Full House Resorts, Inc. (NASDAQ:FLL) Q4 2022 Earnings Call Transcript

Full House Resorts, Inc. (NASDAQ:FLL) Q4 2022 Earnings Call Transcript March 7, 2023

Operator: Greetings, and welcome to the Full House Resorts Inc., Fourth 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 Lewis Fanger, Chief Financial Officer. Thank you. You may begin.

Lewis Fanger: Thank you, and good afternoon, everyone. Welcome to our fourth quarter earnings call. As always, before we begin, we remind you that today’s conference call may contain forward-looking statements that we are making under the Safe Harbor provision of federal securities laws. I would also like to remind you that the company’s actual results could differ materially from the anticipated results in these forward-looking statements. Please see today’s press release under the caption forward-looking statements for the discussion of risks that may affect our results. Also, we may make reference to non-GAAP measures such as adjusted EBITDA. For a reconciliation of those measures, please see our Web site, 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 all that said, Dan, are you ready to begin?

Daniel Lee: Yes, that’s great. And usually, Lewis and I are not in the same place today but we’ll make it work. Obviously, the big news on this call will be about the temporary casino that we opened at American Place in Waukegan, Illinois. I’d opened at 8:00 PM on February 17th. It took us longer to get it open than we had hoped, but we did find the open at 8:00 PM. Now ignoring the partial day of that day, we had 15 days of operations through Saturday. So half a month. The Sunday numbers I should have shortly, but I didn’t have one when I did this. So the win for that half month was $4.1 million, which is run rate of $8.2 million a month or about a $100 million a year. Just to put that in perspective, our whole company last year had $114 million of gaming revenue.

So the Temporary’s run rate is about the same as the rest of the company combined. The trends also have been pretty positive. Now the first week when you get a lot of tourists coming in to see the place, we had 23,000 admissions and the second week we had 20,000 admissions. But the win per person in that first week was $80 and the win per person in the second week was $97, almost $98. And that’s pretty typical of new places that the tourists all come in at first and then gradually build a base of people who are really there in place to play the slot machines. If you work those numbers out, you’ll see it was $1.7 million of win in the first week of operation and that’s just a slot one. So then recognize that the place is only partly open, there was an uncertainty, the opening date made us kind of reticent to promote and to hire people.

The process there is a little bit unusual, at least different than what I’m used to. You start hiring people, you have to staff certain areas and you train and you train. And at some point, the Illinois Gaming Board approves practice days. And in our case, we had two of them. We have had about 10 other ones but formal practice days where you’re being overseen by the Illinois Gaming Board. And if you perform well enough during those practice days and we did then you can open like literally the next day. But if not there’s more training and more practice days has happened to a casino that opened in Rockford a year and half ago. So meanwhile you’re paying people and you’ve got no revenue and it’s hard to promote exactly when you’re going to open, because you don’t really know when you’re actually going to open.

And of course, it’s also harder to hire people before you’re really open because people are wondering what’s it like inside, is this a place I want to work and so on. To put it in perspective, our full compendium is about 800 people, that’s about how many people we expect to employ at full capacity in the Temporary. Today, we have about 400. There’s about 200 in the pipeline, meaning that they’ve applied, we’ve made them offers and they’re going through background checks and filling out the IGB gaming employee and non-gaming employee forms. Some of those 200 are going to fall out so maybe it results in a hundred new employees. So you can see if you’re trying to get to 800 and you have 400, it’s going to take a few weeks to get there, but we will get there.

Now as a result, there’s a few things. One is we’re not operating 24 hours a day. We’re only operating from eight in the morning till four in the morning, that’s not actually an issue with the staffing. That’s our has to get faster at the closing processes from one day to the next. It’s pretty complicated to roll the accounting day over from today to tomorrow when the casino is operating. Somebody shows up to cash out their chips in the middle of it and which day does that go into and so on. And so you want them to be able to go pretty fast. For the moment, we and the IGB agreed that we would not operate from four in the morning until eight in the morning, which gives them time to make sure they’ve done all the accounting processes they need to do and close out one day before we start the next.

Now obviously, lots of casinos operate 24 hours a day, so we’ll eventually get to where we can do that as well. And that’s the wee hours of the morning, so we’re not really losing a lot of revenues at that point anyway. We are allowed to have 50 table games. At the moment, we only have 28 on the floor, because we don’t have enough dealers. And even then, we only operate the table games from 2:00 PM to 2:00 AM. And again, it’s a staffing issue. Now we’ll eventually be open 24 hours a day with the table games and we will eventually have all 50 games open at peak week, peak periods. But it’s tricky to find dealers, because there was no casino in Lake County before. And the casino to our south, which is Rivers and the casino to our north, which is Potawatomi, they’re 45 minutes or 40 minutes each direction.

And frankly, they’re very successful casinos, the dealers make lots of money and they probably live closer to those places than they do to us in many cases. So we’ve been training people. We run our own dealer school and we’ve just recently reached out with a promotion where we’re guaranteeing dealers $60,000 a year, including their tip income. Frankly, we think they’ll make more than that. So the guarantee doesn’t actually cost us anything, but it makes them more comfortable about taking a job with us. And second, if you’re an experienced dealer and you’re working at some remote casino, maybe a tribal casino up in Wisconsin or Minnesota or Michigan or something, and you want to relocate to Lake County, which is pretty nice place to live, we’ll pay up to $5,000 of relocation costs.

So we are doing some pretty creative stuff to try to get dealers and we will eventually have enough to operate table games full board. In the slot area, we are pretty well staffed on what we need in slots, but we have had over 100 machines out of service, one of the manufacturers kind of fell flat on us and so out of 1,000 slot machines, we opened with 800 and something and we are gradually getting to 1,000 closing that gap. And the food and beverage area is a big deficiency. We have two large restaurants, one with 300 seats, one with 200 seats. And then we have a third restaurant that is going to be completed in April, it’s basically a diner that’s going to serve as our steakhouse is delivered in April. The staffing issues we have has us right now only operating one restaurant and even that restaurant is only for dinner.

And so we are really trying to fill this in quickly so we can get a second restaurant open within a few weeks and expand the food service offerings to at least two meals a day and eventually maybe three meals a day in one of the restaurants. So at this point, we are only 50% staffed with limited operations and we are still doing $100 million a year run rate. And of course, there is always some unusual costs around opening that will go through the income statement. But if you are that understaffed and you are running that sort of revenue, I’m sure our margins apart from the unusual stuff are very strong. One other thing to point out is we opened with really no mailing list. You would expect an active customer list in the market of the size to be at least 40,000 to 50,000 individuals, people that you mailed to who you send free play to and they show up in gambling.

And so at opening two weeks ago, we had essentially zero. Today, we have about 15,000. Some portion of the 15,000 are going to turn out that to be active, they just signed up to get free buffet kit. And so maybe out of the 15,000, 5,000 or 10,000 will turn out to be active. So we have a long ways to go built in the mailing list, but we are still achieving that $100 million a year run rate with little or no customer list. So we are pretty happy with how we are doing. In Colorado, construction is progressing well. The large tower crane is coming down today, that’s a sign of progress in — meaning that there is — the billings are basically the exteriors were all built. Inside the plumbing and electrical has been installed in a lot of the building.

The drywall is going up in a lot of the guestrooms and a lot of the public spaces. And portions of this is going to be complete inside of five months and others are going to take as much as 10 months. And we are going to open somewhere within that timeframe, meaning in the fall. Where within that may reflect on what needs to be completed to open. Now the casino obviously, many, if not all of the guest rooms, we’d like to have. We’d like to have the high end restaurant open. And the kitchen on that is a little behind. What about the parking garage, what about the meeting room space. The spa is a bit behind and we may open without it. And so that’s the game we are playing is trying to figure out what can we open with what’s essential to be open to give good experience to the customers.

Like, do they really care if there is 300 rooms or 250 rooms, they are only staying in one, they won’t even know if there is 50 rooms on unfinished. But then you get into fire exit issues and stuff like that. So we are trying to work all that out and — but we’ll be open sometime in the fall. We’ve learned from the experience at the Temporary that it’s very important to build the employee base at the same time as you build the building. Fortunately, the regulatory process of opening a casino in Colorado is different than it is in Illinois, so we will know a pretty date certain of opening. We also have a core compendium of experienced employees to open with. So it’s we’re not starting with zero, we’re starting with a couple hundred people who are already working for us.

And we already have a mailing list. Bronco Billy’s been building a mailing list for its 25 year history. So if somebody is a gambler in Colorado Springs or Denver, we’d probably have a pretty good idea who they are. Big advantage over where we were in Illinois. Now meanwhile, the construction of Chamonix has had a big impact on Bronco Billy’s, kind of no surprise there. Bronco Billy’s used to have all sorts of parking, today, it has none. We offer valet parking and park three blocks away. There’s no hotel rooms on site. And perhaps most importantly, it has a lot less gaming capacity than it normally does. We actually made the situation a lot worse in the second half of 2022, because we closed the core part of the Bronco Billy’s casino. I think Bronco Billy’s is eight different buildings each 25 feet wide and we closed the middle three and as well as it’s steakhouse, which is upstairs in order to refurbish the casino and contemplation of Chamonix opening this year.

So in the third and fourth quarters, Bronco Billy’s was a fraction of what it normally is, and as a result, it didn’t earn anything when historically it was a significant earnings contributor. The casino space reopened in late December, looks pretty nice. And the steakhouse is becoming an Italian restaurant and it won’t be open for another six months or so, but it should be open at or before Chamonix opening. Meanwhile, on the balance sheet, we drew down the credit facility to pay the upfront gaming tax from the Temporary. We also had to fund the pre-opening cost a little longer than expected. And opening later than expected meant we had less income. We had hoped to be earning some money in late January, early February. Now Illinois gaming law is a little bit ambiguous.

There’s a — and that’s not a fault of the gaming board, it’s a fault of the legislature. I mean, that’s what happens when legislatures create laws, sometimes they’re not always clear. There is a tax on gaming capacity amongst other taxes. So there’s all these different taxes we have to pay. Well, one of the more important ones is based on how many slot machines you have, for example. We thought we were going to owe now, meaning next week it’s owed one month, after you open about $38 million in gaming taxes and that we would owe another $12 million when we opened the permanent casino in three years, because permanent has more gaming capacity. The gaming board is interpreting the law that all $50 million is owed now. From our reading of the law, we’re not sure that’s correct.

So we’re trying to figure this out since we owe the money in a week, we’re trying to figure it out fast. And I know the casino that opened two years ago went ahead and paid the amount upfront, but quite a few other casinos have the ability to expand and they haven’t had to pay it up front. So we’re trying to figure it out. It’s not the amount of money, it’s the timing of the money. We thought we were going to pay $12 million three years from now. It’s a much bigger factor for the Valley’s Casino in downtown Chicago. For them, it’s a huge number. But anyway, to make sure that we have the money if necessary to pay that and to have more flexibility moving forward to finance the permanent American Place, we didn’t add on to our senior secured bond issue raising $35 million.

We did it pretty quickly. And so today, we’re in a very liquid situation between the cash on hand and the profits from operations. We’re now generating pretty good profits from operations, including from the Temporary and it’s more than enough to complete Chamonix and to fund the initial construction at American Place. And that buys time for our new properties to prove themselves and for the bond market to continue to stabilize. Our existing bonds become callable in February of 2024 and we’ve long said that sometime after they become callable, we’d probably issue new bond, a new bond issue take those out and incorporate into it the money needed to build the permanent American Place. But with this a little add-on issue, we have flexibility probably all the way through 2025 to just be funding construction from our existing resources and that buys us a pretty long runway to figure out the right timing and how to advance American Place.

And Lewis, let me turn that over to you.

Lewis Fanger: Sure. So well, as Dan noted, we did do that revolver draw and the $40 million tack on notes last month, that’s led to us having a lot of cash currently sitting on the balance sheet. Here in real time, we’re sitting on about $210 million of cash, which includes $110 million of restricted cash for the completion of Chamonix and obviously, a hundred million of kind of unrestricted cash. We’ll use a portion of our unrestricted cash to pay the initial license fees for the Temporary, which are somewhere between $40 million and $50 million, as Dan noted. We do have some modest, very modest uses of capital like that restaurant redo that Dan mentioned at Bronco Billy’s will cost us about a million bucks. But then of course, don’t forget that our existing business generates cash too, especially with us heading into our seasonally strong season and a large new property, the Temporary now open.

Some other cleanup items of note for you. We did sign a new sports skin agreement for Colorado. We actually executed it back in December and it began its contractual term a couple of days ago. That means here in real time, we have two sports skins that have not yet launched. One of those is in Illinois where we contracted with Circa Sports. There’s a natural process that gets followed. But pending normal gaming approvals, we believe that Circa Sports could go live here in the next few months. And then we have one idle skin left in Indiana, which we continue to evaluate whether we use it ourselves or sign up a third party similar to all of our other sports skin agreements. For those of you keeping track, once Circa goes live, the total for all six of our sports skin agreements is $10 million per year of annualized minimum revenue and half of that $10 million is related to our agreement with Circa, which is the most valuable, the most valuable, by the way, because Illinois has so many people in the state and there just aren’t very many sports skins in the state.

In Lake Tahoe, we and our landlord agreed to extend our lease agreement for the Grand Lodge Casino. It was due to expire on August 31st of this year with the extension, it now goes until December 31, 2024. Normally, we would ask for a longer extension but its new owner’s plan on putting the property through an extensive renovation. I think in their ideal world, they would probably prefer to close down our casino while they renovate the entire tower. And in our ideal world, we would have them renovate around us like we did a few years ago. And so we will continue to have conversations behind the scenes about how we can still operate even while they do some extensive work on-site. For the fourth quarter that we just finished, I know you have already heard from a bunch of our other regional competitors about a challenging end to the quarter.

Quite simply, there was just bad weather portfolio wide, especially in December. In Mississippi, for example, we had icy roads and that always creates chaos down south as people — they are not used to those icy roads and they end up just staying indoors. In Lake Tahoe, as another example, we had snowfall up until 8 PM on New Year’s Eve, which is never ideal. The two softer moments in the property portfolio were at Silver Slipper and Bronco Billy’s. At Silver Slipper, our nearest competitor put out some pretty crazy promotions in the fourth quarter. Since then promo levels have gone back to normal and we’ve seen a recovery in visitation. Here in real time, for example, we are seeing visitation that’s about 10% higher than levels that we saw in November and December.

And then over at Bronco Billy’s, I don’t want to go over everything that Dan already mentioned. But the sheer fact is the size of the casino is a fraction of what it usually is. At its lowest point, we are running Bronco with 55% fewer gaming positions than pre-construction levels and even today after the opening of the renovated gaming space, we’re still at about half of our usual gaming capacity. And so we look forward to when Chamonix is open. And we have parking on-site and hotel rooms on-site and a full casino as well. With all of that said, I probably have two last points that I want to make here or a couple last points. One is, if you look at the EBITDA numbers in 2022, they were down. But I do want to remind all of you that we still had some pretty good record numbers in there.

Silver Slipper had its second best year and its 16 year history. I don’t think it’s slipping much from what you have seen for what it’s worth. And then over at Rising Star, they had their second best year in at least the past 10 years. From our seats here, I think we were probably a couple of million dollars or below what we would have liked. But that shortfall is made up through just 15 days of EBITDA from a fully ramped up American Place. And Dan kind of hinted at it, I’ll be a little more listed. I don’t think the ramp up period is going to be very extensive at all at American Place. We are very, very pleased with what we have seen out of the box there given all the limitations that we are currently running with. And I think you are going to see a pretty positive impact from that opening here very, very quickly.

The other last point I want to make is, the way I view the opening of the Temporary is as a massive deleveraging event. Again, as Dan noted, we are very pleased with how the opening weeks have been regardless of what your estimate might be for EBITDA out of the Temporary, it should result in very meaningful growth to this company. Keep in mind that we have raised the majority of our debt to fund construction of the Temporary and Chamonix, and now you have the first of those projects open and doing well. The second one, which should be just as meaningful as the Temporary should be to our financials, is only a few quarters away from opening. And so just keep all that in mind. But with all that said, Dan, do you want to take some Q&A? Operator let’s go for it.

Q&A Session

Operator: First question is from the line of David Bain with B. Riley Securities.

David Bain: Dan and Lewis, congratulations on another exciting casino opening. First, I guess, Dan, you gave some early run rate numbers for Waukegan. That was very helpful. I mean, how should we view it in context though with the upcoming augmented hours, games, amenities, marketing of the database? Can you help us think about how that $100 million, kind of that cadence from here as those things begin to kind of funnel in? And then maybe Lewis on that, how we should think about EBITDA margins, that cadence given fixed cost for a temporary relative to a new permanent casino opening? Qualitative is fine but quantitative is better.

Daniel Lee: Well, I mean, at this point you have kind of a rotation of the tenants. In other words, these tenants will probably continue to run at a pretty good base of 20,000, might slip a little into the teens, 15,000, 20,000 people per week coming through. But the win per admission, which today is about a $100, that’s pretty low by Illinois standards. And so I think the win per admission will creep up as we have longer operating hours and frankly more resource to come. I mean, at this point our food and beverage offerings are pretty limited, for example. And so, as you transition, I would — I mean granted you get some kind of pre business maybe everybody coming to see the new place, but a lot of those people don’t gamble or frankly couldn’t get to a table, because we didn’t have enough tables.

I mean, on opening night within an hour of opening the doors, every table was filled. And so I think we will end up at a higher run rate than a 100 and it’ll build gradually over time. And it’s almost all — and that number’s just gaming revenue, I’m not counting food and beverage in there. We have a center bar, that the bar is actually doing pretty phenomenal members but we’re not going to pay for everything with the bar, but it’s very successful bar. And so I think we end up with something north of $100 million. I mean, I don’t think it’s going to be $200 million, maybe not even $150 million, but $120 million, $130 million, $140 million, somewhere in there and pretty high margins, because it’s almost all slot machines. I think, we are running 80/20 today slot machines to tables and as we get the tables open longer, we might be 70/30 instead of 80/20.

But — and then in Illinois it’s a little unique. The gaming tax was actually lower on the tables, so that shift probably shouldn’t hurt margins very much. And so that’s the bottom line. But we’ll see, we have to build the mailing. Now Typically, I tried to characterize it to our advertisers that — our advertising agency that you’re looking out at a lake that you’ve never fished in before and you have to go out and fish in a lot of different places. And eventually, you figure out where the bigger fish are hanging out and now you start focusing on them. So right now, we’ve been doing a lot of broad based marketing. We’ve got wraps on the commuter trains, we have signage all over the commuter train station in downtown Chicago, we’re on television, we’re on — we have billboards up all over the place.

And gradually as you build a mailing list, you stop paying for the general media and you focus on the segments and the people. And that’s why the players club is so important as you build that players club database and you know a lot about those people, because you know how much they gamble and you know what days of the week they gamble and so on. And so you start incentivizing them to commit with free play or meal offers and so on. And part of the — getting the second restaurant open is an opportunity for us to market it, to say, hey, come back and try our Asia-Azteca, which is just opening. And then when we get the steakhouse, we can say, come in and try North Shore Steak and Seafood. So it’s a process. And whereas in Colorado we already have a pretty good size mailing list, it’s just going out to them and saying, we know you’ve gambled in Crippled Creek before, why don’t you come up and see this new thing we built.

Lewis Fanger: I don’t know that I have a ton to add onto that, Dave. I mean, I’ll tell you a couple things though. I do want to reinforce that when Dan talks about 100 million of run rate revenue at this point, that is purely gaming revenue that does –. And so when you think about overall margins, all the food and beverage tends to dilute your margin. So don’t run a 30% margin off of — in the long run at least, off of just Dan’s gaming number. It’s higher than 30%. I’m not saying it very well, right? I think you get what I mean, everything else dilutes your margin down. So whatever margin you’re using on the run rate gaming revenue should be a much higher number. All that gives me a lot of confidence. I mean, look, if you run a 40% margin on Dan’s run rate number there, you’re looking at $40 million of — roughly $40 million of EBITDA, assuming everything else is breakeven from the restaurant side.

When you walk through the facility, I’ll be honest, it’s — I’m meeting people there for a lunch this week on Thursday and I don’t have anywhere in the building to take them for lunch yet. And it’s not just on a Thursday, it’s every day of the week. And so if you’re a gaming customer going in, you can go and grab a hot sandwich from the two Airstreams that we have on site there. But if you want a true sit down meal, you don’t have it. We’ve got a — we’re making sure we put some food trucks on the outside, especially on weekends. And we do try — we are planning on getting some brunch service into l’américaine here in the near term. But you’ve got a portion of your day where if you are a normal good gamer, you expect to want to show up, have a meal, go and play a game.

And right now we’re only servicing you for the dinner part of every day of the week. So do keep that in mind. And despite all that, we’re doing 100 million of run rate revenue. And the first mailers didn’t start hitting people’s inboxes until a couple days ago. We went all of February without having any of your usual promos out there as an example. So this is a very, very strong start. I won’t give you numbers per se. I will tell you that I continue to think that this thing will be EBITDA positive pretty quick out of the gate, and I’ll leave it at that. But I feel very good.

David Bain: And then I just had one follow-up strategic question, I’m looking at €˜22 EBITDA generation, particularly from a few properties as they begin to normalize, but still be dwarfed by Waukegan, Chamonix. Can you remind us the strategic rationale not to divest kind of the smaller portions of the portfolio? And I guess from a forward equity capital our investment into the more sizable contributors, your time and even from an investor standpoint, sometimes it’s a little distracting when properties off like $500,000 for a one-time reason and it’s like 30% off of consensus.

Daniel Lee: No, I mean, it doesn’t. Like the smallest one is Fallon and we could sell it pretty pretty readily, there is a lot of people who’d be interested in buying it. But we manage it in conjunction with the Hyatt Tahoe. And so it’s to a large extent the same management team that goes back and forth, and that makes it more efficient for us to run those two. And if you sold Fallon, you would have to put the entire management team just against the Hyatt. And if you go to the Rising Sun, which is relatively smaller. I mean, a few years ago, we felt we might have to close it. Frankly, the management team there has done a terrific job and it’s now making $6 million, $7 million, $8 million a year. I think it was $8 million in a peak here with the stimulus checks and six and change last year.

And we are pretty happy with that and in a very competitive environment. And frankly, if we don’t need the money and we have enough money to build everything we are doing and it really wouldn’t move the needle much if we sold one of these properties. And it also is a good place to once we’ve build that management team that you can promote to other places. And so anyway, that’s — we have got no real reason to divest. But when you start thinking, okay, what happens if the bond market is crappy and it comes time for us to raise the rest of the money to build American Place. Well, we could always do a Bally’s deed and go turn to a REIT and get the REIT to fund most of it. We could even do a sale leaseback on some of our other properties and do it.

I happen — I think that’s probably more expensive than it will be to go to the bond market, if you really, really measured everything. But we have multiple ways to finance American Place. And frankly, it’s an asset of the company that we have not done the sale leaseback thing yet. But listen, we are a public company. Everything is for sale. If somebody comes in and offers us a 25 times cash flow for any asset we have, we will be happy to take it.

David Bain: Right. Okay, great. Thanks, guys

Lewis Fanger: I was just going to say — and the good news is Northern Nevada has not taken too much of our time for what it’s worth. So I think you are trying to — ultimately, we are trying to balance the time relative to the EBITDA contribution. And at this point, the team up there is doing a decent job.

Operator: Our next question is from the line of Ryan Sigdahl with Capital Group.

Ryan Sigdahl: A lot of talk about the first two weeks of performance. Obviously, on the Temporary, it’s top of mind, it’s the focus. Curious that run rate that you keep referencing back to. I guess, how when you look at other openings, how accurate is that or I guess is there typically a lull, I guess, after the first few weeks before you get the mailing list, before you get the amenities, before you get the hours, all of those things ramped up?

Daniel Lee: Every opening is a little different. This is — I always say every opening has its prize. In this case, it was the fact that we’re understaffed and having to deal with that. It’s very frustrating me to walk into these restaurants that are — we are all focused on getting them built. Now, they’re built, we don’t have the employees to run them. And the process there in Illinois, even non-gaming employees have to fill out 25 pages of the 30 page form. And they basically ask the name and address of every girl you’ve kissed since third grade. And that’s fine and expected for Lewis and I, we do that all the time with every gaming commission. But it’s not common that somebody applying to be a waiter has to do that and they have to fill it out in English.

When the community we’re in is 50% Hispanic and the people applying for those jobs, the majority are Hispanic. And so we end up sitting down with them and helping them through the form. And by the way, it’s not the fault of the gaming board, it’s the faults of the law. And they’re just — I think they’re frustrated as we are and that the law requires them to do that. And so we’re trying to hire waiters to come in and work in these restaurants, and they have to go through all these background checks, which takes time. And they can go next door and get a job with the — restaurant next door. I mean, unemployment’s at record low levels. And so we’re working our way through that and it takes time, and that’s the current challenge. Now the process of lots of tourists are lucky loses the industry calls them coming in to see the new place, so you get large numbers of people mulling through and then gradually figuring out which of them are gamblers and coming back, that’s a very normal process.

And we had it at , we had it at St. Louis and so on. And you gradually figure out who the gamblers are and build the mailing list and that’s a normal process. And will there be a lull? I don’t know. The second quarter might not be at a — may or may not be at a $100 million run rate. I’ll bet it will be, because we’ll be adding hours and we’ll get all the machines up and running, we’ll be adding more table games and we’ll get the restaurants open. But at in Lake Charles not so long time ago now, 15 years ago, it opened and then there was a little bit of a lull. And then we worked through it and the lull was over, but it also opened with all of its restaurants open and all of its stable games open. And so I think, we’re less likely to have a lull here, because we’re going to build the staffing and build the operating hours and everything else.

It’s like — the fact that we only have 28 table games doesn’t matter that much on a Tuesday, but on swing shift and a Saturday, it really matters.

Lewis Fanger: And the other thing to keep in mind, Ryan, is Dan’s right. Usually, you open up with your full breath of amenities and we haven’t in this case. But on top of that we opened without a date, right, or not a date but we opened the day later than — the day after we — the public knew the date is maybe the right thing to say. And so if you were to sift through the questions that we get on Facebook and all those channels via Google and everything else, the number one question by far, last I looked it was something like 75% or 80% of our questions was, are you open, right? And so usually with a normal casino, you’ve got that date out there six months in advance and you’re telling people, we’re opening this day, we’re opening this day, we’re opening this day, for month and month and you’re just beating at home. In this case, there are a lot of people that just don’t even know the doors are open yet. So I’m not sweating it here.

Ryan Sigdahl: Two quicker ones here on Bronco Billy’s, and I’ll turn it over. But one, how long in advance do you think you’ll be able to announce that opening, is it a few months or I guess any timeline there? And then secondly, with the new casino renovation floor done, do you think that that property can turn back to EBITDA positive going forward even before Chamonix opens, the bigger one?

Lewis Fanger: Actually, the numbers were already quite a bit better just in the five or six weeks since we got it open. So the answer to that questions, yes. It was — I mean, it’s still operating with a lot of the amenities not there, but it’s much better than it was a few months ago. And I’m sorry that was — and in terms of an opening date, well, we can largely pick the opening date but I don’t want to get too far ahead of the constraint. There’s a point where the construction is largely done and you’re installing the furniture. And at that point, it becomes very predictable when you can open. We have a few pieces that are — we’re trying to catch up with, like the kitchen for the specialty restaurant needs to catch up a bit.

And then there’s an issue with — we couldn’t do all three towers at once, because we couldn’t get enough light gauge steel workers. So we had to build towers one and two, and then the — or well, it’s actually one and three and what we call tower two is behind the other ones. And so it’s possible to open without that tower being completed except that some of the exiting from tower one goes through tower two. And so we have to satisfy the fire marshal that while that tower may not be completely furnished and open to the public there are safe fire exiting methods to go through. And if we can’t reach an accommodation with the fire marshal then you probably don’t want to open without towers one or two. Tower one has most of the suites, for example.

So there’s issues like that we have to resolve, but we should know 60 days ahead of the opening date so that we can then advertise the opening date and have a party. And then we actually had a pretty decent opening party at the Temporary, but it was a process of telling people, hey, we’re getting close, we’re getting real close, be ready, you might only have 24 hours notice. And then literally we got approval at like two o’clock on Thursday and we blasted out emails to about a thousand people saying, we’re opening tomorrow, parties at 6 o’clock, we open to the public at 8 o’clock, and we were able to get 400 people in the place. And despite our staffing challenges the staff there did a terrific job at serving a high-end meal and having a great party atmosphere in the place and it went very well.

But I will tell you, it was not the way you normally want to open. I mean, you don’t normally want to tell people you got 24 hours notice to come to a grand opening party.

Operator: Our next question is from the line of Chad Beynon with Macquarie.

Chad Beynon: Lewis and Dan, congrats on the opening. Dan, just one just kind of on the outlook here. I know you guys don’t give guidance. I’m just trying to think about some of the same store growth opportunities of the business that aren’t facing new competition or disruption. I guess, mainly Mississippi, Nevada. In the press release, you outlined a number of things that hurt the properties in the fourth quarter and for the year. But as we look at kind of where the floor is for the foundation of those financials, is there any reason to think that these couldn’t grow from here? I know Indiana, you talked about some competition but just trying to figure out Mississippi, Nevada, if kind of the worst is behind you guys?

Daniel Lee: Well, I think in Indiana you do have a new competitor opened in September, so we have several more months of that. We have done reasonably well despite that competitor. So I think that’s okay. There really isn’t anywhere else that we have a new competitor there. We had — as Lewis and I mentioned, in Mississippi, we had a competitor get very promotional for a while. And then I think they realized they were spending money foolishly and they backed off. We are about to lap or we have lapped the opening of online sports betting in Louisiana. And so that shouldn’t be a factor going forward. In Colorado where the guys adding capacity nobody else is. And in Northern Nevada, Larry Ellison acquired the Hyatt over a year ago, I guess.

And that’s good news. And ultimately, because he has a history of going in and significantly improving the hotels he’s bought. He owns four or five now. And we hope to continue to be the casino operator there. And at least indication so far is that that will be the case. I don’t think he wants to go get a gaming license and have to deal with those issues. It’s an amenity to a hotel. Now we may — he apparently intends to significantly refurbish the hotel. He start with the stuff along the lake, which is hugely valuable real estate, it’s kind of exciting to think what he could do with that. And then he is going to go to the main hotel building, which is where casino is. And as Lewis mentioned, we would prefer to operate during that, but the construction people almost always would rather just close the whole thing.

And that’s a discussion we haven’t had yet with them. That lease has been extended several times. They never let it be a long term lease, I wish they would. But it’s been extended by one year, three years, two years, every few years. And it’d be wonderful if he fixes it up to be a really high end hotel and we are still there running the casino. I hope and believe that that could be the case. We may end up going a year, year and a half without a casino while he’s doing that. But we will see how it shakes out. And in Mississippi, we have actually made a lot of headway to have the approvals to build a hotel tower out over the water. We are a little busy building the other stuff we have but we think we could get a pretty good return adding a hotel tower there someday.

It’s a — let’s finish the construction we have going now, but we do have stuff we can do down the road. The sports books, it was a little bit of surprise to us when Churchill shutdown their sports betting operation 10 months ago. And we’ve now replaced one of them and then we got the Circa deal. And so I think we’re back in a good position with the sports betting stuff. But it’ll be guaranteed minimum of about $10 million a year, as Lewis said, with one Indiana skin still available. I addressed everything. Bronco Billy’s is going to be kind of part of Chamonix. When it opens it’s a whole different scale. I mean, Chamonix is going to make 10 times what Bronco Billy’s ever made.

Chad Beynon: Just trying to fine tune everything. I know, we’re all focused on the Temporary and Chamonix, but as we’ve said, the legacy business still matters to cash flow. And then in terms of some iCasino movement, I know, Indiana and Illinois have been states that everyone has talked about potentially being on the docket in €˜23 or €˜24. I know, there was a little bit of lost momentum in Indiana. But just wondering, if this is legalized, would you guys consider doing it on your own, running one of these very valuable, profitable skins, or would you consider leasing it out and bringing in kind of guaranteed cash flow similar to what you’d done on the sports wagering side?

Daniel Lee: Well, we’ve considered both. It’s probably easier to do the iGaming our ourselves, because you can rent or buy the software to do it. There was a particular issue with the sports betting as a small company. You were concerned that, let’s say, the Colts got into the Super Bowl, while all of our customers in Indiana were going to bet on the Colts. And if the other team in the Super Bowl was not a place we have a casino, we were going to end up with an unbalanced book. And so that is kind of a difficult thing to do. And if you change the betting odds at our sports book to try to attract bets on the other team, then we will not be offering our customers as good a deal as they can get from another casino in Indiana. So we made the decision early on to do the sports betting through licensing with companies like Wynn, who’s got a huge sports book in Las Vegas.

And so they can balance it with what they have out of Las Vegas, they don’t have that concern. Whereas, when you get into iGaming, that’s just a large number of small independent statistical events and that’s the business we’re in. Now we’d have to hire some people who understand how to market that business online, but those people are available. But on the other hand, if somebody offered us a great deal and a skin then we might decide to license it as we did in sports betting. So we’ll see. Yes, I’m just thinking that somebody made the question before about why don’t we divest some of the small ones. Maybe the real answer is as the company gets bigger, maybe we should take the small ones and just group them all together. And so you guys — when you see the Boyd numbers and they talk about the Midwest district, well, just portfolio theory of one casino in the Midwest might be up 30%, another one’s down 30%.

You look at it, it looks very stable. And they’ve kind of camouflaged it by grouping things together, whether it’s them or Penn or most of our competitors, group it together. We’re one of the few companies that shows you pretty much earnings of each casino with the — except of Northern Nevada with the share management team. So we lump them together. But Boyd certainly has lots of small properties, but nobody gets focused on whether they’re up or down a lot in one little market, because they combine it. I’m sure Keith Smith pays attention to it but doesn’t confuse the analyst.

Chad Beynon: Well, we appreciate all the details on the properties and also on the temporary. So congrats on the opening.

Lewis Fanger: Hey Dan, we’ve got five minutes and two last questions, so let’s try to get through both real quick.

Daniel Lee: That’s Lewis’s way of telling me to be succinct, so go ahead.

Operator: Our next question is from the line of Edward Engel with ROTH MKM.

Edward Engel: And again, congrats on getting heating up running, a note to early. But is there any kind of early learnings of where that customer base is coming from, is it all Lake County or are you seeing people kind of close to the suburbs of downtown Chicago as well?

Daniel Lee: No, it’s heavily Lake County. And it’s really heavily Lake County, yhere’s very little from downtown Chicago.

Lewis Fanger: Yes, not a lot to add to that. It’s very heavily Lake County.

Daniel Lee: Yes, I think like the City of Waukegan is the third and I’ve saw the numbers. And it’s kind of — it’s interesting like we’re not even drawing very far from Rivers or Potawatomi. I think that casino revenues we have, as we’ve been saying all along, will mostly be from increased gamblers in our region. My guess is we haven’t had a very big impact on either of those guys. Now recognize Rivers does about $600 million a year in revenue and the Potawatomi does about $400 million a year in revenue and then Grand Vic, which is also kind of in the market, does about $120 million. So there’s $1.1 billion in revenues and if we take 10% of that, well, that’s $100 million, that’s our run rate. So I don’t think we’re going to have much impact on them and I don’t think we have very much overlap with Bally’s at all.

People in Chicago don’t want to drive up to Lake County, they think it’s a place you go on weekends or something and people in Lake County don’t want to go downtown, because you get stuck in traffic.

Edward Engel: Great. Thanks, I’ll pass it off.

Daniel Lee: Yes, I mean, the one way to think of Lake County is like having a casino in Greenwich. You know, it’s not going to compete with Manhattan, it’s going to draw on people who live in Greenwich. If you’re familiar with the New York geography, we’re the Westchester County Casino, if you will.

Lewis Fanger: All right, one last question, Dan.

Operator: Our next question is from the line of Jordan Bender with JMP Securities.

Jordan Bender: Keeping in mind the bumps in Illinois with the hours, the laborers, some of the restaurants opening, et cetera. How should we think about that property running at a run rate over the next couple months? I mean, should we expect something in the next month or two, or should it be more of a traditional like two to three quarter ramp?

Daniel Lee: I think it’s going to ramp slowly, but it won’t necessarily be completely consistent. I mean, if you — eventually you will get monthly numbers from the Illinois Gaming Board and if there’s one month that’s a little below an $8 million per month run rate, I wouldn’t worry about it, because it’s — but the trend will gradually be up. And I think by the time we get to later this year, it should be running 10 night. I think I told you with some of the numbers are of the competing casinos. I mean, Grand Vic is a tired 25 year old traditional riverboat and it’s still doing $120 million.

Lewis Fanger: Yes. I think the only thing to add on to that is, usually, I would talk about a casino ramp taking 18 months before you are on the run rate. In this case, I think it’s going to be a lot faster than that for what it’s worth. I don’t think it’s 12 months either. I think it’s quicker than that. Part of it’s going to depend on how quickly we can get the rest of our amenities up and running. I do think that’s going to be sooner versus later. We have got enough labor I think on the table game side, so that we can extend the hours here very, very shortly for what it’s worth. The other thing that helps us out is our typical guests don’t need to travel 40, 45 minutes to come visit us for the first time. A typical guest is going to be traveling 15, 20 minutes.

And then when you actually get to the site, I think what a lot of people have been appreciating is we are right off the freeway, we are right across the street from a giant Walmart. We are kind of already inserted into people’s everyday lives, into their shopping patterns and everything else. And so I think all of that is going to combine into a scenario where the ramp is on the shorter side versus what you would see for most other casino openings.

Jordan Bender: And then one last housekeeping. How much left to spend in Colorado?

Daniel Lee: Say it again

Lewis Fanger: So how much left to spend in Colorado?

Jordan Bender: Yes.

Daniel Lee: Recognize the $110 million in the restricted payment account, there is a third party who every month goes through and looks at what it takes to spend — and to complete it and where we are and that’s the $110 million. Now, it’s — there is some stuff that — like I’ll probably want to spend a little more on marketing Denver than is in the budget currently and so on. But for the most part, that’s the one hand, that’s what’s needed to complete it. Now that does not include the $1 million change in the steakhouse into the Italian restaurant, that’s what I think.

Lewis Fanger: Yes, that’s right there. And one truly last question, Dan. We will be quick, so we don’t go too far overtime. But we’ll go ahead and clear it out.

Daniel Lee: By the way, before we get to questions, just remind people that, I meant to say it when the fellow from ROTH asked a question, but we are going to be at the ROTH Conference next week and we are looking forward to it. So the last question was?

Operator: Our last question is from the line of John DeCree with CBRE.

John DeCree: I think you covered everything, so maybe one just for you, Lewis. Point of clarity, the real time cash you had given, the $210 million. Does that include the $36 million or so that was drawn on the revolver? And then if that’s accurate, how do you think about the timing of repaying that, is that just after Waukegan ramps to a point you’re comfortable with?

Daniel Lee: Yes, I’ll probably — we’ll probably end up paying at least a decent slug of that back here in the near term for what it’s worth. When we originally did that draw, we did it on a three month draw. So we’ve already put in the request to kind of term out that SOFR contract, if you will, behind the scenes boring stuff with revolver draws. But yes, the short answer is it does include all the cash from that revolver draw and you should expect us to pay a decent chunk of that back in the near term. I don’t think we’re going to pay it all back yet in large part just to hold onto some extra liquidity as we kind of weigh through the opening weeks, but not expecting to need it for what it’s worth.

John DeCree: And last one, Lewis, excluding what’s left in Chamonix and at Waukegan. Do you have a rough number as to what we should expect the CapEx to be for the rest of the portfolio this year?

Lewis Fanger: Chamonix is — well, it’s — we’re spending roughly 10 million bucks a month these days, and we’ve got $110 million left to spend. So in theory, you should be clearing out most if not all of that account here over the balance of the year. You might have a little bit of that pushes into 2024 just because of retention and whatnot. But by enlarge expect us to clear out that account in 2023. For the Temporary, the real time cash number that I gave you already includes the vast majority of construction spend for the Temporary. There’s a couple million bucks of trailing out of that real time $210 million of cash number. And then obviously, we’ve got the gaming license fee as well. So depending on what that final number is for that gaming license fee is, will I guess, affect the full year.

But we made — I’m looking at Adam as I say this, I want to say we made maybe 7 million bucks or so of prior to this real time cash number. So if you’re going to include the 7 million already spent plus another couple million, let’s say for the first quarter, 10 million of trailing of remainder CapEx at the Temporary plus the gaming license fee. But of that 10 million, about 7 millionor 8 million has already been spent in the real time number I gave you. Hope it didn’t confuse you there but I just don’t want you to accidentally double that.

Daniel Lee: Let me add to that. The other property’s very little, needs to be spent, we’ve fixed up this Silver Slipper and Rising Sun and Fallon and even Grand Lodge are all have been — all in pretty good shape. But we probably will spend single digit millions in the next, I don’t know, if it’s this calendar year, but certainly in the next year on professional fees for designing American Place. We got civil engineers and architects and all that so that we can get going with the construction. We have to be open in three years. So we have to get going here pretty fast.

Lewis Fanger: Yes, I’ll give you one last number there, John, if it helps you. The maintenance CapEx figure for 2022 was about 3 million bucks for the properties.

John DeCree: Okay, pretty small. That’s perfect, everything I need. And congratulations again, guys on getting the Temporary open.

Daniel Lee: Yes. Thanks John.

Lewis Fanger: And I’ll see you on a couple days at the Temporary.

John DeCree: Yes, looking forward to it.

Operator: Thank you. As there are no further questions at this time, I would like to turn the floor back over to Lewis Fanger for closing comments.

Lewis Fanger: Dan, do you want to close it out?

Daniel Lee: No, I think we’re done. Thank you everybody. And we’ll keep working hard at it. And next one open is six months away. So okay, thank you.

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