Full House Resorts Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2024

There are 9 speakers on the call.

Operator

Ladies and gentlemen, greetings and welcome to the Full House Resorts Second Quarter 20 24 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Louis Fanger, CFO.

Operator

Please go ahead.

Speaker 1

Thank you, and good afternoon, everyone. Welcome to our Q2 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. 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 releases that we issue. And lastly, we're broadcasting this conference call at fullhouseresorts.com, where you can find today's earnings release as well as all of our SEC filings. And with that, I'll kick it off and let Dan fill in the gaps here. We'll start just with a quick comment.

Speaker 1

We do have some slides on the website. We recently had about 35 investors here at Chamonix in Colorado where Dan and I are today to show off the place. It's quite a beautiful property as we heard from not just the investors that saw, but pretty much everyone that's walked through the door. We continued the phased opening of the property during the Q2. 980 Prime, which is our high end steakhouse opened in April.

Speaker 1

The rooftop pool and portions of the spa opened in May. The balance of the spa is imminent, should be in the next two and a half weeks or so. And then we have a jewelry store that should open up before the end of the Q3. And with all of that done, the core Chamonix project will be complete. There is one other item that we do want to focus on not quite yet, but there is an old restaurant, an old steakhouse that was at the old Bronco Billy's.

Speaker 1

We are eventually turning that into an Italian restaurant. But for the core project, we'll be essentially done here in the next quarter. At the property, we did generate positive EBITDA. We certainly are looking for a lot more than what we made here in the most recent quarter. It was about $600,000 of positive EBITDA.

Speaker 1

But a lot of promising signs coming out of that opening. If you look back in January, we sold 2,100 rooms at Chamonix. That's ramped up pretty massively as the months have gone by. As you and we would expect, in June we were around 5,900 rooms sold and here in July we closed out with a little over 6,500 rooms sold. Gaming revenues at Chamonix more than doubled versus a year ago.

Speaker 1

And maybe an interesting thing to look at is if you look at the city of Cripple Creek, revenues there grew by about $4,500,000 We grew by about $5,600,000 And so we made up all of the city's growth and then some. If you look at the state's revenue growth, they grew by $9,600,000 So again, we made up a mass significant majority of the whole state's revenue growth during the quarter. Our market share in Cripple Creek has climbed from about 21% in July I'm sorry, in January to almost 26% in June. The database continues to expand. A year ago, we were collecting about 1,000, sometimes 1500 sign ups every month.

Speaker 1

In June that number was up to 4,000. In July it's up to over 5,000 new sign ups into the database. And that's important as we continue to try to just get word out on the property. One of the more promising things that we've seen here so far is 21% of our sign ups are coming from the Denver market. We've long talked about how Colorado Springs will be the bread and butter for our business here.

Speaker 1

And so because of that, we've always talked about the 1,000,000 people that are in Colorado Springs, Canyon City, Pueblo, Woodland Park, all those cities that are right around us. What we haven't really talked about is Denver, especially those southern suburbs of Denver, which with Denver traffic, a lot of those southern suburbs are closer to us than they are to Blackhawk. And so that area is really gravy for us as we think about the longer term potential for this property. The fact that they're making up 21% of our new registrations into the database is a pretty

Speaker 2

an area that we target for improvement.

Speaker 1

Year to date gaming revenues, an area that we target for improvement. Year to date gaming revenues, so far the table game side have been about 5% to 6% of total gaming revenues. That should be 20% or higher. And part of that quite frankly is we've been in a town that for the past 25 or 30 years has been seen as a casino destination with nothing inspiring. And what we are bringing for the first time is true luxury product, what we think is the nicest casino in the state, beautiful rooms, a phenomenal restaurant, but we still have to overcome 25 years of branding.

Speaker 1

So we're still in the early innings of chasing that changing that mentality. American Place, in the Q2 we had some summer seasonality that if you look back several years you'll see it year in, year out. June, July, August it is there. Revenues for us in the quarter were up about 34%. EBITDA was up 84%.

Speaker 1

And so we've got a relatively fixed expense line there. And so as revenues continue to climb, you should see an outsized bottom line impact. Sports skins, I'll just highlight for you really quick. We had a little bit of activity there. We did lose one skin during the quarter here in Colorado and so we did have the acceleration of some market access fees in the second quarter.

Speaker 1

We also had 2 skins that previously were post paying their annual minimums. And had we had not received payment for those annual minimums. And so for the last several quarters what we had been doing was effectively creating a credit reserve against the receivables balance there. We settled that here in the 3rd quarter. As a part of that settlement, we will receive a $2,050,000 payment during the Q3.

Speaker 1

We also agreed to reduce the annual payment amount, but we also are now getting that amount prepaid versus postpaid. At Grand Lodge, we did extend our lease that was due to expire at the end of this year. We're pushing that out 10 years to December 31, 2034. And I think that's really all I had, Dan. So feel free to fill in some gaps there.

Speaker 3

Yes. I don't want to be repetitive with what Lewis said, but I would characterize it a little differently. First off, I want to make clear when Louis says we sold that many rooms, he needs room nights. And if you do the math, we're running in July like 65% occupancy, which is filled on weekends and not filled during the week. We have a big push now to try to make sure we fill every night of the week and we'll eventually get there.

Speaker 3

And that's typical of a new casino. But if you went back and looked a year ago, we were talking about American Place having opened in February and we were gradually extending the hours of operations. It took us a while to get approval to run higher table minimums. We were finishing elements like the race and sports book open later. The steakhouse didn't actually open until February of this year.

Speaker 3

We were building employee base and a customer list. And since we lapped February of last year, the revenues have been running up 30% to 40% above the prior year. Expenses don't rise nearly as much and so the Q2. It was American Place, made really good money in the Q2. It's now one of the more profitable casinos in Illinois and we think that will just continue to be the case.

Speaker 3

And we have until August of 2027 that we can operate the temporary casino. We intend to have the permanent casino done before that, which means breaking ground roughly a year from now. And we have at least a year, probably more like 18 months to put the financing in place and we're confident we'll be able to do that. But I think if you think of where we were a year ago at American Place, that's kind of where we are now in Colorado. And so we are still opening things like Louis said, the spot and you get the things open and like we now have 4 masseuses.

Speaker 3

They're very busy when we have them. We need about 8 or 10, so we're trying to hire people. We are hiring casino hosts. We've hired some. We want to hire more sales and marketing reps.

Speaker 3

We have a new head of table games who we hired from Fontainebleau who had a long history with Harrah's and he's terrific. We're hiring salon people. So there's all this stuff as we build and stabilize our employees base, but we're also building the mailing list and all of that. And so a year from now, hopefully, we're saying the same things that the revenues here are up 30% to 40% and expenses are not up as much and we're making pretty good money. And that would be the normal maturation of a casino and we're doing well.

Speaker 3

The Silver Slipper by the way had a rough Q1, but a much better Q2. We mentioned that John Ferrucci is retiring, who's run it really since inception and has a well earned retirement. And we've opted to promote Angie from Rising Sun to go back to the Silver Slipper where she started, but she's now been rising running Rising sun for quite some time and that will be a nice smooth transition. There's always some benefit of having a new set of eyes. So while she John is her mentor really, but bringing new energy and new set of eyes, we think the Silver Slipper will continue to do well.

Speaker 3

It used to be it was our dominant earnings contributor and it will continue to be a significant earnings contributor. But at this point, it's just one leg and a 3 legged stool. And so we will have Colorado, Mississippi and Illinois as being bulk of the company. And then of course, we make decent money at Grand Lodge with very little investment. And then we have Fallon and Rising Sun hanging in there and then the sports stuff.

Speaker 3

Liquidity wise, we're in good shape. We're gradually using up the restricted cash to complete the last things here in Colorado. We're almost done. Louis mentioned a few things. The parking lots are still temporary paved.

Speaker 3

We will finish that this fall. And otherwise, Lewis covered it all. And I guess that's it. I think we're in good shape. The earnings are good.

Speaker 3

We're producing quite a bit of cash and we're watching for an opportunity not immediately, but somewhere out there when the bonds become callable at I think 102 in February, They're callable at a higher premium today. And somewhere between February of 2025 and maybe February of 2026 is when we would look to perhaps issue a new bond and pay off the old bond and use some incremental money to go build the the permanent American place, which we anticipate to cost about $325,000,000 There's other ways we can finance it, but it's our guess that, that will be the least expensive way to do it. We can always turn to the REITs as some of our competition have, but ultimately that's very expensive capital that you can't repay. And so we still own either all of our real estate or where we have leases in every significant case. We have the right to buy out the lease.

Speaker 3

And so we have kind of a more traditional balance sheet than a lot of our competition does. Anyway, that's it. Happy to take questions.

Operator

Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. Our first question is from the line of Ryan Sigdahl with Craig Hallum Capital Group. Please go ahead.

Speaker 4

Hey, good afternoon, Dan, Lewis. Thanks for hosting us last month as well.

Speaker 5

Yes, you're good.

Operator

I want

Speaker 4

to start with Chamonix. Good to see positive EBITDA, obviously looking for more as it ramps. But you walk through the monthly progression on EBITDA specifically there throughout the quarter? And then if you're willing to comment on July, that'd be great.

Speaker 3

In the quarter, it's gotten better every month since it opened. July, it's still preliminary, but we'd probably make $1,000,000 in July roughly, which is up from June and that's pretty preliminary. And that's obviously not an acceptable number. If you're looking at the investment that would not be enough, but it's trending the right way. And as we get the midweek occupancy up, right now we're running a lot of promotions where we offer anybody who has a we bought certain mailing lists of people who have a demonstrated proclivity to gamble and we're offering them a free night stay on a Sunday through Thursday basis, which is helping our occupancy.

Speaker 3

Then we look at whether they actually play or not And based on whether they actually play or not, we invite them back. And so there's kind of a cycling through people to try to help build a mailing list of known gamblers. Louis mentioned we have fighting a little image and we hear it all the time. Cripple Creek had become known as a downscaleslotgrindoperation place. And people walk in here and I heard it this morning, we were I was showing the Board of Directors around and a woman from nowhere said, holy cow, what a terrific place.

Speaker 3

We had no idea this was up here. The Board accused me of planting her, but I didn't. And we hear that all the time. And it's a little frustrating because it's like how many ads do I have to run-in Denver and Colorado Springs to say there's a new place up here. But fact is every new casino says that they are the best thing since sliced bread and most of them aren't and ours really is.

Speaker 3

And so it takes time to kind of overcome those prejudices and for people to realize that this is really a sliver of Las Vegas plunked down in a historic gold mining town in Colorado. The animals don't even want to say the word Cripple Creek because we're there's this negative connotation of Cripple Creek. And by the way, the Mirage had the same issue in 1989. No new casino had opened in Las Vegas in decades and it was all about cheap buffets and sleazy entertainment. And Steve Wynn reinvented the town with the Mirage.

Speaker 1

So did Blackhawk if you go back to the early 2000s.

Speaker 3

Blackhawk had the same issue with when Ameristar opened And Ameristar overcame it and Monarch followed and Mirage of course overcame it and so will we. And then we are reinventing this town and it doesn't happen overnight, but it does happen and it's happening every day. Last Saturday, the place was jammed. We had one of the best revenue days since we opened and you could not get a seat at the table and it was the first time I've been here where I started to think, okay, maybe we do need to open. We have a second pit, the old pit in Bronco Billy's.

Speaker 3

I thought on some weekends we're going to have to open that second pit because you couldn't get a seat at the table game pit. We have a little speakeasy bar that we just completed a couple of weeks ago and it's like one of those hidden bars that you don't tell anybody where it is. But if you're wandering around, there's a moose on a door. If you see a moose on a door that's it. It's the lonely moose bar for lack of a better name.

Speaker 3

And I poked my head in to see if anybody was in there. Place was jammed. Every single slot machine was being used at the bar. There were some seats if you weren't in the slot machine. But I said to the bartender, I said, no, you're really checking to make sure these people are gambling.

Speaker 3

You're not just giving away booze. He's like the guy 2 tables over just put in $1200 in the slot machine. I said, okay, keep serving drinks. So you're finding it's gradually working and it will work. And but people on Wall Street sometimes think you open the door and it's immediately profitable.

Speaker 3

It takes some time. But this will be a successful casino a year from now, 5 years from now, 10 years from now, 20 years from now, just as the Mirage and Bellagio and L'Auberge and so on are.

Speaker 1

And Monarch and a lot of other ones, yes. Look, a little more to add. What we're going through in real time is we have a database of customers that are accustomed to going to a product that's one star in quality, right? That's what this town has historically been. And over the coming months, we continue to build that database to fill those rooms.

Speaker 1

A year from now, we'll be kind of lifting that database tied up, if you will. And so better players will start to get into those rooms weekends. And then as time goes on from there, we'll start getting better players in midweek. If you look at July as an example, we hit a new revenue gaming revenue record in July. I think we probably as I look over at Backstory, I think we had a revenue record in June, right?

Speaker 1

And so as every month goes by, the revenues get better and better. July was right around 15% plus better than what we did in June on the gaming front. And so look, everything that we see is everything that we wanted to see in this building. It is beautiful. It is unparalleled by anything else in this city.

Speaker 1

I would argue it's unparalleled by anything else in this state. And the response, the number of times today and yesterday that people have said, this is my new place, I've lost count. It is this casino is going to be doing everything that we expected to do.

Speaker 3

I do want to point out most of the costs of running it, we're already incurring. So we would like to hire more masseuses and we need to hire some more salon people and maybe some casino hosts, but 90% of our operating costs were already incurring. And our revenues are still building and have a long way to go to where we and we're already profitable. So that's where we are.

Speaker 1

I just want to make one more point to put things in perspective. But if you look at the full year last year at American Place and I'm going off of memory, I think we did $17,000,000 maybe $18,000,000 of EBITDA for the full year. For the 1st 6 months of this year, I mean, I think we're at $15,000,000 So we've almost surpassed what we did all of last year at American Place in just 6 months. You're going to see the same thing all over again to Dan's point with Chamonix here. It's we feel very good.

Speaker 3

It's the normal maturation of a successful casino. We've done a lot of them. And I remember the first 4 months people were like, how come you're not making any money? And it's made $100,000,000 a year for 20 years since. So, anyway.

Speaker 4

Very good. I'll make the second one quicker here. Louis, what is the new run rate for your sports skins absent the one timer in Q2 and what will come in Q3, but what's kind of the new contractual quarterly run rate starting in Q4?

Speaker 1

The annual is about $5,600,000 but it moves up over the coming years. So but the current year is where it will bottom at it is that 5.6%.

Speaker 3

It used to be flat.

Speaker 4

Thank you. Good luck guys.

Speaker 3

It grows.

Operator

Thank you.

Speaker 3

That's assuming we don't find any new partners.

Speaker 1

Yes. Yes. Very good point, Dan.

Operator

Thank you. Our next question is from the line of Jordan Bender with Citizens JMP. Please go ahead.

Speaker 6

Great. Thanks for taking my question. Maybe to just follow on the prior conversation. Good to hear on the room nights on the weekend in Colorado. What are you seeing in terms of group and convention mix to get those midweek rooms filled as well?

Speaker 3

Honestly, we're a little behind on where we should be. We hired 1 woman 18 months ago, I guess, as a one person sales force. We just hired a second, the woman who was in charge of doing corporate meetings in the resort community of Vestes Park, just joined us a couple of weeks ago. We need 4 or 5 of these people. I mean the Broadmoor has 900 rooms and does a very large meeting and convention business and we understand they have 18 people in their sales and marketing office.

Speaker 3

We should have 4 or 5. So we are in the hunt to find more and that is one of the secrets of filling the midweek business. Now we do have some midweek business. We had the state VFW convention was here about a month ago and it was really kind of nice to have the place very energized during the week. We have a professional dart championship who was here a couple of months ago and they're coming back in a week or 2 and they help fill midweek.

Speaker 3

It's like 180 rooms for 4 nights during the week. But we have a ways to go on that.

Speaker 1

I mean and VFW is 300, I think, offhand. Yes.

Speaker 3

So this stuff gets booked in advance and it's hard to get somebody to book into a hotel that's not yet open because you can talk all day about how terrific it's going to be and when it's going to open, but the meeting planner is very hesitant to do that. And so we're kind of in that window now. Now we're open. We're sitting in one of the meeting rooms here which is gorgeous. And so now we can show people the building and book those meetings, but there's long lead time on that.

Speaker 3

So it's a business we have to build gradually. Something I pointed out to some people, it's worth mentioning here again. It's very key in Las Vegas. Las Vegas fills on weekends from people driving over from LA and always has. And it fills the midweek with meetings and conventions.

Speaker 3

If it wasn't for that strong meeting and convention business, Las Vegas would be far less successful. Well, the growth of Las Vegas has to some extent come at the expense of Scottsdale or San Diego or Hawaii. And let me explain that. Let's say you're the person at Microsoft who's going to have your annual software planning convention and you're trying to figure out where to go and you need 5,000 room nights or something. And if you call the Marriott in San Diego that's on the waterfront, it's a large hotel, does a lot of medium room business, it's quite a nice hotel.

Speaker 3

They're going to quote you $400 a night for that room. And if you call The Venetian in Las Vegas, which is say an equivalent hotel, they're going to say $200 a night. Now The Venetian knows each of those software writers is going to dig into their own pocket for another $200 So they're getting $400 They're just getting $200 of it at the slot machine. But the guy at Microsoft who's making the decision of where to go, as long as the meeting as long as his software engineers are indifferent. If the software engineers are saying, well, we'll go to Las Vegas, we like Las Vegas.

Speaker 3

He's going to pick Las Vegas over San Diego every single time because it hits his budget less. And so the growth of Las Vegas has come at the extent of the traditional hotel business in other markets. The same thing is true in the regional markets. And so people don't quite recognize it, but if you're like the Colorado Department of Courts Colorado Association of Courts Stenographers, who I ran into some time ago at Ameristar, They have an annual convention. And if they're thinking of having it at the Gaylord Hotel by the Denver Airport or up in Blackhawk or here in Cripple Creek, we're going to undercut that Gaylord Hotel every day of the week because they don't have slot machines.

Speaker 3

And so it takes us a while to get there, but we have a big competitive advantage against the traditional hotel business and we will get there eventually.

Speaker 6

Awesome. Thank you. And then just my next question here. For American Place, it's running high 20% margins really in the trailing 12 months, in the quarter flow through 50%. Are there still cost levers to pull at that property to get the margin over 30%?

Speaker 1

I focusing less on that and focusing more on the path to take it from $9,000,000 of monthly revenue towards $10,500,000 of monthly revenue. That is our more immediate goal right now.

Speaker 3

The other answer is yes. I mean, it's more in the marketing. You get the marketing more focused and as you build a better mailing list, you could be more focused on the marketing and spend it in ways that really drives the gaming. So there is some cost efficiencies on the marketing.

Speaker 1

There are.

Speaker 5

There are.

Speaker 3

Yes. You also want revenue growth. But can we get to a 30% plus margin? Yes, we can.

Speaker 1

Yes. I mean, if you want to get into our heads a little bit there, we're trying to strive towards $10,500,000 of monthly gaming revenue consistently with north of 30% margins. And with that, you're north of $40,000,000 a year of EBITDA.

Speaker 6

Awesome. Thank you very

Operator

much. Thank you. Our next question is from the line of Riccardo Chinchilla with Deutsche Bank. Please go ahead.

Speaker 7

Hey guys, thanks so much for the question and for providing so much detail on how you guys are thinking on the financing. I was hoping if you could give us a little bit more in terms of currently how much of those $355,000,000 you guys anticipate financing through these new bonds that could take out the existing structure? And as you mentioned, one of your competitors just recently did a lead transaction that is kind of creative versus to finance the property rather than doing sale leaseback transactions with the receipts in real estate. Is this something that you guys would consider at some point? So any color on these points would be very appreciated.

Speaker 3

Well, I don't want to cast dispersions on any particular competitor, but we're trying to be very methodical about not biting off more than we can chew and finding ourselves in a position where we have to go for very expensive capital to get things done. So while we are ambitious and aggressive, we are thoughtful about doing it. So obviously, a good chunk of the cash flow we expect to generate quite a bit of internal cash flow between now August of 2027. I don't want to quantify that, but you can run the math. It'll be significant.

Speaker 3

And that can be applied towards the 325. So we don't need 325 of additional financing. It's probably more like half to 75% of that or something like that. And if you start running the math on what our leverage is as American Place matures, as this place matures, Chamonix, we will be one of the less levered casino companies. And then pretty easy for us to refinance our bonds, which mature in 2028 anyway.

Speaker 3

It's not like they have a long time to go. And so you go refinance those bonds with enough extra money to fill in the gap. And I think we've done quite well for bondholders both at this company and in our prior lives. And so I think we have a good reputation in the bondholder community. And I'm confident that we can do that in pretty good terms.

Speaker 3

I'll also point out that even the new bonds probably aren't outstanding all that long because the permanent American Place Casino should make quite a bit more than the temporary. And so even the new bonds are probably only out there until we refinance those at their first possible call date. And bondholders love that. They get called out of the one bond and they get a new bond, a little bit discount to paying. And We will negotiate over interest rate.

Speaker 3

Of course, we will. But whatever that interest rate is, we're not we don't anticipate paying it for very long.

Speaker 1

We I'm trying to think of what I can add there. In terms of structure, we aren't trying to be we're not cemented at any sort of structure. I mean, we tend to like good simple structures generally. I like what we've done historically where we have a large slug of bonds. I'd like to have a much bigger credit facility than we've had historically and have the ability to draw down on that revolver to pay for the permanent American Place Casino as time goes on.

Speaker 1

That way we're not out of pocket for a whole ton of interest until it's needed. And so look, we run through all sorts of variations. The reality is the whole world is going to change over the next 6 months or 9 months or whatever it is, a year before we end up finally pulling the trigger on this. And that's okay. And so whatever I tell you today is probably not going to be what actually happens when we re buy.

Speaker 3

Louis is trying to keep our flexibility, but I will make one firm commitment. At $5 a share, there is zero chance we are issuing equity or any equity related entity for this financing. We don't need to do so. It would be ridiculously expensive at these prices. So you can take any idea of equity or equity related issues off the financing because that will not happen.

Speaker 1

And I don't think we need to for what it's worth. I mean, look, we have a whole slew of banks that have trotted through these doors. I've got one more coming in here tonight for dinner. I've got one more coming in on September 10th. We have another group coming in at the end of September.

Speaker 1

The financing want is there. There are people that are showing up by the germs that want to help us with this financing. So I don't worry about it. Now for us it's starting to think about timing.

Speaker 7

Perfect. For my follow-up, I just wanted to ask if you could give us some color or some numbers with regards to CapEx for American Place next year? And what is your maintenance CapEx going forward? You said you guys now have a new facility, but do you guys want to keep in great condition?

Speaker 3

Yes. You're a little broken up, but I think I heard you. The American Place, the commitment with the state is to invest an incremental $325,000,000 above where we are today. Now the total commitment was $500,000,000 and quite a bit of that went into the temporary including like the $50,000,000 license fee and the $25,000,000 of slot machines, which really part of the permanent. So right now, the CapEx is pretty small.

Speaker 3

It's kind of designing the place. Since we originally started working on the design Durango Station opened and I actually think they did a very nice job on Durango Station. So we are kind of redesigning some parts of it based on what we can learn from Durango Station. They did some pretty creative stuff that was very thoughtful and the place is very successful already. It's only been open a few months.

Speaker 3

And so there's like some design fees. There's still a lawsuit from the Potawatomi tribe who was not chosen for this license. So they sued the Gaming Commission in the city. The Supreme Court is expected to take that up in the Q4 and we expect a decision in the Q1. So the money we're spending at this point is really just design fees and it's pretty de minimis.

Speaker 3

When you start construction initially, it's really just a bulldozer moving dirt around. It's not very expensive. So most of that $325,000,000 ends up being back ended, meaning between, like if we break ground in August of 2025 and then we open in August of 2027, 2 thirds of that $325,000,000 would be spent in the second half of that 2 year construction phase. So you can do a little spreadsheet to try to figure out how that falls calendar quarters, but that's approximately how it would fall.

Speaker 1

You'll tend to spend 40% to 50% of that budget in the last 6 months. So it's extremely back half weighted.

Speaker 3

Some of it is post opening.

Speaker 1

Yes, absolutely right.

Speaker 3

Just like here, we're still spending some money. We've been open 6 months.

Speaker 7

Great. Thank you so much for taking my questions.

Speaker 1

Thank you.

Operator

Thank you. Our next question is from the line of John DeCree with CBRE Securities. Please go ahead.

Speaker 5

This is Max Marsh on for John. Hi, Dan Lewis. Thanks again for hosting us at Chamonix American Place and thanks for taking my questions. Looking over to your same store performance, looks like trends from 1Q have continued into Q2 despite your call out that Silver Swipper is showing improvement. It'd be helpful to get your view on high level causes there, if there's any property or market specific conditions or maybe something more broad based?

Speaker 3

I don't know. I kind of anticipated somebody would say, if we have a recession, how does that affect you? And it's kind of like, we're a regional casino company. We generally regional casinos do pretty well in recessions. And the issues we're dealing with are more like how come we can't get the tonal machines to work properly in the spot because customers are complaining.

Speaker 3

And so it's hard to think about what a recession means. I don't think a recession would affect us much, if that's kind of what's behind your question. I already mentioned that the Silver Slipper had kind of a rough Q1. Some of that was weather, some of it was maybe we didn't market quite right. And it came back on in the Q2 to be much stronger.

Speaker 3

It still was a little bit behind the strong results of the prior year Q2, but it was close. And so I think the Silver Slipper makes in the high teens every year and has for quite a while and I think that will continue to be the case. But the run rate at the Q1 was below that. And then in the

Speaker 1

way we finished out the second quarter, second half of the second quarter was better than the first half. So trends coming out of the quarter were actually picking were actually better.

Speaker 3

Yes. And up in incline, it's very summer seasonal. We didn't have a great June, but it looked like we were going to have a great July. I haven't seen the numbers close yet, but it looked pretty promising last I saw it. And August is also important up in that market.

Speaker 3

We're very recognized we have operated that place now for 10 years, I guess. And it was always on a short term lease that would get extended and re extended and re extended. They've always had the right to buy us out on short notice by paying us certain fees. They never have. We've got a good relationship with them.

Speaker 3

And so it was nice to have this turn into a 10 year extension, although they still have the right to buy us on it at a certain fee. So it's still kind of essentially a short term basis. We have very little investment there and we make a few $1,000,000 a year. So we're happy to run it, although it's not one of the main legs on our 3 legged stool. Rising Sun is a pretty small earnings contributor to us, a pretty big footprint.

Speaker 3

We think it could be an interesting asset in other ways. It's Angie has done a good job in a very competitive market. So we're hanging in there with it.

Speaker 1

And American Place, I mean, look, American Place continues to hold its own. I will highlight for you just since the numbers will come out any day now, July for us we had hold that was 700 basis points lower than the prior year. That's good and bad. We have a lot more table games volatility there, but we have that volatility because we are getting much better players in the door than we did a year ago. And so just know that when those July numbers come out, there's still pretty solid numbers, but we had some pretty off table games hold in July.

Speaker 5

Great. Thanks for that guys. And as a quick follow-up, to the extent that some of those legacy portfolio has been made relatively less core with those new properties, as you put it, the 3 legged stool, Are you looking at potentially monetizing any of those less core assets for financing of the permanent?

Speaker 3

We are always looking at opportunities to improve our portfolio, but we have nothing to report at the moment.

Speaker 5

Okay. Thanks guys.

Speaker 1

Yes. Thank you, Max.

Operator

Thank you. Our next question is from the line of Chad Vanac with Macquarie. Please go ahead.

Speaker 8

Good afternoon. This is Aaron on for Chad. Thanks for taking our question and good to see you guys last month. So I wanted to start with Shamani. Nice to hear that 21% of your sign ups there are coming from the Denver market.

Speaker 8

Do you have any data on how many people are actually making it to the property? And what their behavior is like in terms of night stay, gaming spend? Any color there would be helpful.

Speaker 3

You have to be here to sign up. You can't sign up online. And so of the people signing up, 21% have found their way here from Denver. We know from their Denver addresses. But and recognize, I mean Denver is a very expensive media market.

Speaker 3

We've done some advertising in Denver, but not that much. We've focused more of our advertising in Colorado Springs. And but just like at American Place, we kind of had an advertising push initially to try to tell the world we're here. But now we're trying to focus more carefully on people who are more likely to gamble. I mean there's if you just buy a billboard along the highway between Colorado Springs and Denver, a third of the people driving by are not old enough to gamble and another third probably wouldn't choose to gamble.

Speaker 3

And so you're paying for a lot of eyeballs that aren't likely to be customers. So we're trying to focus in on people who are likely customers maybe based on what magazines they subscribe to, what places they use ATM, how many big the ATMs are. There's a lot of sophistication these days on how you can target people and how you approach them. And if you turn your computer around in certain neighborhoods, suddenly there might be an ad. If your last name is Lee like mine, the ad might be in Chinese, which would be a mistake, but it's something you do, right?

Speaker 3

And so, you were trying to get more and more focused because, listen, we have 3 major expenses, payroll, right? And that's a matter of hiring the right people and you want to pay them appropriately and treat them well and turnover is expensive, so you want to try to reduce turnover. 2nd is gaming taxes and that's baked in and it's largely variable, but it's baked in. And the third is marketing and marketing broadly defined like are you buying them dinner in the 980 Steakhouse? Are you advertising on TV?

Speaker 3

Are you paying casino hosts? It's a type of marketing so on and so forth. And when you start looking at how do you get your operation to be more efficient, And certainly in the new property, marketing is the richest soil to go for us, try to get more efficient. You don't just cut it because that's not appropriate. You're not going to build your revenue, but try to get more efficient to it.

Speaker 3

And a lot of times you experiment. I remember trying to explain to people when we opened in Waukegan, at least here we had a casino. So we had something of a mailing list. In Waukegan, we had nothing. And I characterized it to some of our employees, it's like pulling up to Lake Geneva and you want to go fishing and you have never been there before and you have no idea how deep the lake is or what type of fish they are or where they are or what they eat or what sort of bait and you have to go out there and spend days just casting around and trying a worm and trying a minnow and trying a spinner and different parts of lake and you gradually figure out that there are walleye pike over this little bay.

Speaker 3

I don't know why, but that's where they are. And it's kind of the same thing. We gradually figure out that the people who live in Zion, Illinois for some reason like to gamble and they come to our place and we need to fish there a little more and that's what it's like to open a new casino.

Speaker 1

I heard maybe a different question in there too, Aaron. So just like we're trying to change the mentality of what Cripple Creek is, There's a similar I'm at a loss for words. Typically, when people come to this town, they don't stay for more than one night. And so one of the challenges we found is people are coming in on a Friday and checking out on a Saturday, then they're not checking out on a Sunday. And so just as we're looking to upgrade the database and get more people into it, there's also an active push to turn what would typically be a 1 night stay into a 2 night stay or a 3 night stay.

Speaker 1

This is all stuff that happens just as time goes by. So it's just the normal gives and takes. But it's look, this market historically didn't have a room for you to stay overnight at all. And that's a big part of one of those branding things that we're still trying to get over.

Speaker 8

Understood. Thank you. Appreciate the color on that. As a quick follow-up, what does the competitive environment look like in Cripple Creek? And I know there really isn't any competition on your level.

Speaker 8

So maybe the answer is that none of this really matters. But have you seen any competitors make any adjustments to their strategies in response to you? And how do you expect do expect any changes as we move through the summer? Thanks.

Speaker 3

I will tell you historically, our principal competitor and I would characterize it almost as a friendly competitor because it's professionally run, is a private company across the street called Triple Crown. And so the 2 of us would kind of dictate the town of what should happen. We were the 2 most successful casinos in town. And Triple Crown is still quite successful. They're directly across the street and they're professionally run.

Speaker 3

In fact, we've heard we don't until we have that Italian restaurant that Louis referenced earlier, we often don't have enough food and beverage capacity when our hotel is filled. And so we use one of our meeting room spaces as kind of a temporary buffet. What we've heard when our hotel is filled, they have long lines at their restaurants across the street, which they're happy to have. And that's fine. And so they have had plans for a hotel that they talked about, but they don't seem to be actually building it.

Speaker 3

We think they should and we'd welcome it if they would, but there doesn't seem to be anything happening on it. Also across the street from us is the original Century Casino. And I think Century is one of those companies might have bit off a little more than they can chew. They had plans for hotel at 1.2 and nothing seems to be happening at all. The other significant casino in town used to be called Wildwood and Tillman Fertitta bought it a year and a half ago and changed it to the Golden Nugget.

Speaker 3

And it's now one of the more successful ones in town. It was always like 3rd or 4th and today it's advised for second after us. And Tillman is a good operator and he hasn't done much other than converted one of the restaurants into his saltgrass steakhouse. But I expect he will improve it and I welcome that. And they're a professional outfit too and will help grow the market.

Speaker 3

The real opportunity here is the gaming per capita out of Colorado Springs is about half of what it should be. And so, I expect this market to grow significantly. We're part of that. I think Tillman will be part of that and Triple Crown will probably be part of that. The other one in town is a place called the Double Eagle.

Speaker 3

It's old. It's run down. The 2 owners the second of the 2 owners has just died, so it's in probate. And it's like gaming capacity, but there's nobody in there. And then there's 2 small places, which are now controlled by Michael Gaughan's son and some partners.

Speaker 3

And they freely admit that they want to be the place where our customers where our employees gamble. They're quite small and will probably be a fine investment for them, but they're very small. That's the entire market. And it would not be easy to assemble a piece of land to build another big project in this town. It's a bunch of small lots.

Speaker 3

It took us years to do it. And really I think our principal competitor is really Monarch in Blackhawk, which is a very high quality casino that does a very good job. And they're making, as I understand it, and they don't break out Reno from they only have 2 places, Reno and Blackhawk. The Reno one has been there forever. So you can look back at what they used to make in Reno and look at what they're making today and interpolate approximately what they're making in Blackhawk.

Speaker 3

And it's at least $100,000,000 a year. And that's phenomenal. And they have 500 rooms, we have 300 rooms. We benchmark an awful lot of what we do against what they do because there's no sense in benchmarking against the other places in Colorado Springs. That would be like Four Seasons saying we need to match what Hampton Inn does, right?

Speaker 3

So you look down the road at the Ritz Carlton and say we need to match the Ritz Carlton. And so, our steakhouse is at least as good as the one at Monarch. Our prices are about the same as Monarch. Our website, we look at Monarch does and we try to mirror Monarch. And when I talk about hiring casino hosts, I keep telling people go park yourself at Monarch and don't come home until you hire 2 or 3 of their casino hosts.

Speaker 3

And I know Mr. Farahi is listening. And yes, I'm going to try to hire your casino host. And there we are.

Speaker 1

There you go, Aaron.

Speaker 8

Thanks, Dan. Thanks, Louis.

Speaker 1

You got it. We probably have time for one last question.

Speaker 3

I say that jokingly. Mr. Farahi does a very, very good job. And the Denver market is also undercapitalized. And But we do have

Speaker 1

the nicer casino, Dan. That's

Speaker 3

a very nice one too.

Speaker 1

Sorry, last question.

Operator

Our last question is from the line of David Hargreaves with Barclays. Please go ahead.

Speaker 2

Hi. I want to echo what everybody said. Thank you for hosting and the Chamonix is absolutely fabulous.

Operator

You guys have

Speaker 2

a coupon coming up on 15th. I'm just wondering, the escrowed cash, the $13,600,000 are you able to use that for the coupon? I'm just curious, is that a permitted use?

Speaker 1

No, that cash is really for Chamonix purposes. But we feel fine making that August 15 payment will be made just fine.

Speaker 2

Okay. Thank you very much. Great. Congratulations and good luck.

Speaker 1

Thank you.

Operator

Thank you. Ladies and gentlemen, this concludes our question and answer session. I would now hand the conference over to Daniel Lee, President and CEO for his closing comments.

Speaker 3

I just want to thank everybody for your support. And sorry if I picked on Mr. Farahi a little bit, but I made it in a nice way. He does have a nice hotel and his success has encouraged us. And even the fact that his company focuses very well on 2 key properties.

Speaker 3

And I take that if all we do is focus on 3 key properties, it should not hurt our valuation. The portfolio managers can diversify on their own. We don't have a need to be everywhere all the time. Just make sure we do it right. And that's and he does it right.

Speaker 3

And we hope to do it somewhat as well as he does. So thank you very much, everybody.

Operator

Thank you. The conference of Full House Resorts has now concluded. Thank you for your participation. You may now disconnect your lines.

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Key Takeaways

  • Chamonix property: Completed core phase with 980 Prime steakhouse, rooftop pool and spa, generating Q2 positive EBITDA of ~$600K and preliminary July EBITDA of ~$1M while gaming revenue more than doubled year-over-year, boosting market share in Cripple Creek from 21% to nearly 26%.
  • Customer database expansion: Monthly sign-ups surged from 1K–1.5K to over 5K in July, with 21% of new registrations from the Denver metro area, signaling strong outreach beyond the Colorado Springs market and supporting midweek occupancy initiatives.
  • American Place: Q2 revenue grew 34% and EBITDA 84% year-over-year, positioning the temporary Waukegan casino as one of Illinois’ most profitable operations, with lease extended to 2027 and a permanent $325M facility slated to break ground in 2025.
  • Sports-book skins: After losing one skin in Q2, the company settled past‐due minimums to receive a $2.05M prepayment in Q3, restructuring fees into a prepaid annual baseline of ~$5.6M, excluding future new partners.
  • Liquidity and financing: In a strong cash position, Full House is using restricted funds to finish Chamonix, plans to refinance bonds when call premiums decline in 2025–26 to fund American Place’s permanent build-out, and has ruled out equity issuance at current share levels.
AI Generated. May Contain Errors.
Earnings Conference Call
Full House Resorts Q2 2024
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