Full House Resorts Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2024

There are 8 speakers on the call.

Operator

Greetings, and welcome to the Full House Resorts First Quarter Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr.

Operator

Louis Bangor, CFO of Full House Resorts.

Speaker 1

Thank you. Please go ahead.

Speaker 2

Thank you, and good afternoon, everyone. Welcome to our Q1 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 these anticipated 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 2

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 earnings release as well as all of our SEC filings. With that said, there's a lot of good stuff to talk about from the quarter. The biggest of all American place in Waukegan, we had a really good Q1 there. We've been setting record after record for monthly property gaming revenues recently.

Speaker 2

We hit our property record in December. We beat it in February and we beat it again in March. And we don't think we're done growing yet. April gaming revenues were put out yesterday by the state of Illinois, and we rose 39% versus April of 2023. From an EBITDA point of view, we are now consistently generating about $3,000,000 of EBITDA per month.

Speaker 2

We did roughly that in each of February, March and again in April. That puts us on a current run rate of $36,000,000 per year of EBITDA, which is about double the $18,000,000 of EBITDA that we generated at American Place during 2023. That's a good prologue for what we expect to happen over at Chamonix since its opening parallels the opening of American Place in many ways. The most obvious is that much like the early days of American Place, Chamonix isn't fully open yet. It's being open in phases.

Speaker 2

And during the Q1, our full 300 guest room hotel gradually came online and is fully open today. A couple of weeks ago on April 19, we opened our high end steakhouse 980 Prime. Our goal was to create a restaurant that could draw people from all over Colorado and early reviews have been very good. It's a very good experience. The service is very on point.

Speaker 2

The food is delicious. And

Speaker 3

just like

Speaker 2

the new steakhouse at American Place was important for our best guests, The same will be very true over at Chamonix. The next amenity to open will be the pool and spa, which we're expecting in the next few weeks. Now we did have some weather complications in the quarter. The rough winter weather that you've heard about on everyone else's earnings call certainly applies to us here. The weekends are our most important part of the week.

Speaker 2

Unfortunately, the winter snow kept falling on weekends. In Colorado, we had 3 snow affected weekends in January, 3 more in February and 2 in March. There was a snowstorm in March that cut off electricity to the entire town of Cripple Creek for 3 days. And so with all of those affected weekends, it certainly was not a normal quarter, but it did allow us time to fix some of the opening kinks that we needed to work through. In terms of profitability at Chamonix, we're on the right track.

Speaker 2

We lost money in the early days when we carried a lot of excess costs that improved as the Q1 progressed. For the Q1, our adjusted property EBITDA was a loss of about $400,000 We have not closed the books yet for April, but it looks like that should be a breakeven month. As we go into the summer, our amenities should be largely complete. We should have much better weather and our targeted marketing plan should start to kick in. All of that should continue to propel Chamonix forward and result in a pretty meaningful positive EBITDA contribution.

Speaker 2

Elsewhere in the portfolio that same winter weather affected us. I'll keep it short on the rest. But if you look at our core customer outside of those weather events, it feels like there's been stability in terms of their spend with us. And perhaps a bright spot elsewhere, I know in the past we've specifically called out some costs like property insurance at Silver Slipper. That over the last few years has just grown outrageously.

Speaker 2

Some good news there, we just wrapped up our property insurance renewal and those costs will actually go down by 19% starting on May 15. That's about $900,000 in savings over the coming 12 months. That's my quick highlights. Dan, anything you want to

Speaker 3

add? Well,

Speaker 4

I'll address American Place First. Obviously, it's everything is going in the right direction. I don't know that we can keep a pace going for the rest of the year, up 40% of revenues. But we had 2 months in a row now up 40% and I think we will be up strongly as the year goes on. Obviously, the which is obviously a good thing.

Speaker 4

Which is obviously a good thing. And just to put it in perspective, we're doing almost the same revenues as the downtown Chicago property. It opened in September, didn't have any impact on us at all and that's still the case. And our gaming tax rate is a full 10 points lower than theirs. And so we're in pretty good shape.

Speaker 4

And the requirement to build the permanent, we have until we can operate the temporary until August of 2027, which is a special build the legislature approved for us. I assume Bally's would probably have to seek something similar because they have a pretty short timeline. Anyway, the Leonor commitment going forward is about $325,000,000 to build the permanent and we're designing the permanent to fit that number. A lot of what we invested in the temporary will be used for the permanent like the construction of the parking lots and storm sewers and so on. So anyway, so we're very happy with American Place.

Speaker 4

We always knew we were the closest casino to 1,000,000 people and that eventually they would find their way into our tent. It's not very impressive from the outside, but once you go in, it's arguably one of the nicest casinos in the state. So I think we're in good shape there. Lewis mentioned that at Chamonix, we're opening in stages. They said the hotel gradually came online during the Q1.

Speaker 4

Well, that's part of it. We now have all the guest rooms done. And at any given night, there might be a handful that are out of service trying to fix something. But in effect, we have all 300 rooms. But the occupancy also builds gradually.

Speaker 4

And so we've been running pretty decent occupancy on weekends, but it drops off during the week absent blizzards and stuff. So like most regional casinos, we're now preparing to roll out programs designed to help build the midweek business. Like if you're staying with us 2 nights on a weekend, you can get stay one more night on a Thursday or Friday at a much improved rate or even free. And that sort of thing to try to build occupancy midweek that will take some time. But the seasonality helps.

Speaker 4

I mean, we opened this in the deadest part of the year. We're now coming up on summer. Summers are beautiful up in the mountains of Colorado. And so I think we will be able fill our hotel just about every night in July August. And so we should be quite profitable during the summer.

Speaker 4

And we're focused on getting meetings and groups in the fall so that when the normal vacationers start to go away, we have a lot of very good meeting space to help fill the hotel during the slower season. The Silver Slipper and Rising Star were off a little bit. Some of that was weather. And fortunately, they're not as important. I mean, American Place earns more than everything else in the company combined these days.

Speaker 4

And eventually, Chamonix probably will as well. But that's not that we're overlooking it. We're also looking at programs at those places to get them back to where we want them to be. Northern Nevada, we have a lease on the Grand Lodge Casino that expires at year end. We've had some indications from Hyatt that they would like to extend it yet again.

Speaker 4

It's been extended several times. So we're trying to get that inked and then we still have the small casino in Fallon, which is there. So that's kind of where we are. We're still finishing. So we got a jewelry store.

Speaker 4

We got one more kind of unique speakeasy bar to get done. The spa will be open just before Memorial Day. We won't have all the treatment rooms, but we'll have enough treatment rooms that we can offer massages and the pool and the weight room and the locker rooms and all that's done. The salon is being put together as we speak. So people get a haircut and stuff.

Speaker 4

So I guess that's it. I mean, we're at the point where as a company we'll start where we are already producing positive cash flow and I think that will build significantly as we go ahead. I mean, if you take our interest expense about $35,000,000 $36,000,000 a year, American Place alone should earn that. And everything else does in the mid-20s plus Chamonix. Everything else excluding Chamonix does something in the mid-20s and then Chamonix will come on.

Speaker 4

And I will point out that it's not unusual that a lot of times I find investors think you open the doors of a casino and it's an instant slam dunk profit generator and that's really never the case. Even Bellagio, the Q1 or 2 were far less than what we expected. And then it kicked in and it's been making $500,000,000 a year for 20 odd years now. And the same with La Beiers and Beau Rivage and all these other regional casinos. And so the good news is Chamonix is beautiful.

Speaker 4

It's getting all sorts of great accolades. Even we hosted the Hotel Association of Colorado, which had the GMs and presidents of all the different top hotels from Vail and Aspen and Denver and Colorado Springs all were at our place and had dinner at our new restaurant. And without saying names, the President of several of the prominent high end hotels in the state came and told us that we felt we had the best restaurant in the state even better than their own. And so we're very proud of our team for that. And now we just need to fill it with people and we will.

Speaker 4

Anyway, that's it. We're just trying to finish those things out. Very early stages on not very early, but we're really in the designs of the permanent in Waukegan. Frankly, we've been pretty focused on Chamonix. We have until August of 2027, as I mentioned.

Speaker 4

And That's not even a requirement of to open the permanent. That's just the outside data which we can operate the temporary and you really want don't want there to be a gap. You want to be able to move customers and employees seamlessly to the new place. So that means we really have to start construction about 2 years ahead of that. So August of 2025, which means we have 15 months to 18 months to raise the money before we start construction.

Speaker 4

But even that is not a requirement because the early stages of construction aren't a whole lot of money. And so there's probably 6 months of construction we could do just out of free cash flow. And so we have a couple of years to figure out the financing and our bonds have come back. They're not quite back to par, but they're well off their bottom. And so our guess is at the right time, we go to the high yield market and refinance our debt.

Speaker 4

And but it's not imminent and let's get Colorado making good money and then people will see that we're actually less levered than most casino companies. And at that point, we should be able to refinance the debt on favorable terms with the extra money to build American Place. So that's the strategy, that's the plan. So on that, happy to take any questions.

Operator

Thank you. We will now be conducting a question and answer session. Your first question comes from Ryan Sigdahl from Craig Hallum. Please go ahead.

Speaker 5

Good afternoon. This is Will on for Ryan. Thanks for taking our questions. First question here, how do you think you've shifted share in the overall Cripple Creek market? Obviously, it's a pretty slow start to the season given a lot of those a lot of that snow on the weekends.

Speaker 5

But curious where you think it's at right now and where it could ideally be long term?

Speaker 4

Well, I think long term, we grow the market. And we get this a lot like clearly, we account for more than 100% of the increase and Cripple Creek has been showing increases. But that's not the whole picture. You have to almost look at all of Colorado. And when I look at where our pricing should be or our promotion should be, we look at what Ameristar and Monarch are doing up in Blackhawk because they're comparable to us in scale and quality.

Speaker 4

I think we're nicer, maybe not quite as big. We have 300 guestrooms. They each have about 500. But we are nice. And frankly, it's a more romantic environment.

Speaker 4

I mean, Black Hawk is, I think, legally a historical mining town, but if you go there, you see very few vestiges of it. And Cripple Creek feels a little bit like Colonial Williamsburg out of brick. And so I think we're at a better environment. Now distance wise, the southern parts of the Denver MSA are about equal distance. So Centennial, Castle Rock and so on, they can go to us as easily as they can go to Blackhawk.

Speaker 4

And so obviously, we're doing double the revenue. Last year's revenues weren't very high. We're doing double and that's not even close to what we should be doing and will be doing. But I think it comes from growing the market. I mean the gaming per capita in Colorado Springs is one of the lowest places I know of in the country and there's no inherent reason for that.

Speaker 4

So I think we grow the market. We have a few good competitors in Cripple Creek. I mean Golden Nugget having bought Wildwood and rebranded it, that's 100 rooms and their rooms are about the quality of the Fairfield Inn. 100 rooms and their rooms are about the quality of a Fairfield Inn, but they do fine. And then Triple Crown is our other major competitor right across the street from us.

Speaker 4

And also across the street from us is the original Century Casino. And they're right next to us. So the people staying at our hotel will end up going over there sometimes. There is a weak competitor in town called the Double Eagle and the owner I think the second of 2 owners has now passed away and so it's a little bit tied up in probate and so on. It's a pretty big facility, but not close to us and it's probably the weak sister in town.

Speaker 4

If somebody gets hit, it's probably them. But they've been the weak sister for an awfully long time. So that's the Cripple Creek market. It's pretty simple. Then there's 2 tiny, tiny little places that are just being bought by Michael Gaughan that I think their strategy is to have a place for our employees to go after work.

Speaker 4

And that's a perfectly fine strategy for a small casino. That's pretty much it.

Speaker 3

But you

Speaker 4

can't you almost have to look at Colorado as a whole and because to a very large extent, we view particularly Monarch as our competitor. I don't think we're going to take

Speaker 2

I don't think we're going

Speaker 4

to hurt them either. Even the Denver market is underserved. And if you start looking at what people in, say, Seattle gamble, well, people in Seattle have to drive up into the mountains too because the gaming is all on Indian reservations. But the quality of the stuff that the tribes have built in Washington is quite good. And that's one of the few states you can actually get the tribal casino gaming revenues.

Speaker 4

And when you look at it, people in the state of Washington are gambling about 3 I think it's $3.75 per capita now, which is over double what the people in Colorado are gambling. And there's no inherent differences in religion or education or something that would explain that. I would think people in Colorado will eventually gamble as much as people in Washington. And there's other markets too you can look at like in California, there's they gamble about $50 per capita too. And most of the people do not live near a casino.

Speaker 4

They have to drive an hour to get to a tribal casino or 4 hours to get to Las Vegas. And so when you start looking at Denver and which is somewhere around $200 per capita gambling and Colorado Springs was even lower than that. I think as people understand the quality of what we've built, we grow the market.

Speaker 2

Yes. I think there's not a lot to glean from the Q1 for what it's worth. That winter weather on weekend is just was just pretty wretched. I think maybe the more important takeaway is we have a market that isn't trained yet to go to Cripple Creek when it snows because they're used to there not being any rooms in town. And I think conversely when you look at Blackhawk, I've been to Blackhawk during a snowstorm before and I've been a Monarch specifically during a snowstorm on accident.

Speaker 2

But what I can tell you was it was a casino that was still pretty bustling because people know that they're they know that they have their rooms. People don't yet know that in Colorado Springs for us. They assume that if there's a snowstorm and they drive our way, they might get stuck there without a place to sleep for the night. And so this is all stuff that will change in time. But look, it's I'll tell you where I find comfort is we always worry heading into these openings, did we build the right thing, did we build something that's approachable, that's nice, that people will feel comfortable in?

Speaker 2

And I'll tell you overwhelmingly, I think the answer to that is yes.

Speaker 4

I mean, I've had a number of customers say it's a miniature version of Bellagio. And of course, we don't have the fountains and so on. But the point being that the quality of the finishes are what you would have at Wynn or one of the high end MGM places. Not surprisingly, we used a lot of the same designers. And no, we're not very big.

Speaker 4

We're only 300 rooms. So we're a 10th the number of guest rooms of a typical Las Vegas casino. And our casino itself is a few 100 slot machines instead of a few 1,000. So we're smaller, but you only stay in 1 guest room at a time. You only play 1 slot machine at a time.

Speaker 4

How many guest rooms do you really need? And so we will eventually educate people on the quality of it. And a little bit more of a problem here, actually it's pretty similar to Lake Charles when we dealt there. There were really crappy casinos in Lake Charles before La Vergia opened. And you almost had to reeducate people in Houston that there was something nice in Lake Charles.

Speaker 4

They thought of it as a chemical dump. And here people have been to Cripple Creek before. The product wasn't good. It had a $5 maximum bet, etcetera. And now to say, no, you really got to come and take a look at it again, it's different.

Speaker 4

And there's I had an acquaintance there who owns a liquor distributorship And he came up to Cripple Creek for the opening of a restaurant. And he says, everybody tells you how great their facility is. He was blown away when he walked in. He said he had no idea. And this is a guy whose family had been in the casino business years ago.

Speaker 4

And he said he had no idea that somebody had built something that nice in Cripple Creek. And so now he's coming back up with the sales force from his liquor distributing business having a meeting at our place. So word eventually gets out. Okay. Great.

Speaker 4

Thanks for that guys.

Speaker 5

Sorry, Dan, go ahead.

Speaker 4

Yes. I was going to say that the win per slot machine per day and recognize about half our slot machines in Colorado are in Chamonix and about half are in Bronco Billy's. And the win per slot machine per day in Chamonix is by far the highest in the market. And the interesting thing is the win per slot machine per day in Bronco Billy's is actually up because the spillover from Chamonix going into Bronco Billy's.

Speaker 2

Yes. We're still not we lead the city. We have not yet come close to Blackhawk. But again, as we fill the rooms, that will all change in time. Let's do another question with the other question.

Speaker 5

Fair enough. Thanks for the color there guys. Maybe a quick follow-up. Yes, just curious maybe on labor at the new properties. I know there's a few struggles maybe in past years and just kind of industry wide.

Speaker 5

But now that you've got a few months and a year in the case of Waukegan under your belt, how do you feel about that?

Speaker 4

Well, they were different challenges. In Waukegan, the challenge is that every single employee must be licensed by the Gaming Commission and it's a pretty ominous form that they have to fill out and it's only provided in English when we're in a community that's about half Hispanic. And so the hiring process was complicated by not the regulators because the regulations are set in place by the state legislature. And it just is what it is. That's what the law is and we had to adhere to it.

Speaker 4

And so it took time to build a stable workforce. I think we're there now. We have a good stable workforce and a good management team on top of that. Now we always have some people quit and we always have to train new people, but it is stabilized. And the 1st 9 months, it was a struggle.

Speaker 4

And now in Chamonix, dishwashers don't have to be licensed. So it's an easier process. But you're at 10,000 feet on the backside of Pikes Peak. And so the population of the town is 1200 in total and probably 40% of those are either retirement age or kids. And so there's not enough people in Chamonix to staff our place, let alone all the casinos.

Speaker 4

But there's places like Florissant, which is nearby and Woodland Park. And a number of our employees actually commute from Colorado Springs, which if you live on the west side of Colorado Springs, place called Manito Springs and so on, that's a doable commute. I mean, that's not unlike our offices in Las Vegas are here in Summerlin and Lewis commutes from Anthem or Green Valley outside of town. That's not much different than going from Colorado Springs to Cripple Creek. So we are I mean, it is a challenge, but we are every day able to hire some people and kind of build a team.

Speaker 4

And then we also used some outsourcing of labor, which has helped. So for example, the cleaning of the guest rooms is being done by a cleaning company who does it for normal hotels as well as other casinos. And that's worked out pretty well. They do all the hospitals in Colorado Springs. So they had a big pool of people to draw on.

Speaker 2

Yes. It will be a non issue in a year. We're not too worried about it. It is if you're an employee at any other casino in town, you see the very big difference between our quality and others. And if you're especially if you're in a tipped position, it becomes the easy move into our building.

Speaker 2

Yes.

Speaker 4

And you do find some surprises. Like for example, we have a pastry chef who's world class. He's written books about it. He's done a terrific job. Every time I'm there, I have to remind myself not to eat too many of his pastries, so I won't fit in my suits anymore.

Speaker 4

And he used to be in Denver and he wanted to live in the mountains with his big dogs. So he kind of sought us out and he's enjoying the mountain life. So sometimes it does work in here benefit. Good to hear. Thanks guys.

Operator

Thank you. Your next question comes from Riccardo Chinchalla from Deutsche Bank. Please go ahead.

Speaker 6

Hey, guys. Thank you so much for taking the question and for all the great color. I was going in a different direction. There's potentially some assets of the right size that might come to the market, let's say, 6 to 9 months. Somebody like Cesar talked about it.

Speaker 6

Are you guys committed to deleveraging or to build cash for the facility or you know that the right opportunity for acquisition is something that could be too tempting for you guys with regards to your strategy and capital allocation priorities?

Speaker 4

Well, if the Caesars guys are willing to sell Caesars pallets for 4 times cash flow, we'll figure it out. But we look at a lot of things. You almost always learn something from it. We did get into the Colorado market through acquisition. We acquired Bronco Billy's at 6 times cash flow at the time and had a bunch of surplus land and then we added to the surplus land, which allowed us to build Cheminy.

Speaker 4

But it's not we don't have to. I mean and frankly, if you run the math and just say, okay, just get this stuff mature and you get Chamonix up to I mean, Monarch is making over $100,000,000 a year. We have 2 thirds as many guest rooms as them. Can we make 50? We should be able to.

Speaker 4

It's not going to happen tomorrow, but we should be able to get to that sort of number and it might take us a couple of years to get there. But and then in Waukegan, I mean, we're going to do 35 to 40 this year and probably better than that next year. And then the permanent casino is probably a big notch up from that. And if you start playing with the numbers and say, well, they have to spend $325,000,000 to build the permanent, but about half of that is probably generated from free cash flow. And so the debt today is $450,000,000 When the permanent opens, we might be something like 600,000,000 And then you say, well, if they're making 100 in Illinois and 50 in Colorado and 40 in all the other properties, you work backwards, our stock will be 3 or 4 times, 5 times where it is today.

Speaker 4

And Louis and I and the rest of the management team, it's a big part of our net worth is tied up in the company. And so we look at it as like let's not screw that up. We have a very good story, not even a story. We have a very good company. We just need to get this stuff to mature and stay focused on it.

Speaker 4

And you can go out and without naming companies, there's a competitor of ours who we would look at once in a while that may be acquiring. And boy, in the last couple of years, they went out and sold their good assets to a REIT and took the money from that and leveraged against it and bought a bunch of shit. And now we look at it, it's like, well, let's not do that, okay? And their stock is not done well. I'm not naming the company, but what I just said probably applies to 4.

Speaker 4

And so we're very careful to not make mistakes. Bobby Baldwin used to have a saying I really liked. He says, it's so hard to not do a bad deal because there's so many bad deals out there and they're so easy to do. And so I'm not going to say we will never do an acquisition.

Speaker 2

It needs to be very compelling.

Speaker 4

It needs to be very compelling because we want to make sure and the other thing is when you say are we committed to deleveraging, Yes, because just the I don't view us as highly levered now because I'm very confident in this stuff maturing as any new casino does. And so I look at it and say, I don't think we're that highly levered now, but we will delever as Chamonix comes online and becomes more profitable and as Waukegan continues to do better. And then we'll lever up a little bit, but still less than most casino companies to go build the permanent. And when the permanent opens, we'll be one of the least leveraged casino companies. Now, I don't think it makes sense for us to have no leverage, but I also don't want to be highly levered all the time.

Speaker 4

So if we can be in a spot where our EBDIT is 2, 3, 4 times interest expense, that's a very comfortable place to be. And we're not too far from being in that range now. So

Speaker 2

As a some of that covers the bonds, I'm sure you're very happy with that answer. But look, to Dan's point, this is a company that last year did whatever it was $48,000,000 or $49,000,000 of EBITDA. And we think that number realistically should be somewhere in the low to mid 100s when everything I don't know if the number is take or pick on number, whether it's 120, 130, 150, whatever number you want to use. I'm throwing out numbers, by the way. I'm not giving you guidance.

Speaker 2

But realistically, that's where everything should be ramping up towards. And so we need to make sure that, that works correctly. That will always be job number 1 here for us because that is massive, massive growth on assets that we've already invested the capital in.

Speaker 4

And I don't want to be completely wedded to this, but just strategically, we do view ourselves as having multiple, what is the word, stakeholders. It's not just shareholders. Now legally, we know shareholders in most states, I think, including Nevada, that is our primary responsibility. But if you look back at the track record that I had at Mirage and that Lewis and I had at Pinnacle, both of those companies were gradually improving credits the entire time we were there. And so we may lever up to go build something, but we don't just lever up to lever up.

Speaker 4

And we do pay attention to try to be an improving credit as well. And so there's lots different aspects to this.

Speaker 2

And I'll just feel it out. And there's no ego in wanting to be big just to be big either for what it's worth.

Speaker 4

Yes. In fact, I mean, I kind of I will freely tell you I admire Monarch and they are a pretty good company and they trade pretty well. They only have 2 places and they stay very focused on the 2. And it doesn't seem to hurt their valuation. And so as we evolve, we're going to have 2 principal places, which are the 2 new ones.

Speaker 4

And then the Silver Slipper will still be important and the other stuff is pretty small. So it's not that we don't love the team at Rising Sun because I'm sure you're listening on this. It has 300 guestrooms and a golf course and they're doing a terrific job. But being realistic, we make more money in a couple of months in Waukegan than we do in a year at Rising Sun.

Speaker 2

All right. Next question.

Speaker 6

Got it.

Speaker 4

Steve, I saw was that Steve registered?

Speaker 6

No. Thank you so much guys. As a Board Analyst, I appreciate all the color and that's kind of what you want to hear being covering the bonds. Thank you.

Speaker 2

Thank you. Thank you.

Operator

Thank you. Your next question comes from Jordan Bender from Citizens JMP Securities. Please go ahead.

Speaker 3

Hi, this is Eric Ross on for Jordan. Thanks for taking our question. Now that you've operated the temporary for about a year plus and with the delay of the American Place with the lawsuit, has customer behavior or preference at the property changed any of your thinking around what is ultimately built there in terms of amenities?

Speaker 4

Go ahead. Well, I mean we have designed a place that can be easily expanded and we're going to start with kind of the core of it. And then as the business builds somewhere down the road, it could be expanded. And by the way, I do that conceptually all the time. We have a way to add rooms at Chamonix also.

Speaker 4

We have a way to add rooms at the Silver Slipper. And we're not doing our job if we're not thinking through of where it might go. A public company goes forever, so 10 years from now somebody might go build those hotel towers. And we have learned some things from Waukegan. I mean that Rivers is a very loyal clientele.

Speaker 4

We haven't nicked them very much. And in fact, I think we had very little impact on them. The Bally's Casino seems to have had a little bit of an impact on it, but they are still the £500 gorilla in the state. They make far more revenue than anybody else in the state. I thought we would impact the video lottery machines more than we have.

Speaker 4

That was interesting. And we've been kind of scratching our heads saying, why are people still going to the closet at the back of the liquor store to play 6 slot machines when our environment is much nicer? And maybe that's convenience like there you pull into a strip shopping mall, you park your car and you walk in, you're 20 feet from the slot machine. Well, maybe we need to think about offering valet parking that we don't today or trying to figure out how do we get into that market. People don't eat as much and that's interesting.

Speaker 4

And we have 2 pretty good sized restaurants and then we 2 months ago opened the high end restaurant. The high end restaurant seems to have kicked our casino revenues up quite a bit. That was it's a little if you look at the turnstile and you're getting 2,000 people a day in the casino and then you look at the steakhouse that's serving 150 people a day at best. It's like really, but those 150 people are perhaps your most important people and so getting it open. But if you look at the food covers relative to the gaming revenue, I mean, Louis and I live here in Las Vegas and we frequently end up walking into the Red Rock Casino or Durango Station or something for a meal because they have great restaurants.

Speaker 4

You don't even think twice about it. That why is that? And part of that is you have to go through the security and show your driver's license and all that, whereas in Nevada, you don't. So part of that is perhaps the regulations. Part of that's the design.

Speaker 4

And so for example, Durango Station and I will tell you, I think stations did a fantastic job at Durango Station. And I go in there, they have probably the best food, not even food, what do they call it? Food hall. Food hall that I've ever seen. And it's very well done, lots of different brands and so on.

Speaker 4

And we're scratching our heads saying, okay, how do we do something like that in Waukegan? And maybe it's like part in, part out of the casino environment. So you can kind of get around the regulation. So you learn a lot. Durango Station did not have a large system of corridors underneath the casino to get the food from 1 loading dock to the restaurants.

Speaker 4

They designed it more like a shopping mall where the each restaurant has its own loading dock or 2 restaurants will share a loading dock. And on the outside of the building, it's kind of camouflaged that it's a loading dock. That's pretty typical in shopping malls, but not very typical in casinos. Well, it saves a lot of money. And when I realized what they were doing is like, okay, let's think about this for Waukegan because we can save the money of building these expensive quarters so that the food gets distributed throughout the property.

Speaker 4

Just make Cisco make multiple stops at their expense. And so there are things we've learned. The customers, it is built. I thought it might ramp up a little faster than it is. And when I look at why it's not, I think the outside of the building is a big part of that.

Speaker 4

I mean, we tried to build this very quickly and we used a sprung structure. At night, we project things on the sprung structure, try to make it look interesting. But it's not a fetching building. It's not like if you drive down the strip and see Bellagio where the fountains going, every bone in your body wants get into the building on the other side. It draws you in.

Speaker 4

And our tent doesn't do that. It looks like where the Department of Public Works stores salt for the winter. And so we've been getting past that. When we build the permanent casino, it will be fetching. It will draw you in.

Speaker 4

And I think it's pretty remarkable that we're doing $9,500,000 a month in revenue in a stretched Kevlar fabric tent. And it kind of shows you what can be done at the permanent. And there you go. The delay from the Potawatomi lawsuit, which I am convinced is a nuisance lawsuit. I was there when they made their presentation.

Speaker 4

And if I were on city council, I would have just said, you operate a tribal casino across the state line that pays much less in taxes and none of it goes to Illinois, why the hell would we choose you? That's all you needed to say. But if you didn't know that and you just saw their presentation, it's like that is the ugliest piece of shit I've ever seen. I wouldn't pick them for that. So I don't think there's any leg they can stand on where they should have gotten this license.

Speaker 4

I think they're just they make a lot of money in Milwaukee. They're using a piece of it to try to delay us. But that delay is perhaps good because it's allowed the high yield market to come back. I think it will come back more, allows us to get Chamonix open and get it ready and have it being contributing cash flow that can be used for the permanent and allows us time to think more about the permanent. So we build the smartest and best casino possible.

Speaker 4

So don't get me wrong, it would have been better if the Potawatomi had not filed the lawsuit and we could have moved faster. But the fact that they did has some benefits to us as well.

Speaker 2

Only because we're running out of time. Quick thing here too. I will tell you what always catches my eyes every month when I look at the gaming report from Illinois is number 1 in the state, like in April, dollars 42,000,000 from Rivers number 2, dollars 12,000,000 of gaming revenue. So $30,000,000 gap between number 1 and number 2 in the state. It is a bananas thing to look at.

Speaker 2

And then when you start thinking, well, wait a minute, that is our closest competitor and we have a northern shore or these northern suburbs of Chicago that are just still underpenetrated in terms of overall gaming spend. I'm not saying that we're going to hit $42,000,000 of gaming revenue by the way, but it just it keeps my eyes wide open as to what the ultimate potential will be for us when we have a beautiful building that people actually want to walk inside of. So anyway.

Speaker 4

Yes. And the Potawatomi is up in Milwaukee also generate $450,000,000 a year in revenue. And so we're doing 25% of what either of them are doing. And I think we can do

Speaker 2

In one of the wealthiest counties in the country.

Speaker 4

Yes. So I think we're in a great location, great barriers of entry. Nobody else can get a casino anywhere near us. I've got a flurry of stuff. There's an Indian tribe out of Kansas or Oklahoma that's getting some recognition of a potential Indian reservation Southwest of Chicago.

Speaker 4

And I got a bunch of phone calls. Well, they're obviously doing this to try to get a casino. Is that going to impact you? If you get out of map and look at it, it's a long ways from us. It may impact, I forget whether it was I think it's Aurora, it's not too far from them.

Speaker 4

That's not us. And then there's different Indian tribe who's trying to get another casino up in Wisconsin. I think the Potawatomi's are pretty opposed to that and the Potawatomi's are a force to be reckoned with in Wisconsin. So there's lots of barriers to entry. It doesn't mean people won't try, but it's very hard to build a new casino there.

Speaker 4

Whereas in a place like Nevada, Mississippi, Atlantic City, there's very few barriers to entry.

Speaker 3

Okay. Yes, that's great to hear. And then maybe just a quick follow-up. Could you about some of the trends you've seen in our legacy portfolio in the Q1 and how you expect those properties to perform for the rest of the year? Thank you.

Speaker 4

We expect them to perform better. The Silver Slipper was a weaker quarter and I don't have a good reason for it other than we were a little distracted with Colorado. And we want to get back in and understand what they're doing and either the we've got to get smarter at marketing or smarter at controlling the payroll or both. And that happens sometimes. It's still doing okay, but it should be making a little more money than it is.

Speaker 4

Rising Sun is doing okay for it's always been a tough property. There is a new racino that opened in Northern Kentucky in September of 20 2, I guess it was. And it's been building some market share, which has been a little bit of a challenge. We've done relatively well despite that. And then Churchill also has built some stuff down in Louisville, the other side of us, but we're hanging in there.

Speaker 4

Tahoe, it's often driven by weather, what goes on in Incline Village. If we get a normal month, all of a sudden we'll have great income and then all of a sudden we'll have too much snow or too little snow. It's just the nature of a tourist place like that. And Fallon, it depends on whether there's

Speaker 2

a Well, it's really a Navy base. Navy base, yes. Yes. And in March April, the Navy had increased in visitation. It didn't happen

Speaker 3

in January February, but it was back in March April. It's a

Speaker 2

little when the Navy before a lot

Speaker 4

before a lot of people don't know this. When the plane to take off a plane and an aircraft carrier, the carrier has to be moving. And you need that headwind of like 10 miles an hour, 15 miles an hour for the planes to get off the carrier. And so when it goes into San Diego Harbor, before it gets to the harbor, any plane that is capable of being flown is taken off. And then they go land at a Naval Air Station.

Speaker 4

Well then while that boat is being outfitted or people are on leave and so on, the pilots and co pilots and mechanics and everything, they go up to Fallon for training. And so it's a naval air station kind of in the middle of Nevada. And it gets a little frustrating because our business surges whenever there's a, what do they call it, CAG, carrier aircraft in town. But it's like considered a national secret when they're coming. So the Air Force Base doesn't tell us, oh yes, we got a whole bunch of people coming next week.

Speaker 4

All of a sudden, we just find people in uniform showing up in our casino and then we're scrambling to accommodate them. So yes, it's a unique little market. Yes, very small for us at this point, But it's okay.

Speaker 2

We have 2 last people in the queue. So let's try to get through them real quick.

Speaker 4

I should mention the sports betting, the Illinois, which is the bulk of it is doing fine. And some of the other licenses are not being used now and we continue to look for either partners or possibility of doing something very modest where we don't lose money and offer sports betting online ourselves mainly for the people who are in our database as kind of an amenity. And I think that could be done without losing money.

Operator

Your next question comes from Chad Beynon from Macquarie. Please go ahead.

Speaker 7

Hi, this is Sam on for Chad. Thanks for taking our questions. So monthly GGR at the temporary in Walkegan is taking a step up into the $9,000,000 to $10,000,000 range. What's further required at the temporary to get another step up into the $11,000,000 range? And what do you think run rate EBITDA would be at that mark?

Speaker 2

Well, I'll be frank, it's time. Look, it is I think people don't realize sometimes that when you open these new casinos, different marketing promotions work in some places and they don't work in others. And so for us, it feels like we've really cracked the code for us on Thursday, Friday, Saturday, Sundays. Other days in the week, it feels like we're still making tweaks and figuring out what brings in those players in real time. And I'm not going to Dan, don't spill the secret sauce for what we've learned already.

Speaker 2

We spent the last year in change learning it ourselves. But I will tell you, we've run some recent events that we think are promising. And so I think we're getting there. But at the end of the day, that database continues to grow. That's probably the most important thing.

Speaker 2

We're over 71,000 people in the database now and it's that and really just learning and quite honestly using that stake house now to maximum benefit.

Speaker 4

Last year at this call, we would have been talking about 10,000 or 20000 people in the database. So but actually the other thing I noticed yesterday when the Illinois results came out from the gaming commission, I'm looking through it and they have a column of square footage and it shows us as 70,000 square feet and Rivers is only a little bigger than us. But based and I looked at it and I thought it shows us as being one of the largest in the state on square footage. And I actually stopped and thought, I wonder if that's including our restaurants that are in the tent or not including the restaurants, I'm not sure. But I think it's the more I think about it, I think it's probably accurate because places like Grand Vic and Aurora and Joliet, those are riverboats.

Speaker 4

And they are stacked and crowded and not a whole lot of square footage. Our place is a large single level casino, 70,000 square feet. And so, I don't think we're if you go in there on a Friday night, sure, it's busy. I mean, of course, it's busy. But we're not close to capacity.

Speaker 4

I mean, I remember at the bears down in Lake Charles, we used to do $500 per machine per day. We're not doing that here yet. Interested and look up what Rivers is doing, they might be close. But it's we can do a lot more revenue in our 70,000 square foot than we're doing now. And I think it will continue to build.

Speaker 1

Thank you.

Speaker 7

And then as a follow-up, what are the marketing plans for Chamonix as we head into the summer months and the potential for increasing group hotel revenue?

Speaker 4

Well, the groups book quite a ways in advance. So we're trying to we have a sales team now, it's very small. We're trying to augment it. And that's really about putting business on the books for the fall, the winter and thereafter. Because if you call up a group now and say, hey, why don't you bring your group to our place in June?

Speaker 4

Well, they already have it booked somewhere. They've already told their attendees where they are and so on. So that's a more long term thing. Now, summers, people go to the mountains in the summer. So I think we will fill with gamblers and retail customers in July August, even midweek.

Speaker 4

But there's a lot of stuff. If you go in part of the way the hotel business has evolved, the Expedia contract says if you offer a $150 rate on your website, then Expedia is allowed to offer $150 rate on their website and they keep 20% of it before they give you 80% of it. And so whenever you're booking, go to the hotel website where you're traveling and look for a button that says offers. And they will have offers. And it's very hard for the Expedia bot to try to compare the offers.

Speaker 4

And all of a sudden, you'll see, well, our rooms are $150 but if I do this weekend package, I get free valet parking and breakfast and a booking on Expedia. And so more and more you'll see hotel chains kind of doing that. Well, if you go and look at our competition in Colorado and click on the offers button, there's all sorts of creative stuff there that we will have as well soon that says, hey, and you try to direct business to the midweek. And so an e mail goes out to people that maybe there's a database that we've been able to purchase that tells us these are retired people in Castle Rock who tend to gamble. And we will send them a thing that says, hey, come on up and try us.

Speaker 4

We'll give you a meal coupon on the weekend. But if you want to come during the week, we'll give you a hotel room. And so you try to drive business to the midweek and that's the key. That's always been the key in Las Vegas as well. I mean, the hotels in Las Vegas would naturally fill every weekend by people who drove over from LA and that's still the case.

Speaker 4

And the entire convention business that's been built up here in 60 years is about trying to fill the midweek. And that's why you'll notice when Comdex show starts, it's like, well, it starts on Monday morning because they want you to fly in on Sunday night because their hotel is otherwise going to be empty on Sunday night. But the hotels on the Strip want that convention out of here before the weekend because you're likely to get people who are more prone to gamble and pay more for their rooms and their food retail than you do for meetings and groups. Anyway, that's just the hotel business.

Speaker 2

And time will help too. We that database will continue to grow. I mean, we picked up about 5,000 people in that database in the Q1. That's going to get kicked into a next level of overdrive in the second and third quarter with better weather. And so with that database, it's obviously important as well.

Speaker 7

Thanks, guys. Best of luck.

Speaker 4

Thank you.

Speaker 2

Thank you. Oh my gosh. I think we have time for one last question, if you can be quick, Dan.

Operator

Thank you. Your last question comes from David Hargreaves from Barclays. Please go ahead.

Speaker 1

Hi, congrats on the successful opening. I'm just wondering if there's any more adjustments to where the final budget is shaking out. And could you talk about the cadence of payments over the next few months? I assume there's probably some construction payables. Anything you could give us on that would be helpful.

Speaker 1

Thank you.

Speaker 4

Well, there's a roughly $20,000,000 of restricted cash in the restricted cash account still and that should pay for the completion of it. There's some small amounts outside of that, but they're small and not very material. And so when we started this process and issued the bonds, the bond buyers and the underwriters requested that we have a construction reserve account. And actually, that's kind of nice for us because it's a 3rd party who monitors all the construction expenditures and make sure that you're in balance, that you always have enough money in the construction reserve account to complete the project. And so I think we're fine.

Speaker 2

Yes, it's been a relatively slow spend from here. A lot of it honestly is just sitting in retention for what it's worth. Last month, I think our draw was 3 little over $3,000,000 So it's kind of trickling out at this point, but certainly by the time you head into, oh my gosh, my gut says end of Q3, you'll see that have been exhausted, but it could drag on slightly longer.

Speaker 4

I mean to give you an example, we have a big surface parking lot across Carr. Midway through construction, we were able to buy 3 houses that finished off the rectangle. So it's a clear rectangle. Well, that makes that parking lot a little bigger than it was before. So there's some additional curbing and asphalting that wasn't covered in the construction reserve number and will be paid for separately, but it's not a big number.

Speaker 4

That's the sort of thing you run into.

Speaker 1

Got it. You guys think you filed the Q tonight or soon? We yes,

Speaker 2

I think in the next 30, that's the goal. Watch for it. If you have a really boring night ahead, David, you'll have that reading for you.

Speaker 1

Thanks very much. Congrats again.

Speaker 2

Thank you. Thank you. All

Speaker 3

right. We're done?

Speaker 2

Yes. You want to wrap it up, Dan?

Speaker 4

Well, thank you. Everybody, if you I would actually urge you to get to these places if you can and because they speak for themselves, so when you walk into Chamonix, you go, oh my gosh. Actually, when you pull up to Chamonix, you say, oh my gosh. Whereas in Waukegan, when you pull up to it, you say, this looks like a public works garage. And then when you walk in, it's surprising.

Speaker 4

And even for me sometimes, I stopped in there on a weeknight, 2 or 3 weeks ago, and I walked in and the place was surprisingly busy on like a Wednesday night. And I was like, okay, that's nice to see. So there's no replacement to actually visiting these things once in a while. So both for us running it and for you guys investing in it. So anyway, thank you very much for your support and we'll see you in a couple of months.

Operator

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

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Key Takeaways

  • American Place in Waukegan set record gaming revenues in December, February and March, with April up 39% year-over-year, generating about $3 million of monthly EBITDA for a $36 million annual run rate.
  • Chamonix’s phased opening brought its full 300-room hotel and 980 Prime steakhouse online in Q1, reducing its adjusted property EBITDA loss to roughly $400 thousand, with April on track to break even and summer amenities poised to drive profitability.
  • Severe winter weather caused multiple snow-affected weekends at Chamonix and other properties in Q1, though outside of these events core customer spending remained stable.
  • At Silver Slipper, property insurance costs will decline by about 19%, yielding approximately $900 thousand of savings over the next 12 months.
  • Management plans to delever as Chamonix and American Place mature, then refinance and fund the $325 million permanent casino project in Waukegan, targeting favorable financing by 2025–2027.
AI Generated. May Contain Errors.
Earnings Conference Call
Full House Resorts Q1 2024
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