter. The property continues to mature and it's doing just fine.

Speaker 4

Good.

Speaker 3

Continuing on the trend of outperformance, Moving to the West segment, it had been revenue down each Q1, Q2. EBITDA has been roughly 0 in each of those quarters with the construction at Bronco Billy's. And This quarter showed a nice improvement on revenue and on the bottom line. I guess, can you comment on what's Going on, which properties within that segment are doing better?

Speaker 2

Well, part of what we had done, at one point, We had renovated the middle part of the Bronco Billy's Casino. So a year ago, like the heart of it was actually closed. It's been open now since It's early this year, if I recall correctly. So it wasn't it's still heavily disrupted, but a lot less than it was a year ago at this time. And but the interim results at Abracobilly's are Minor compared to what Chamonix is likely to do for that segment.

Speaker 2

I mean, it's not unlike what Monarch did in Black They bought the old Riviera and added well, renovated the casino and added the hotel tower and Tore down a parking garage, built a new parking garage, etcetera, etcetera. They never actually closed their casino, but the old Riviera didn't make much compared to what Monarch is making now and it's kind of the same sort of thing we're doing. And like them, We will open, but it will be kind of a soft opening. We're not planning a grand opening party on December 26 or anything like that. Frankly, we're scrambling to get open and we're hiring people now.

Speaker 2

We, of course, already We have 250 employees. We're trying to pick up another 100. And we won't have everything open on December 20 Now we will have 300 guest rooms, all the guest rooms. We'll have the casino, all the casino. We'll have the high end restaurant.

Speaker 2

We'll have the parking garage. We'll have the surface customer lot. There's an Italian restaurant that won't be ready for Several months after this, the spa will not be ready. There's like a speakeasy bar that will not be ready, but it's Speakeasy, so nobody will know it's there anyway. And you end up in a Situations like all the key drivers that will make this successful will be ready by December 26.

Speaker 2

So you wouldn't want me to wait 2 months until the spa is done. I mean, we'll go ahead and open. And so we'll open on December 26 and then as quickly as we can finish the other stuff. And the And that other stuff, it's like the finishing work in the spa. So it's not anything that would be disruptive to a customer's experience.

Speaker 2

And so we're excited about being open and then we'll have a grand opening party in the spring, which is very much The same as Monarch did. And I know Durango Station postponed their opening, but I think they figured they couldn't get the publicity they wanted with Formula 1 in town. And I think that may have been a factor of that as well. So We're a little different. We're much more similar to Monarch.

Speaker 2

We're going to get the doors open, get some revenue coming in And then build from there.

Speaker 1

And apologies if this isn't what you're asking to Ryan, but if you're looking sequentially from 2Q This Q3, Grand Lodge actually benefited pretty nicely. What you had in the Q2 of this year was a lot of Well, you had a very bad winter to be quite honest and a lot of snow. And that snow lingered for the longest So usually what would happen in our Q2 around Memorial weekend is the locals would come back and start gambling again. And this year, because there was so much snow that was sitting around, they didn't come back in the Q2. They didn't really come back until 4th July weekend.

Speaker 1

And so Sequentially, we got a pretty nice bump from Grand Lodge just having the locals back in town.

Speaker 3

Great. I'll turn it over

Speaker 4

to the others. Thanks, guys.

Operator

Next question, Chad Beynon with Macquarie. Please go ahead.

Speaker 4

Afternoon, guys. Nice quarter.

Speaker 1

Thank you.

Speaker 4

Wanted to start just kind of honing in on some of the OpEx items. Some different contracts, understanding that probably most of your costs on the labor side are going to be coming temporary and then Chamonix. I guess you were kind enough to break out the Midwest and South, and it looks like margins were down a little bit, probably Roughly in line with revenues, but can you just talk about kind of where we are on the inflation journey, on the expense side, If you feel like things are under control, if you're going to see additional creep in the back half of 'twenty three and beyond or if things are kind of status quo there? Thanks.

Speaker 2

Well, obviously, at Chamonix, we have to hire people and we're in an isolated location up in the mountains. And so in some job categories, we have to pay up to attract people. On the other hand, the tip positions, If you visit the town, it's pretty obvious we're going to be the center of action. And if you're A tipped employee, you're going to make more money with us than you are anywhere else in town. So I think there will be okay.

Speaker 2

If you if talking about Like normal inflationary pressure, 6 months ago, I was getting a lot of pushback And it was kind of like the press would say inflation year over year was up 7%. And so it seemed like every employee went at a 7% raise. And I'd point out that our revenues at most properties were not up 7%. And that in the inflation index, there are things like Cost of houses or cost of a new car. And if you didn't buy a new car, if you didn't buy a new house, your cost of living didn't change And you pushed back.

Speaker 2

I think now that you've had lower or at least press articles of lesser inflation And things like that, a little bit of that pressure has gone away. The last employment statistic actually showed unemployment up a little bit. Now Colorado Springs is still a very tight labor market. But one of the things we're doing in Colorado Springs that takes a lot of pressure off us is we've Taking a page from the Hyattaho, Hyattaho outsources their housekeeping to a third party. A number of hotels are doing that these days.

Speaker 2

And so we've chosen to do the same thing. Well, the company that is going to do our housekeeping Does the housekeeping for the hospital in Woodland Park, which is the 2nd largest employer in the county And they also do the housekeeping for the 5 hospitals down in Colorado Springs. And so Woodland Park is 18 miles from us And then it in turn is about 20 miles from Colorado Springs. So it's easy for them to transfer housekeepers from Woodland Park to us to our property and then replace them with people from Colorado Springs and so they can move people around. They've already got a workforce and So on.

Speaker 2

And when we after negotiating with them, we looked at what we would pay them by the hour and what it was going to cost us by the hour. It was kind of a wash and they have more resources than we do to move people around and supervise people and so on. So that's about a third of the employees we need to hire were resolved with that contract. And so we're That helps us a lot. Then about a third of the other employees are tipped employees and that's going to be relatively easy.

Speaker 2

And then the last part we're working on. So I think we'll be okay up in Waukegan. We continue to hire people. It's a little more of a challenge there because every employee down at the dishwasher has to go through gaming licensing. And somebody who, And somebody who might be applying for a dishwashing job, that's a pretty big hurdle When they can go to the Amazon warehouse next door and not have to fill out a 30 page form.

Speaker 2

We've been working through that and we have a pretty stable employee base now, But it's been a little bit of a struggle. Anyway, that's the bottom line. We get asked all the time, do you see signs of a recession? Sometimes I think there might be, but particularly in Mississippi, which is where the economy seems to be a little weak and then all of a sudden we'll have a good weekend. And then it's like, well, no, maybe there isn't a recession.

Speaker 2

And then people ask, are you Feeling inflation, it's like, well, on the revenue side, no, I wish our revenues are growing 7% at the older properties. And I think, yes, it's one of those things when the press is filled to talk about inflation and everybody starts looking for a raise And if the press would just shut up about it, maybe we wouldn't have as much inflation. Some of you may not in an earlier life, I lived in Brazil And the Brazilian government at one point had to admit that they lie. And that was because the Sao Paulo newspaper Did the an analysis of a bunch of prices from 1 year to the next and they concluded that inflation was 100% The government was saying it was 70%. I mean, the inflation rates were nuts.

Speaker 2

And the Minister of Finance in Brazil said, well, actually, as a

Speaker 4

And Dan, a lot of times when we're talking to investors, it's always the what's next after Chamonix. Louis, you kind of laid out the spend per head in the market

Speaker 2

and the opportunity there. And I think everyone's

Speaker 4

on board with the And I think everyone's on board with the returns that could come out of this. But after that's open, you'll have New properties, one property down in the South that's a good cash cow, the sports businesses and then a few other smaller properties. But Just in terms of kind of the 3 year portfolio or how you're thinking about what to do with the cash, whether it's Pay down the debt, buy back stock at these levels or look to grow the business. Can you kind of give us a little peek into 2024, 2025 kind What's next after you open up Chamonix right after Christmas?

Speaker 2

Well, we get Chamonix open and it It will take a while to mature just like it's taken American place, little while. I mean, and just as it did Bellagio, Leberge and so on. I mean these things the 2nd year is almost always better than the 1st, the 3rd year is better than the 2nd. Usually about that time, it's kind of mature. And now at some point, The City of Waukegan and the State Gaming Commission will probably get that lawsuit resolved from the Potawatomi tribe.

Speaker 2

And when they do, then it's hard for us to go arrange financing for the permanent casino When you have a lawsuit out there arguing that you should restart the licensing process, it's kind of an absurd lawsuit, but it's out there. And when that's resolved, I would expect and it might be a year to 18 months. And when that happens by then, frankly, we're going to be one of the least leveraged casino companies out there. And hopefully, the bond market is in better shape. And we will go raise money to build the permanent casino in Waukegan.

Speaker 2

Our obligation Is to invest, I think, the number is about $325,000,000 going forward. It was $500,000,000 less what we've invested to date. So And a lot of what we've invested to date is parking lots and land acquisition. So that's really for the permanent and license fee itself. And the permanent will be much more obvious and nicer casino than the 10, we're operating it now.

Speaker 2

So we still have that ahead of us. It's a pretty big task. It's not immediate because the lawsuit has it kind of on hold for now. We hope they resolve the lawsuit pretty quickly, but The courts are pretty backed up these days. So in the meantime, we'll continue to grow the business and improve the balance sheet.

Speaker 2

Somewhere down the road, we do have the entitlements to build a hotel tower at the Silver Slipper and it would make Sense to do it. We've just been a little busy with other stuff that we think has a higher ROI than that. But at some point, If we're generating excess cash and looking for something to do, that's a growth opportunity that exists for us. And in a 3 year time frame, that's kind of what we have in mind. Okay.

Speaker 2

I mean, we don't see any other markets To go into, I think the markets we're in are pretty good. Even Chamonix is designed to be able to be expanded at some point and we own a Piece of land to do that on, but let's get it open first.

Speaker 4

Thanks, guys. Appreciate it.

Speaker 1

Thank you, Chad.

Operator

Next question, Jordan Bender with JMP Securities. Please go ahead.

Speaker 5

Great. Thanks for taking my question. It looks like reservations in Chamonix, the hotel did open the other day. I was wondering if you could just share maybe like what you're seeing in terms of bookings, whether you want to talk about ADR? And Just given some of that demand, could that be kind of a forward leading indicator into some of the demand for that project?

Speaker 2

Well, we haven't publicized yet that it's in a big way that the reservations are open. And in fact, I was a little chagrined when I saw it because for the 1st several days, it really should be held for our casino customers. And so we're fixing that. We have a mailing list there over 100,000 names. Now Some of those people are probably dead because it's been built over 25 years that Franco Billings has operated.

Speaker 2

But there's 20,000 regular people who are we see all the time. And of course, we want to make sure we accommodate them early on. And so the bookings we have are only been a few days, so I wouldn't expect it to be at all material. But people will want to see it. The ad campaign is just starting.

Speaker 2

It's a really cute Series of ads and they'll be pretty prominent in Colorado Springs and in Denver And that will build. And it's not only it's 300 guestrooms on any given night is around 500 people in the property. We only have 800 slot machines. And we will continue to get a lot of day trip customers as well. And so the revenue will be there.

Speaker 2

Will it be there on December I don't know, the day after Christmas, probably be pretty busy. I actually there's a side of me that hopes we're not completely slammed Our employees will still be learning the building and learning their jobs and gradually build up. I mean And so like stations is actually concerned, stations, casinos and they're good operators. They're going to open Durango stations, The first new locals casino that's opened here in a while and there's 2,000,000 people live in this town. We all drive past Durango Station and they will be swamped with people And they will be on the day they open.

Speaker 2

So they said we want to make sure they have all their employees trained and everything else. We're 45 minutes up in the mountains And I think people will find us. I remember when we opened L'Auberge, which was 2 hours from Houston, I wondered whether people would show up. We had so many people show up in the 1st day that they would threaten to close down the freeway interchange, which was a mile from The property because the traffic was backing up onto the freeway. And Yes.

Speaker 2

Sometimes it builds slowly, sometimes it builds more quickly. I expect this to build somewhat slowly just because of where it is and because Most people in Colorado Springs have been to Cripple Creek at some point in the past. And if you went there before, It looks kind of like if you've ever been to Virginia City, Nevada, so like a little historic town with little itty bitty casinos and you go there and you look at it. And And our task is to tell them that no, this isn't the Colorado this isn't the Cripple Creek you knew. This is a different Cripple Creek.

Speaker 2

This is Kind of like when the Mirage opened in Las Vegas in 1989, all the marketing in Las Vegas up until that Cheap buffets and cheap hotel rooms and lounge singers. And the Mirage introduced a whole different type of casino And it changed the market. And that's a little bit of what we're doing in Colorado Springs on a smaller scale.

Speaker 1

Our TV ads haven't yet started airing. That's literally happening this week, Jordan. So it's a good question, but ask me Again, in a week or 2 is probably the better thing to tell you. I will tell you this though, it is beautiful. And I know I keep saying that whenever I meet with people, but when you walk into that building for the first time, it is Your jaw will drop because it is truly a special place that is unlike anything else in that state.

Speaker 2

Quite odd, it's wind quality and that's not Surprising because the designers are people who worked on the Wynn product.

Speaker 1

Yes. That's right.

Speaker 2

And so and the hotel itself is Four Seasons quality and it's the designers. The design firm we used for the hotel is the same design firm that we used at the Four Seasons in St. Louis, who did the Four Seasons in Jackson Hole, who did a Number of montage properties and that's the quality of what it is. And To do that in Cripple Creek is a little stunning. There's some local people in town who think I'm nuts, but I think it'll work because I've

Speaker 5

Great. And then just kind of led into my follow-up question here. I think the original benchmark for Colorado was about $50,000,000 of EBITDA. Is that still kind of the right way to think about the project Return with where you guys sit now about a month and a half out?

Speaker 2

Yes, I think so. But don't expect us to do $6,000,000 in January. I mean, it takes a while to get there. I mean, Monarch is doing north of I think in fact, I heard somebody talk somebody I said that to somebody who was a big shareholder there who said, no, no, they're doing like 120 now. And so that's great news.

Speaker 2

They are 500 rooms worth 300 rooms. And the casinos aren't much different in size. So if we could do 50, I'd be pretty happy and that's Less than half of what they're doing. And they're the principal competitor. Our ads quite Clearly say we're the best casino in the state.

Speaker 2

They're pretty good too. I mean, I think we're better because we have a better footprint. Their footprint, they had to be very long and narrow, but the actual quality of the experience is pretty similar Between the 2 of us and everyone else pales in the state.

Speaker 1

And by the way, no comparison in Cripple Creek.

Speaker 2

0. Yes. 0 comparison in Cripple Creek. Yes. Ameristar is very successful.

Speaker 2

It's gotten old. They need to refurbish it. It's not a bad And the next best property is a pile of debris. It's got the Caesars name on it, but it was built by Islay Capri, who we used to jokingly refer to it as

Speaker 1

If you think about when we first bought that property, that was My gosh, Dan. 2015, I think, when we bought Bronco Billy's and that's when we first started looking at the expansion. But since that time and certainly since we put a shovel in the ground there, The town of Colorado Springs has continued to grow pretty massively. We always talk about there being 1,000,000 people in our broader feeder market. That's really Colorado Springs, Divide, what am I missing, Dan?

Speaker 1

Woodland Park. Pueblo. Pueblo. But what it doesn't include is all of the suburbs To the south of Denver, so kind of Castle Rock and going to the south. And if you were to try and drive from Castle Rock to Blackhawk On a Friday or Saturday, the traffic is so bad that it will be quicker for you to make it to us instead.

Speaker 1

And so that whole area It's above and beyond the 1,000,000 people that we talk about and we will market to those people. So I think there's room for

Speaker 2

And we will grow the market. I mean, we talk about Colorado Springs being an underserved market. Denver itself is also an underserved market. And so I don't think we'll have a negative impact on Monarch or Blackhawk at all. I think we will grow the market and but it will happen over time.

Speaker 2

And $50,000,000 is not an aggressive number on this property. Just don't expect it to get there overnight.

Speaker 1

Yes. And sorry, my point was only That the feeder market is a lot bigger than what it was 4 years ago when we started this whole process.

Speaker 2

Yes, so eliminated table game limits. You did. Bidding limits. There were bidding limits. Are we up to half hour?

Speaker 1

We are, but we have more people in the queue.

Speaker 2

All right. I'll try to base the sync. Go ahead.

Operator

Next question, John DeCree with CBRE. Please go ahead.

Speaker 6

Hi. This is Max Marsh on for John DeCree. Congrats on the great quarter, guys. Looking at the strong results out of Waukegan, I'm curious if you have any updated view on elevated marketing In that environment, whether you're still sticking to that elevated marketing or maybe you're seeing the ROI here and giving you an opportunity to back off?

Speaker 2

Well, I mean, we're still being pretty aggressive with the free play. We were a little quiet with the Advertising in October, we're about to go back up and it's a little bit of the experimentation is like does advertising drive business at this location. Every market is a little different. And so we'll see. We're still learning and we are still spending quite a between the free play And the reboot of the advertising, if you were to look at it on a quarterly basis, you wouldn't see it.

Speaker 2

But on a behind the scenes, We watch it week to week and it's like, well, what did we spend advertising this week? What were our revenues this week? And you try to figure out Do you target it differently? The new ads have a little different look and feel to them and We'll see. That's just part of fine tuning.

Speaker 1

Yes. You should expect more of that though throughout the Q4, Max.

Speaker 6

Okay, understood. Thank you. And then just one quick follow-up on the opening of the circa sports book. Any commentary on that and if you're maybe seeing some elevated play on heavy sports days or any additional color there would be great. Thanks.

Speaker 2

It's clearly a positive. It's not a big positive, but it does bring people into the property. Of course, from Circus point of view, Most of their revenue comes from the app, which is because they can access everybody in the state of Illinois. You can be down in East St. Louis and place a bet with circa.

Speaker 2

And so the $5,000,000 a year Well, the percentage of revenue with a floor of $5,000,000 a year is based The statewide ability to operate sports betting. And does it bring people into our property? Yes, it does, but It's not a huge number. And by the way, that's true in Las Vegas as well. I mean, the sportsbooks have always been relatively modest amenity to the casino, Except at circa itself who made a big deal out of it.

Speaker 2

And in our permanent casino at American Place, we have A bigger sports book similar to what they have at Circa Downtown.

Speaker 6

Great. Appreciate it guys. Congrats on a good quarter.

Speaker 1

Okay. Thank you. By the way,

Speaker 2

the steakhouse will probably have a bigger impact because right now we don't have a fine dining Amenity and most of our all of our competition does.

Operator

Next question comes from Riccardo with Deutsche Bank. Please go ahead.

Speaker 7

Hey, guys. Thank you so much for taking my question. I was wondering if you could comment a little bit on your Deleveraging expectation for the business, what's like, let's say, the 2 year target for you guys where you would feel comfortable With the balance sheet before moving to some of the other opportunities that you have talked to about in the call and that could provide strong returns

Speaker 2

Well, it's actually hard to look at our leverage because As a kind of the way we've been developing this, we borrowed all the money up in advance to build both American Place and Cheminy. And so now We're about to open all that. And so if you were to look at trailing 12 month earnings compared to debt, it looks like we're over levered. And if you look ahead and say, well, what are earnings likely to be in say 2025 versus our leverage, we're probably under levered. And I think as we grow in our scale here, you won't see as big as swings on that.

Speaker 2

Our obligation to build the permanent American Place will not be as big Jump because the company is bigger as we did last time. I mean, when we went and let's say we built Would it be about the $500,000,000 worth of stuff on the backs of casinos that we're doing $40,000,000 of BBDIT. Now we're going to be doing I'm taking American Place in Chamonix and comparing it to the traditional casinos. And if you look at Now with Chamonix and the temporary and the other places and the sportsbooks and you look at building the And that's by the way, Lewis and I have been doing this a long time. And at Mirage Resorts, when I got There was pretty heavily levered.

Speaker 2

We had the Mirage, then we levered we borrowed more money, built Treasure Island. It was successful. We borrowed more money, Bill Bellagio and Beau Rivage and they were successful. And along the way, we became an investment grade. It was The industry's 1st investment grade company, but we grew our way into it.

Speaker 2

And at Pinnacle, we did the same thing. I mean, the properties we inherited at Pinnacle, We were able to double their results just by being better managers. And then we built La Beres and then we built the 2 properties in St. Louis. And Each time we'd borrow the money, build something, get good returns on investment and that would reduce the leverage.

Speaker 2

And so when we get to this company 8, 9 years ago, I mean, it was pretty levered and we've already reduced the leverage. And when this stuff When Shamnee gets open and so on, if you do it right, it's a win win. In other words, Shareholders are getting good returns, employees are getting good growth opportunities, but bondholders also do well because you end up Getting upgraded, you end up calling the bonds before their maturity and nobody loses. And I kind of try to I can't plan it that way. Legally, I guess, management and the Board is only obligated to shareholders.

Speaker 2

But In my mind, we have all these constituencies and the lenders are certainly a big part of that and we've always taken care on every aspect.

Speaker 1

Yes. I think what a lot of people forget sometimes is we borrowed a big chunk of this debt to build 2 properties, One that's already opened in the temporary and one that's about to open in 7 weeks in Colorado. And when you pro form a and run rate for those Properties, depending on your estimates, you're probably between 3x and 3.5x gross levered. So to Dan's Point, it's actually a pretty manageable balance sheet. And so and then we'll have cash flows that all that generates That we can use to contribute towards funding the permanent casino in Waukegan.

Speaker 1

There will likely be Some sort of incremental slug of debt there, but it's between now and then, we've got a split rating between S and P and Moody's. I would expect The lower part of that equation to get upgraded, just on the sheer fact that you've got an interest expense that's around $35,000,000 a year And a company with pro form a for those two openings that's making 3, 4 times that amount. It's doing all the things that we intended.

Speaker 2

Actually, it's interesting to look at the 9 month numbers, our EBITDA for 9 months Exceeds our annual interest expense and our debt during those 9 months included all the money needed to finish Chamonix. So without Chamonix earning anything and with America Place just ramping up after opening in February, We still earned enough in the 9 months to cover our annual interest expense. So Obviously, we have leverage. But in some ways, you look at how levered are we really? We're not all that Get

Speaker 1

into it. It's essentially fake leverage since it's for something that isn't yet in those trailing numbers. Yes.

Speaker 7

Got it. Thank you so much for taking my question.

Speaker 1

Thank you. Thank you. I think we have time for one last question, Deanna. Yes.

Operator

We have a follow-up from Ryan Sigdahl with Craig Hallum. Please go ahead.

Speaker 3

Hey, guys. Just quickly, what's Which sports books do you still have licenses for on your skins? And then what should we expect for Q4 from a licensing line revenue with Ken, what's the case with circa and to termination?

Speaker 1

Yes. So on a go forward basis, we have one skin in Illinois, One skin that's live in Indiana and 2 skins that are live in Colorado. And the sum total of that is $8,000,000 per year. What we have idle is we've got 2 skins idle in Indiana, 1 skin idle in Colorado.

Speaker 3

Any one time impacts in Q4, Louis?

Speaker 1

No.

Speaker 4

Thank you.

Speaker 3

Yes. Sorry, I know

Speaker 1

it gets a little confusing with all that movement there.

Operator

I would like to turn the floor over

Speaker 2

to the Q4. The Illinois one is far more any comments. I was going to say the Illinois one is far more important than the others and Circa knows that business better than anyone else. So we're pretty happy with So, we don't know what the results are, but we know that they are very good at promoting a sports book and good at operating it and It's fun to watch. And on that, I'd like to thank everybody for your Support and we'll get Germany open and next time we'll be talking about how it's been doing.

Speaker 2

So thank you very much.

Speaker 1

Thank you, guys.

Operator

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.

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Key Takeaways

  • Q3 revenues jumped 73% to $71.5 million and adjusted property EBITDA rose 64% to $6.8 million, driven by the ramp up of the temporary Cripple Creek casino and $5.8 million of accelerated revenues from terminated sports agreements.
  • Temporary Cripple Creek revenues climbed 18% sequentially to $24 million in Q3, the on-site sportsbook is now live, and a high-end restaurant is on schedule to open by year-end.
  • The $250 million Chamonix resort is set to debut on December 26 with 300 four-star hotel rooms, a flagship steakhouse by the Circa culinary team, a rooftop pool, spa, integrated parking and a differentiated casino design.
  • Liquidity stands at roughly $10 million in cash plus $13 million of undrawn credit, and the company expects ~$10 million of prepaid sports-skin cash in Q4 from Illinois and Circa mobile operations.
  • Longer term, Full House plans to fund the permanent Waukegan casino (remaining ~$325 million investment pending tribal lawsuit resolution) and may pursue a hotel tower at Silver Slipper as part of its growth and deleveraging strategy.
AI Generated. May Contain Errors.
Earnings Conference Call
Full House Resorts Q3 2023
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