Q3 2020 Full House Resorts Inc Earnings Call
It's the first time in many many years.
We achieved that there.
Well the way the same measure at the silver Slipper is 32% this year and it was 17% last year.
Yes norm in these markets as usually in the mid to high Twentys.
Bronco Billy's.
We have the Christmas Casino, we had a new marketing plan, we had lower expenses.
A lot of things going on our revenues were about flat off 2.5%.
But EBIDA t. again more than doubled from million six to 3.4 million.
And so.
A lot of things come into play there.
The margin would be 43%, which should be abnormally high.
Last year's 19, but Theres also one other unusual thing that happened there.
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And that when you when you have one of these loyalty programs you go through some pretty complicated math required by GAAP to accrue a liability.
For the points that you're giving out and one of the assumptions is what portion of those points are going to be redeemed a lot of never get redeemed so you'd have some math figuring that out.
Well we started.
When we acquired Bronco Billys four years ago, we started to assist them and you started that accrual now we changed the program to a new program well part of doing that was we changed the points completely and so we told people really is a marketing reason we said your your points are going to be worthless. If you don't come in and use them.
And we first told them that early in the year.
As kind of an incentive to get people to make an extra trip and then the pandemic hit. So then we gave them additional months because we didn't want anybody to feel like they get screwed.
And and after we proudly told everybody. Please when you use your points. Please commute in and use your points. We finally said, okay. We have a new program now and your old plants are worthless.
Years ago I lived in Brazil in the head crews arrows and all of sudden they went to cruzados. It was kind of the same thing at one point you just say accusing sales are exchangeable for while and at some point, they're not like Cruzados just went away.
Such hyperinflation that had to do that once in a while so.
Nevertheless, because we had.
Maybe guest a little bit to conservatively on what portion of points would be redeemed. We ended up with about $400000 of accrued liability related to points from the old program and since they are no longer redeemable that ends up with a credit in the quarter that that's real income its just a show.
Shifting of income from past quarters, so another way to put it put it as in the past quarters, we had perhaps slightly understated the income of Bronco Billy's and we caught up this quarter. So there was a $400000 unusual thing in there.
And if you back that out the margin was still 36% and the income was still up very nicely.
And then in northern Nevada, that's our toughest spot we've got two casinos up there one is the Grand Lodge casino in the Hyatt Tahoe.
Luxury hotel on the north traveling Tahoe.
And.
People do fly to Lake Tahoe to vacation in the summer or ski in the winter.
And an independent make people are hesitant to fly and that hotel.
Hotel also does a fair amount of meeting and convention business and obviously that's off a lot of the crisis.
And so the hotels occupancy is often that affects us in the casino.
And then in Fallon, it's the home of the top gun Naval Air station when they do a lot of training of carrier pilots and so on and the Navy has been restricting most almost all of its personnel to the base for the same reason they don't want to spread.
And the people in the Navy necessarily travel they don't want to spread Cove it into the community nor do they want their pilots getting pulled in from the community so to reduce the transmission rates theyve restricted travel off the base and that is not helpful to us So our revenues in northern Nevada in the quarter were off 35.
5%, we do have pretty tough cost controls up there so while our revenues fell 2.2 million our income only fell $1.1 million.
In northern Nevada.
At corporate our corporate expense was down about 18%.
Part of that is.
We have a few expenses that we used to carry at corporate that we are now allocating to the properties because we found out that thats pretty much the norm amongst our competition.
So it's a little bit of an adjustment there.
And.
In our corporate expenses, a little below last year, maybe not quite as much as the shows because we've got some allocation stuff going on there when you add it all up our EBITDA was.
It was up 115% and frankly, a good chunk of that is sustainable.
And I don't know if all of it sustainable I mean things are going pretty well.
At first back in.
July which was one of the best month in our history I thought well, maybe it's the very generous unemployment.
That ended at the end of July and business did good then I thought well, maybe it's because there is no sporting events on television and in September Theres, probably more sporting events on television that theres ever been in history. Because every leak was planned and our business remain good.
I think there is an element of people are hesitant to fly nobody flies to our places they drive to him. So we are locals place.
I know our senior citizens segment at 65 and older is off like 30%.
And and I'm, hoping that that's people were nervous and they are staying at home.
Percentage of their revenues and each one is slightly did.
Differently defined but when you add them all up at $7 million a year, we had two of the seven.
And this quarter.
Was like two and a half million dollars.
This year it ends up.
Because it's not material enough yet.
Others have kept it is.
In the entities.
Like the Indiana licenses in rising star and the Colorado license and rockabilly. That's why we gave you the numbers both with and without it we anticipate in the first quarter that will have.
Most if not all of these up and running and we'll probably break it out as a separate segment because it it really has very little to do with the casino at somebody.
Actually use somebody else's money it was cheaper we'd have to pay a little breakup fee.
And so on so forth, but part of the reason to do it is to give comfort to Illinois that this is financeable and if they choose us this will get built and and so I think thats pretty important and frankly its good relationship for us to have its good company and it probably is the right way to finance it.
And it also allows our investors in our company our lenders.
Not to get too concerned about us, making a $300 million proposal when a company our size.
At the end of the day.
Let's see the other.
Thing I've noticed two days ago, and Colorado, there was a referendum that past.
Actually two aspects of it.
The state wide they approved a change in the law so that the.
The gaming communities that have casinos could.
Could vote to change the bedding maxims and what games are offered now the main game that has not offered today that that most casinos would like to offer his background or many background that just wasn't one of the approved gains before otherwise, we're pretty heavy let blackjack slot machines craps and so.
But theres no back right now, but there is a huge Asian population, and Denver or or Colorado Springs, but your attack and six or seven people. So in there somewhere there is an Asian population and the Asians often prefer to play baccarat and there are people are nominations, we like to play back so.
That was but the bedding maximum as a kind of a big deal.
Originally in the state it was $5, which was a huge deal I mean that restricted a lot of the play.
That was changed to a $100 maximum bet a few years ago.
And now it goes away, but by the way on the same ballot.
The community of Cripple Creek.
Had or Teller county head to head its citizens vote.
Whether in fact do this and they approved it so the state approved subject to local referendum and the local referendum happened at the same time and they approved.
We think it will be implemented.
May onest around May Onest and.
And you know for Bronco Billy's today, it's certainly a plus as a huge plus I don't know, but it's certainly a plus bronco billys is pretty simple casino today, but we do look and have talked a lot and have acquired Atlanta and have plans to eventually build a high end hotel in Cripple Creek.
And fix up Bronco Billy's and obviously this is a very big plus for that.
No.
Having said that we are still in a pandemic, we're not out of this pandemic and.
Yes, and you see the news the case rates go up Colorado's got this meter system that.
If you if you're.
If you're yellow you're supposed to be really careful if your orange you've got to do other things and if you read I think you'd go hide underneath your bed, but theres a whole there's a whole process of of what it is.
And each state has a different system, but it all comes down the same thing have case rates go up they tried to get everybody to try to stay home and sometimes that means closing virus at 10 o'clock or something except North Dakota. Just thanks, none of these rules apply to them and they have the highest case rates in the country, but but do you have.
All these different rules, yeah, we're going to be in the US frankly until there's a vaccine that is widely available and.
And you know enough people have taken it that you don't have to be as concern.
Until that point, we are at risk of having to close a casino or more than one casino for some period of time and so we're still pretty cautious about maintaining liquidity.
And.
Give a waiver of licensure for bonafide institutions up to 10%.
And Illinois, Donnelly does that too but in this case the owner of gaming Board.
As being super sensitive that whoever they choose doesnt embarrass them down the road.
Trading volume in our stock.
And start going down and then we were told okay. We're under 5% so stop asking us for social security numbers and we're like Okay kind of sorry, you did it but.
Well at least it resolved the problem with gaming point. They were they were good shareholder values, sorry to see themselves down.
I think going forward after they do the initial licensing I think it's the intent to bill annoy to go back and follow the normal 10% rule, everyone else above the sports betting loft calls for 5%.
About some of the components to your marketing and labor saves that you've taken basically since the casinos shut down and then the ramp back up I.
Akane re to hit.
And laborious been open three or four months had huge revenues, but it wasn't producing as much income as it really should have and when we were closed for about a month to rebuild from Rita.
Then.
We focused on okay, let's when we reopen let's be really careful how we reopen and <unk> has been very profitable for 10 years. Since then and this was kind of the same thing when you when you have to close everything and lay everybody off.
Then it's it's a it's.
It's an opportunity.
And so it was kind of like well, let's give them less if they if they still show up great there'll be continued customers, but if they don't show up.
But I actually you bring up another.
We were we were kind of studying five dollar blackjack tables anyway, we were right because if you run the math.
50 hands an hour.
How Serge black.
Blackjack, if it's a normal player not occurred counter but somebody who rid of four page article on how to better <unk> check. The house is about 2%. So if somebody is betting $5 a hand, we're making 10 cents a hand, and there's 50 hands an hour. So we're making $5 an hour on that person. So if you have a five dollar blackjack table with.
Three people sitting at it.
You're not making enough to pay for the dealer the relief dealer, who has taken a break in the back.
The shift supervisors over over watching the dealer and so on and.
You know you could so in effect the the pandemic and the forced Reid.
Yeah.
For opening what they're finding is nobody is going to.
Yeah. So thanks.
Make sure that we're probably a plan for one one last question.
Okay. The next question is from line of Ryan ticked off from Craig Hallum Capital. Please go ahead.
Great.
The really strong results.
Already out of it maybe you are in the low Fortys and then if you say some of it might not be sustainable so maybe you're in the low thirtys, but then you're going to have the sports betting stuff come on which you add on to that so.
The FDIC of the company is.
Thirtyish maybe.
35 ish.
It's not 15.
I guess the bottom line and when you when you started at 50.
In the end you start making adjustments to say well what is the ongoing number.
We're going to do do the best job, we can to get good sustainable income in this turbulent world.
I don't think I'd.
I think our margins will not go back to where they were before the pandemic.
Good.
Helpful. And then just trends in October and then the first few days here in November.
Revenue cost margins anything directionally change in here.
Actually you just reminded me as I know things that things have been pretty good as well and easy comparisons to last year.
But we did have a hurricane which I failed to mention earlier and it hit us.
This was probably the biggest arm since Katrina to hit.
The Mississippi Gulf Coast, and we did have some damage.
Good.
Last one for me.
On what key again, great to hear the financing partner.
Feedback that you received from.
Illinois Gaming Board when you amended your proposal informed about that partner.
No. They are there they keep a pretty good poker face to be honest.
They said thank you for that additional information we were taken into consideration so.
Yes. They were they were they were not budging on the social security number issue, although I will tell you. The other institution. We have this big institution, they kind of shifted the investment into an entity that has a smaller board in that smaller board provided their social security numbers and.
We think that May satisfy Illinois, it's not our call we'll see but.
But it was a creative idea and we think it might work thinking probably will work actually because.
Yeah. So I mean, it's a catch 22, you have these regulators, who really want to make sure. They know who they are dealing with them. So they throw a broad net and then you have some institutions since for this tiny tiny investment you're going to investigate all of our officers and directors are you Kidding me right and we get caught in the middle saying listen with this is the world We live in we Didnt.
All the time, let's see if we can find a way to keep everyone happy.
Because because the the institutions, we're talking about it's not the Teamsters pension fund or something anything questionable there reputable financial institutions and so you try to get everybody comfortable that that is the case and so.
We got there with the one institution frankly, I think we would have gotten there with the other institution, but the the.
They had a.