Q4 2020 Full House Resorts Inc Earnings Call
You're holding on for two days of full House Resorts Conference calls, we are still and many other participants on the call should begin shortly we do thank you for your patience for please continue to standby.
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Yeah.
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Good day and welcome to the full house resorts fourth quarter earnings call. Today's conference is being recorded at this time I'd like to turn the conference over to Adam Campbell Corporate controller, you may begin.
Well, thank you and good afternoon to everyone and welcome to our fourth quarter earnings call and as always before we begin we would.
Remind you that todays conference call may contain forward looking statements that we're making and under the safe Harbor provision and the federal Securities law.
I'd like to remind you that the company's actual results could differ materially from the anticipated results and 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 on.
And so we made 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.
Lastly, we're also broadcasting this conference call. It full house resorts Dot Com, where you can find today's earnings release as well as our SEC filings and it's.
And I'll turn it over to Lewis, our Chief Financial Officer.
Right.
Hi, Good afternoon, everyone really briefly we are down one day after day.
Dan was involved and a small accident and Toby fine and he's been working from home over the last few days and he was actually supposed to come on to the office for today's earnings call.
And I thought there was a last minute opening with a doctor to get some fixes down to his shoulder and so that's where he is right now and also.
And our apologies there, but he is doing fine and.
It means you get to hear from new voices on the call like golf I got them for yourself.
And it was all all of that said I have quite a bit to go over.
And most important would be on fourth quarter results, we pre announced our numbers. So I don't think the numbers will be a surprise to anybody on the important parties. We were at the upper end of our expectations.
Consolidated revenues were down about 2% to $38 3 million our adjusted.
Adjusted EBITDA, so increased and a very big way for the fourth quarter of 2020 adjusted EBITDA increased nearly $10 billion, that's more than four times, what it was on the fourth quarter of 2019, and we went through a lot of the reasons why on last quarter's conference call. So I won't go through all of them again here today, but they largely.
Comes down to labor efficiencies and marketing efficiencies and more refined operating hours for our amenities and where we're making sure that our hours match the demand for those amenities.
I do want to make two points on the cost structure, though the first is that a lot of the improvement that you've seen over the last two quarters aren't COVID-19 changes there changes that were and the implementation process prior to the pandemic shutdown and.
Things like the new swap marketing system at rising star and a Bronco Billy's that Lee installed back at the end of 2019.
Yeah that that slot system is a good example are at rising star before we put in that brand new Konami system. We had a 17 year old system. If we wanted to give you $5 of free slot play before under the old system. We had to go through a lot of steps, we actually send you a coupon and the mail you have to then go to the players club.
Showed on your coupons and look you up and make sure. It was a valid offer a void the coupon on the system and then they give you a voucher to take the to the to the cage.
Cage, and then give you $5 and cash and we would hope that you would put that cash into one of our slot machines on that.
That was a lot of extra labor it wasn't a very good guest experience because you spent a lot of time standing in line today under the new economic system, you get the mail or you don't have to bring anything and all you need to do is put your players card into the machine your $5 of free play downloads for the machine automatically that's it that's a big change and and.
And and then again, it's not a COVID-19 and change it. It's one of those things that that we won't go back to the old way, because we don't need to go back to the old way and the new way is a lot better.
Similarly under the old marketing system, it was beyond difficult for us to Paul and he useful analytics out of the old system.
We could not easily tell you what was a good marketing campaign and what was the bad ones and so under this new system not only can we tell you, but we can tell you on real time, but the marketing campaign is profitable we're not me.
Meaningfully easier to pull out all of our unprofitable campaigns and we're doing it now and real time.
And so all of that leads to the second point that I want to reiterate that these changes are sustainable.
Already logged more than eight months with what we call. Our recent operations and we think we're here for the long term.
If you put all of that into perspective really quick for the last six months of 2020, we did $22.3 million of adjusted EBITDA and those six months alone. We did 40% more adjusted EBITDA and we did for the full year and 2019, the third quarter tends to be a little seasonally.
Stronger fourth quarter tends to be seasonally weaker but between the two they should average out somewhere near normal run rate, which is meaningfully above what you saw on any recent year for them for this company.
Go on to the properties really quick and silver Slipper, we had an amazing fourth quarter and full year. We spent a lot of new records. There at the property a year ago, we were thrilled when that property had $13 million of adjusted property EBITDA for 2019, but here in 2020 and client even higher.
$14 $7 million of adjusted property EBITDA, that's despite 66 days of closure due to due to the pandemic.
And those two months of closure has led to a 15 per cent decline in revenue, but we were diligent on the cost side and and again the biggest benefit whereas was from the marketing side and from labor efficiencies that we rolled out and all the properties and not the ones who've already mentioned.
For software continues to benefit from the physical investments that we made at the property and I like the renovated casino the renovated buffet the oyster bar at the Beach club, we took a small amount of damage last year during the hurricane system, but we do keep good insurance and so on real climate is getting some more improvements Ah thanks, and thanks to summit.
Thanks to some insurance proceeds and we replaced our shingles on the roof for what some of which go off during the last hurricane season, and those are getting replaced with a much more durable standing seam metal roof.
It's part of our insurance claim and we also asked for a fresh coat of paint and so we've updated the brands and the turns on the building to a more modern gray and white color scheme and.
Have you been day shutters on the beach, and Santa Monica and you'll know exactly the color scheme and we have in mind.
And there was damage tour and neon sign on the front of the building. So that's being updated to our new Led's line, that's not only much more durable, but also much more energy efficient and so on all of that work is done between these changes and the ones. We have done and the recent past it's going to look like a brand new property and all this past Saturday and the Mississippi Gaming Commission gave casinos and the Green light.
And move back to normal operations, and we're happy to see and the world slowly moving back to normal, but we also continue with many of our safety measures. That's about say for example, we continue to have our employees serve guests rather than have our guests serve themselves.
Our rising star adjusted property EBITDA grew by $3 $3 million, a big part of that increase was due to the economic slot system that I already mentioned.
And then there are other things too like we continue to not be able to operate the buffet at rising star.
Cameron and I don't at all right now, but quite honestly it wasn't generating enough volume in recent years anyway to make all of the extra labor and food preparation work and that's why it pre pandemic, we built a new sit down restaurant named on Easter Island prior to the shut down and we had already per the buffets hours two weekends.
That said I don't think you'll ever see the buffet at rising star organic it cost us something like $2 million per year to run and so we're saving a lot of money by no longer running yet and our guests are getting a much better experience with fresh food that's made the order.
And we benefited also from a full quarter of one of our three sports games. That's the debt Americas came from Churchill Downs, which they're currently rebranding of transpires.
More recently, we had and easing of our some of our operating restrictions at rising Star and you can now eat again and smoke again as you said and play at a slot machine and then on July 1st and a couple of months, our gaming tax rate and I will essentially get cut in half. So we also have that would support you and the near term.
And Northern Nevada segment continues to be the segment that is most impacted by the pandemic and its also our smallest segment for what it's worth at Grand Watch the convention and meeting business is understandably down as people socially distance. So there are fewer people on the hotel that make their way to our casino and they're also fewer people up and nearby.
And ski areas, which are operating at limited capacity.
And the near term and we're looking for to Memorial day, which is when the locals start to come back into town for the summer once that happens we should be a bit less reliance on the hotel.
Documents are there really arent groups visiting and nearby Naval base for training and a lot of those guests stay at the hotel. That's that's right at the edge of our parking lot without people visiting the Navy base or our business at Stockman's is also feel on that so those two factors led to the results that you saw our revenue was down $1 1 million Bucks, we controlled <unk>.
Costs wherever we cook for adjusted property EBITDA was down less and that down only about $270000.
And then on profitability, we had a strong performance despite no table games.
In Cripple Creek no one has been a lot of reopened and table games since the pandemic up until a few weeks ago and so we went and nearly a full year without tables for March 2020 until nearly the end of February of 2021.
And that did affect our revenue by a little bit on the in 2020 with fourth quarter revenue declining by about 6%.
Offsetting that was a full quarter of one of our three sports games and about one week for a second scan that launch just prior to Christmas of 2020 on the cost side, we implemented that same economics slot system that went into rising star between that and labor savings adjusted property EBITDA went from a modest loss.
Modest losses last year to a positive $1 $7 million a share.
Elsewhere and in Cripple Creek, and I'm sure you're well aware we're building.
We are currently calling the Cripple Creek luxury hotel and Casino project.
Obviously, a placeholder name and I don't want to ruin danced Thunder by giving you the name for the new place without him, but that new facility will be located next door to the existing Bronco Billy's casino and it will physically connect so he can walk down the hall and B and the new building as a guest you can earn loyalty points and comps in both places as if they're one.
But that all said the new facility will have its own identity. It will be beautiful and quite honestly will be transformational for that Cripple Creek market Entre, Colorado Springs.
We can't wait to tell you about all the final details on that project, but it.
It wont be today Unfortunately.
It's a bigger project and when we last spoke to you because voters eliminated betting limits and improve new table games, we increase the size of our hotel by 67 per cent to about 300 hotel rooms.
The team behind the scenes and we've worked on a lot of projects and our histories and Dan going back to those days at Mirage resorts.
And Alex and I collectively at Pinnacle Entertainment and we work on projects like we're bearish on Lake Charles and all of those projects I can tell you that this is the most excited that we've been for any project that we've ever worked on.
The excitement really comes down to two statistics. The first is the number of hotel rooms, and Cripple Creek there just aren't very many the the whole town and only has about 300 hotel rooms to serve the 1 million people and the Colorado Springs can and Citi and Playboy feeder markets.
But by the way none of those rooms are high quality. It's a collection of mostly two star and a small handful of three star rooms.
The other number that we look at closely as gaming spend per capita.
It is extremely well for a market for.
For gaming markets that are roughly an hour or so away away from their feeder markets you tend to see a gaming spend per capita figure of around $300 you'll.
You'll see that and places like Washington, and.
Places like Kansas City, and St. Louis and the number is even higher for Cripple Creek, we're sitting at half of that it's $146 per person per year and not only is it half of where it probably should be but it's also a $50 below where the national averages which include states without any casinos at all and it's got low quite frankly.
There's no one offers anything nice and town.
And we can get that gaming spend per capita number up to treat up to $300.
Sorry.
Back and second if we can get that gaming spanning per capita figure not up to $300, but just up to the national average we will have earned a very very healthy return on our project without affecting anyone's business at all and Cripple Creek, helping us out will be the fact that the population and that state and in Colorado Springs continues to grow pretty health.
Lee and then things like median household income and also quite strong.
Regarding the construction we are back at work the storm sewers are underway and the related utility work is also being handled right now that'll take a few more weeks to get done.
We are on the verge of going out and starting work on some test micro piles on very shortly and then and we'll start with the real pilot and micropyle right after that and the.
Near term debt cash spend on that project isn't very big and so for all of 2021, you might see something like $40 million of cash invested into the project.
Because we pre funded the cost of the project with our recent bond deal and we're already paying interest we're anxious to get it done as quickly and as efficiently as possible and should see that place open up by the end of next year.
The firm building it Hensel Phelps is one of the largest general contractors and the U S and we're actually in Colorado their headquarters just outside of Denver, They know how to build and mountain town and they actually built the merest, our facility and Black Hawk, Colorado, and so we're excited to be working with them.
And I'm looking over at her linker and real time here, we usually have a construction camp on the up on the website, where and the process right now of updating that construction cam and and likely adding a second one but you wouldn't you wouldn't see very much right now anyways that with Ehealth and work, that's going on but but but very shortly you'll see not just one but two.
Good views of that project.
A.
A lot of stuff sports games, our sports games continue to rollout now just before Christmas as I mentioned when launched their mobile sports betting App and Colorado that puts us at three wives sports games currently with the other tubing markets are alive, and Colorado and that America wide and Indiana. If you were to take those three scans and annualized.
For revenue its three and a half million dollars per year of contractual revenue with no meaningful expenses attached, though it's essentially three and a half million dollars and EBITDA.
And that leaves us with three skins and left left for lunch.
Lynn and Indiana markets, and Indiana, and then be on line scan for.
For that America and Colorado.
When all six of those skins and alive.
Annualized revenue will be $7 million per year, and still with no meaningful expenses attached.
We continue to think by the way that that those approvals will be soon and that's it is quite a process to get things approved as it should be you've got a growth go through their testing labs. The people on the entities involved with I'll have to get approved by the game and commissions and then things got slowed down by the pandemic as well, but it does feel like our partners on the homestretch to get their alaskans.
Launched and and.
And the good news is everyone is moving as quickly as they can on behind the scenes.
Regarding the balance sheet, a little more than three weeks ago, we issued $310 million of new senior secured notes those are seven year notes due in 2028 they were our.
Our not our but I guess full houses a D D issue with the with our high yield markets.
Proceeds will be used for a few reasons. The first was to refinance all of our existing senior secured notes, we had $106 $8 million our existing under the old notes, we had to pay a modest debt 90 basis point call, a 90 basis point call premium.
From a crude interest as well up to the redemption date.
Are those all notes were floating rate notes they were at LIBOR, plus 700 with a low.
LIBOR for a 1% so they were effectively 8% floating rate notes that were likely to go higher in future years. The new notes that we have arent floating or fixed with an interest rate of inc, and a quarter percent.
And then we have a big positive for these new notes. They don't have a quarterly leverage test that we have to meet like under the old notes.
Under the other ones if you recall because of the three months of pandemic shutdowns, we ended up having to pay for a waiver fees.
And each of the first three quarters of 2020.
And we won't have that anymore without that without that quarterly leverage test.
We used $4 million of our bond proceeds to take out all of our warrants those warrants.
We are out there are they and we could've given the holders and the chance to purchase 1 million 6568 shares of our common stock at an exercise price of $1 67 per share. If you use the closing price of our stock on February 12th which was the day, we completed the warrant redemption redemption.
Net repurchase price for all of those warrants would have been more than $6 million.
They could've been outstanding until their exploration in 2026 and if so.
And I strongly suspect that the repurchase price would have been meaningfully higher.
And by them for 6 million or higher we purchase them for $4 million and so we're happy with the meaningful discount that we got on that repurchase relative to where the stock trades today, and we're happy to because getting rid of those warrants really cleaned up the balance sheet.
The most important use of proceeds to fund our Cripple Creek growth project Theres, a $180 million remaining project cost to income.
To complete it and so we put a $180 million of our bond proceeds.
And two weighted construction and reserve account and dedicated to its construction and.
And we paid for expenses related to the deal and after all of that worried about we had about $8 million of cash left for the balance sheet.
From a liquidity point of view, we have more cash than we've ever had and in my history of this company at the end of the fourth quarter, we had $38 million of cash and that compares to $34 million at the end of the third quarter and then sitting here and real time, we have about $232 million of cash that consists of the $180 million.
And that is reserved for the build out and build out of the Cripple Creek project and then another $52 million of normal cash and equivalents.
Can you give us additional liquidity, we've also been working behind the scenes on a $15 million revolving credit facility.
Was hoping it would be done before this call and it won't be that much longer I think it's only another week or so there are some last small documentation issues that we're getting through it but it shouldn't be very much longer when we do close on that revolver and it'll be undrawn and it's really there to provide us with any additional liquidity should we need it and to help facilitate things like.
Ordinary letters of credit that we might need to post.
And I feel like I went through a lot I'm going to Workover and Adam anything I forgot about that.
So much for everything.
Alright, so with all that said, our operator, let's let's take a few questions.
Well thank you.
And you would like to signal with questions. Please press star one on your own.
Touchtone telephone if you are joining us today use a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment and again that.
That is star one if you would like a sitting on with questions Star one.
And our first question today will come from David <unk>, a private investor.
Thank you so much hey, Hey, Lewis congratulations on another great quarter, and and definitely hope that Dan feels better very soon and my best wishes to have and I know you've got a ton of energy. So it's probably hard to hold them down.
And I'm sure I'm sure he's fighting right now to get out of the out of his doctor and get on this call day, but I will let him know it'll be fine he's doing well.
Okay great.
So your cameras and tell him really well, but I just want to confirm so for your average the seasonally weighted for two and three two and that's kind of a fair go forward from here just prior to pent up demand, maybe the new skin launch as the stimulus and tax relief I, just want to make sure I'm getting that sort of.
Yeah basic down.
Yeah, and then I know that's a good question and and and the short answer is yeah, I do think Youre right I mean, if from our shoes. We were we've been scratching our head a few times, we're where we thought that maybe when sports came back things might settle down a little bit and you had more sports on.
And I think and anyone's histories, all at one time and and things are fine and and so we're kind of sitting here today and looking at things and I.
I will tell you that our best customers are.
And has been coming by about a third less unusual that's kind of 50, plus and then more the their absence has been more than made up for by younger guys thirties forties that had been coming in and playing and our casinos and and signing up for the players club for what it's worth.
And so to the extent that you see some of the 13th and 14th play go away.
And that saying that we will by the way, but to the extent that you may see it go away. The good news is that our best customers should also start to slip back in the door as vaccine distribution rolls out and and in a big way and and.
And then we've got a few I feel like we have more more more things to more ways to grow than things that might go away for what it's worth that so even if some play does manage to go away. We still have three more sports games that I think will launch here very very soon and that's not and the annualized number we've got.
We do have that a gaming tax reduction that rising star that's going to be something like two or two and a half million Bucks a year that will save us going forward once that kicks in on July 1st.
So they're there, they're a little things and yet still that that that will be additive and so I don't think you're thinking about and the wrong way I think you're I think you're right and I think they're thinking wow.
Okay fantastic.
And that's customers will be the first to be vaccinated so favorably.
Back per se.
On Cripple Creek, so it sounds like construction disruption at Bronco, Billy's and possibilities for the mitigated and just give him a configuration.
And so I'm thinking about that and I'm excited for the for luxury offering and scratching the math on it just given the investment draw that you're creating does full house have any you know strategies overall for our Cripple Creek in terms of land purchase options or a strategy for the strictly on the facility or is that a little premature for us.
And so at this point.
There is.
There's some stuff we're working on behind the scenes. So it's not gonna be a completely disruption free a construction process. Unfortunately, there's there's parking.
That's gonna go by the Wayside as we you know the new building will take over some of the existing surface lots and so right now around town and we.
Signed up a few leases to just get some extra lots for parking.
Oh, Wow well, while the building is under construction, but the hope by the way is that the garage may be done sooner versus later and and if so we could actually let people start parking and a garage before that full facility is done.
There's.
There are are there there is a building that debt that does get torn down and it has some rooms and it so we're going to see some rooms and they go by the wayside, but.
But but we never had that many rooms to begin with for what it's worth we only have 36 total rooms and.
And so I think we'll be able to navigate that decently and.
That all said if I had my druthers between minimizing disruption or getting it done quickly and where we're going to err on the side of getting it done quickly for what it's worth.
For the existing parcels that we have we have quite a bit.
Actually on both blocks so not only on the main block of Ben It but on the street behind on car, we've got quite a bit of a room as well and so down the line, we actually could go in and add more hotel rooms, if we wanted to.
But at this point I think we've sized that project appropriately and and.
And you heard me say it with now and then we were excited to see that then get built and get done and we think it's a.
We think it's going to be a big deal so yeah.
And we're moving up there.
Yeah.
And I can just go on over and then all you all and I promise just on high gaming and Indiana Day do you think any license access easily.
Potentially net more royalties to you and and just if you're granted multiple scan for do you look to be potentially active with one of them or is that just not the strategy.
We.
Oh go ahead, Alex go ahead.
Yeah, I don't think that's a good question.
And there was.
Legislation that was introduced this year and Indiana.
A lot of free online casino skids legislation did not.
For this year, but we expect to be reintroduced next year and standard pretty good shop leasing.
Yeah.
We would definitely look at possibly doing one of them.
And one of the skins on our own brand.
And online casino.
And then we definitely believe we could monetize at least two if not all three of those skids.
And on the comparable with what we did with the sports betting.
Yeah, the the important nine very much.
Hey, Dave that really quick the important thing to keep in line with with our current sports games as they we.
The contracts that we have in place for all of our sports games, and Indiana and in Colorado. They only include the sports piece. They don't include.
The rights to any any.
True casino, so slots or tables or whatever whatever it is on line and so we do have the ability to continue to monetize. It. However, we ended up doing it so.
It's a great question also.
Great. Thanks, Scott and thanks, again, and and that's what's just for debt.
Thanks, Dave.
And our next question will come from Ryan and signal with Craig Hallum Capital Group.
Good afternoon, guys. Thanks for taking my questions and I will send our best wishes to today and its older Coal Hill up.
Curious on Waukegan and whats the latest you've heard there are checks indicate board is still looking for an investment banker and those are on a month ago I don't know if there's been anything more recent and the process and then kind of best case scenario of how early do you think we could get a determination there.
I'll, let you go get out.
Sure Yeah, no great question.
Gameboard has their next meeting actually two days on Wednesday, So we'll see if there's any updates but.
Absolutely correct.
Looking to routine and investment banker to help them analyze the two competitive license application that they have one of them and swap cake and the other one is for the southern suburbs of Chicago.
And the executive director of the Gaming Commission beginning board I'd, rather previously noted that he thinks its probably about a six month process for.
The time, the higher debt investment banking from help analyze the applications.
So you know.
We're probably a good six bucks out we think from.
And then making a decision.
And then second part of your question and I don't recall.
No that pretty much covers it.
And two six months.
And then I also had a cripple creek and Waukegan and are there any other projects that you have on the table that you're considering and then for quite some nice upgrades and feel good about your casinos, but anything else growth to the properties. You currently have that you'd like to make.
Yeah, we are well for what it's worth we're where we are laser focused on its bronco project.
We are all the other projects, we've done and done and our history and that's actually one other small ones but.
But nonetheless are super focused on it and want to make want to make sure that it gets done well and.
Successfully and and the launches are the way we think it should.
Now behind the scenes, we've long talked about.
And at least internally long talked about going and doing a modest NIM expansion over at silver slipper.
Process there it takes a little bit of time because there's.
Where there's a existing peer at our property and we will look at putting the hotel the new hotel tower out over that peer and so it's a little bit of back and forth with the government entities.
Well have some some mitigation of of Marsh land that we have to do over over there, but so that that's something you could be a little bit down the road, but no. No you you kind of know what and then otherwise we you know we keep our eyes wide open on everything but nothing nothing nothing to report for you right now.
Great and typically hop back in queue. Thanks, guys. Good luck.
Good stuff thanks, Brian.
And our next question comes from Chad Beynon with Macquarie.
I believe with cash.
Congrats how're you doing.
Could you address on the bond deal and the results here and also and then a speedy recovery wishes.
Wanted to just.
Basketball margins I know you guys have talked about taking no EBITDA for the bank and and the margins but.
Just just curious in terms of when some of these customers come back to the properties Theres, probably some additional cost creep and probably not much but a little bit but it comes back you guys posted 28% margins and the back half for the year.
Not that you're giving guidance, but can you kind of help us think about what it would have a good margin.
Margin profile could be could you can you continue to post something and the mid twenty's or should this draw.
Drop just says as we get through and.
A different period thanks.
Yeah, and I know that that is a good question I do think that on margin for us should be.
And that we can have margins and the mid twenties for what it's worth it and you are right. There is the potential for some cost to come back into the system and is a good example, as table games come back more and more.
Tables tend to be a lower margin business, but you do it because it's additive to EBITDA.
We haven't or we just got back tables at Bronco Billy's a few weeks ago, we haven't been running the tables at stockman's, even though we could.
But it didn't doesn't make sense currently.
And so there there.
There are some some pads, where the margins could creep down and I would tell you on the flip side, we have a lot of cost that.
Debt or elevated debt go away. So we've got a lot of extra cost of people standing at the doors, taking doing thermometer checks before you enter the casino.
And we've got a extra cost as we had people running around doing sanitizing of all the equipment.
And quite quite often and.
So so there there are some and there are some expenses on the other side of that go away.
I will tell you that.
Well, we listen and I know you guys listen to everyone else's conference calls and it is.
And nice hearing our competitors also talk about how.
And they think that we've all over marketed in the past and and I think they are right and and.
So that that helps out but the big point that I tried to make at the very beginning of this call was we just have a lot of changes that arent COVID-19 changes. They they really are they really are things that where were being put into place pre pandemic and those don't change and and so on.
And I feel good I feel I feel good where we are mid twenty's is not a bad spot to be.
Okay perfect Thanks and.
And then you obviously talked about all the internal options of growth here and we're still waiting on Waukegan and and Cripple Creek, you'll certainly have your hands full with that but now that the balance sheets and a great shape. Your stocks near at all time high how are you thinking about some other smaller potential tuck ins that you know what.
Probably always marketed and maybe higher multiples than where you were trading or you just didn't have the cost of capital to maybe do those or are those still important in terms of division of a full house and if so.
Is there a type of property that would make sense, something with with low capex or where maybe an opportunity to kind of do something like what youre doing a debt Cripple Creek, just kind of curious how you're thinking about the next couple of years with regards to that.
Yeah. There is there's not a big push for M&A on our side for what it's worth I mean, you know a lot of the assets that end up getting shopped around are we.
And what we spend a lot of time doing us scratching, our heads and saying why are they trying to sell this asset right and and and so so we.
Sometimes you have assets that are getting shopped around and and and they're required to sell them.
And then you have to worry right was this property starved of Capex was it a did they take all the good talent out of the property and and and.
And and kind of started out of the of the HR talent, if you will and.
And we go through a lot of those reasons and our head.
Our heads I should say we.
And when we bought Bronco Billy's and it was a little bit of a different scenario and it was a stellar group of sellers that were I think and their eighty's, if I recall right, Alex and but they were on the older side and they were really.
And thinking about estate planning and more than and so the reason for them to start with a good and natural one and and.
And that's why it was exciting to us so.
I mean, we're fortunate we get every pitch book under the Sun.
We have bid on things, we try not to chase up bids are but oh, and we have their hands full so I you know what we'll continue to work I.
Don't hold your breath on on us buying something anytime soon though.
Okay. Thanks Lewis Thanks, Alex appreciate it guys.
Yeah, and you got it.
Our next question come from John Decree with Union gaming.
And so on before.
For you before you ask your question John I, just wanted to tap onto my last comment really quick I mean, we've really been at this company and not for any reason other than and then to try and do good and smart things and.
And so theres no ego involved we don't need to be other are.
Trying to build the biggest casino and casino company in town and that's that's not the launch or the mantra that we have is just do smart things and.
Try not to do anything dumb today is really what we see on a daily basis, so anyway, but little postscript, sorry, John Hello, [laughter] no.
No worries.
Good question right out of my mouth.
But on the note.
Working on smart things and you've talked about some of the.
And be implemented operationally, they just started to pay some dividends like the new slot system and I guess another way of asking the margin question.
And with everything you know today.
And you wanted or you know in terms of it seems that you were working on pre Covid operationally I mean is there any of your properties left where you can implement some best practices that you haven't gotten too or make some tweaks or changes.
Or do you feel like the portfolio operationally, it's kind of all kind of operating the same playbook right now.
And I think there's there's always more that you can do so northern Nevada, and as our one group of properties that arent on the economic system.
And then I feel like I'm, a walking Billboard for economic and these days, but we we are now we now have it everywhere, but northern Nevada, we know how to use that system extremely well and.
And we do plan on installing that system, and northern Nevada, and it's probably going to be not a first or second quarter, but maybe third quarter of this year that will get that installed and they've got a pretty healthy backlog before they can get around to us.
But I think that's going to help out and a meaningful way.
No.
And we're always going to look for more and more ideas. So stay tuned but as of right now and we feel pretty good about where we are absent a few things like that.
Understood.
And I'll throw a line in order to give you a little fishing here on the current quarter. I know you went through the property reviews, if you've kind of made a little bit of discussion but.
Big picture.
As the quarter progressed, we've talked heard from some closures and stuff and the <unk> had had impacted demands a little bitter capacity restrictions coming out of fourth quarter do you have any kind of high level comments on wave demand has trended.
On a portfolio wide and at a high level has it been similar to what you've seen in the fourth you is it has it gotten better.
Worse anything that you could give us would be helpful.
Yeah Yeah.
Well, it's good news so for first quarter has been more of the same as for Q4.
First quarter like the fourth quarter is a little seasonally slower.
Did have a pocket and in February where you had some IC and snowy weather that took out a lot of People's properties. Unfortunately, so down and New Orleans, they felt the cold snap.
We added a we had a lot of snow at rising star, we added a bronco Billy's and so there was there was a about a week where are where.
And where the properties are really didn't have any one and the building, but strip out that Lee and I will tell you that January and February where we're pretty pleased.
And you, even northern Nevada by the way and I say this cautiously I'll knock on the wood on the table here, but even northern Nevada and recent weeks feel like it may be starting to turn around and go the other way and as you know that that was one of our one laggard, but and I, it's starting to hopefully show some.
Signs of go on the other way here in the near term.
Got it and that's very helpful. Thanks for taking the questions and all the detail and give them on our best for a quick recovery.
You got it you got it thanks John.
And our next question will come from Steven and Brent stature with ABL investments.
Congratulations gentlemen, great quarter.
Thank you.
I'm just one quick question and I think all my other questions were asked for the other gentlemen.
Are any of your competitors and Cripple Creek looking the kind of size on the hotel like you guys are doing or are you guys going to be the big game in town.
We will be we will be the big Guy in town and the there there is a competitor that's building their own hotel right now, but it's being built.
And to be a bit more of a three star and quality.
Century has talked about and in the past about expanding but they haven't broken ground day. They ended up doing some acquisitions and.
And expanding on Canada, I believe so they're there they've got a little preoccupied with other things for you you may see them.
Spanned out later with with their Cripple Creek plans.
And then a group of casinos across the street called Triple Crown.
Not yet launched either but when you look at everyone.
Hours I think ours are the only really.
I don't want to say distinguished but.
We do believe that we stand for.
Pretty decently apart from everything else in town and that even with some of the new stuff, that's being proposed or under construction.
And and the one that's being built Alex correct me, if I'm wrong and I.
And it's only 100 rooms, and I believe yeah. So it's not a it's not a monster.
Monster facility.
Well, you do kind of want to build up the area and on the more people that come more popular and aerie become so having them to competitors, though and we've actually possibly a good thing.
We absolutely are more and more we don't see the competition at all.
Yeah, we don't see the competition at all and we welcome more hotel product into the market for sure.
And all the other road set up to handle increased traffic.
They're actually pretty good growth. There you know there are two ways that you can get there there's a if you're coming from Colorado Springs. You are you go through a theres a theres a road that you could take that goes along the shoulder of the mountain there or if you go maybe five or 10 minutes past that.
And there's actually a pretty easy road into town and the Cripple Creek, So you've got and you've got to actually pretty good options. The town has always gone out of its way to make sure that those roads are pretty well counts.
They get a lot of tax revenue from the casinos and.
So they're incentivized to make sure they are in good shape and time.
Time flies by during this pandemic, but I think it was two years ago, They went and repay that entire that entire a path along the along the mountain side there. So.
So and so I know it's in good shape. The other thing that they're working on behind the scenes and.
And that last bit is lit and so so theres been a proposal going around actually put in from some waiting to make that path even easier, but it it's actually a good road, it's in good shape and and freshly painting.
Great I'll check one over the Indiana with the the theory are you know marketing over and Kentucky.
I guess the primer on.
On the system.
We are we are yes, yeah.
That's very actually doing pretty well for US now if you look at the monthly cost for that theory relative to the revenue same day revenue that we get from people that write it and its actually doing quite quite well.
You can still and and.
And need to market and a little bit more but it's in good shape right right. Now if you go and you want to take that theory.
We actually make you swipe your players card. So we can keep a pretty good record of who's going on that but we didn't do that for the first six months nine months or so as we were just getting people accustomed to that variable being around and we're still going through that process, where a lot of people don't know about that very boaters there but.
You know these things change and time and I and I think once you take it and it's actually a pretty nice and easy route. It's it's a it's a good path so.
Great and with the Konami system.
Are you guys looking to do upgrades and cashless wagering is that something in the future.
I would be here and we are actively yeah. Yeah. No no. Good question. We are at very actively looking at it and we've been looking at a cash flows have to slots and then and then also I think the.
Better thing would be a cashless debt at the table games themselves, where where you could actually a bed at a table game you basically have a mini iPad in front of you that you use for your chip. That's when you are cash out and you'd have a tito tickets and to then put and you could put into a slot machine or you could just cash out like normal vs. Chips were you only can.
Taken to the Cage, and then maybe maybe the gamba little more on your way out maybe not.
But they know cap cashless is quite quite interesting and not a lot to tell you quite yet, but we're pretty actively working on it.
Well I'm thinking more cash looks like right through your cellphone I mean is that something that you.
Just to make it all and I guess, we're touching.
Yeah, Yeah, no no. So looking at that you're still looking at that too that that process is oh all of these processes are a little a little more complicated because you've got various state gaming Commission and they have to work through their approvals debt, but all of it is is intra.
Interesting and we think.
Look we'd love to do any of that stuff as soon as we can.
And so we're paying close attention.
And the and the last three skins that haven't.
<unk> already close or there's still just and the process.
No I I yeah there.
Go ahead, I'll start and then all of our yeah, Doug, but they're all very.
Close.
Turkcell has I believe on their last earnings call. It publicly say that picks up and you live and Colorado before the other.
Kentucky Derby.
And the other two sparkling and landmark public communication with them, but they're both working on getting the R&D and approvals and they're pretty close.
Great Great job gentlemen, thank you and continued success.
Well, thank you Steve.
We have Oh, maybe time for one last question here absolutely Sir that question will come from Kenneth pounds with Castleberry advisors.
Oh, Yeah, it was great to see the.
Good job great to see the <unk>.
On getting rid of the warrants it seems like that will save you guys.
Okay, and just to put a number on it because we moved around with the stock price.
And I guess at least.
Seven or 8 million. This this year or is that correct.
Okay.
And you know, it's it's all of it it would all depend on where the stock price goes for water and so.
Yes, it's a function of that but I.
I I admire and where do you think the stock price goes [laughter]. So yeah and know who you are what you you you are right, though it does make it makes them. It makes the balance sheet pretty pretty darn clean and makes the income statement way easier as well because we always had to make adjustments.
Diluted EPS for those warrants and and so it's gonna be way way cleaner from here. So we're excited to take them out.
And other small thing with their debt as theory.
Instead of like early redemption option on that at all.
On the new notes that we just did yeah yeah.
Yes. So those are those will be those that are no.
No call three period.
And then we kind of go into a standard call after that where it's half the coupon and year for and it ticks down after that so we'll be we'll have those notes for a little bit of time, but where we are okay with that they were they were honestly largely for the build out of <unk>.
I've got a better Cripple Creek expansion and.
And as you know that that wont open up until the end of 2022 and.
And then we'll have a period, where that price where that practical will ramp up and.
So we wouldn't normally have taken them out well inside of that three year period anyway.
Right.
And just lastly, I know you guys are based in Las Vegas, we're hanging on.
And is there any idea looking at and southern Nevada property.
No probably not.
These are the the benefit that we get here in Las Vegas is is that we do enjoy being able to walk down to.
IGT or style games or whoever it is to look at their latest product right and their factories and.
And when it comes to auditors right, everyone and town knows no Dan and quite well so it's nice to be in the mix of it all here in Las Vegas, and have real time access to what works and what doesn't.
When it comes to southern Nevada casinos.
We feel the strip is.
A bit difficult to compete and.
Especially right now is you've got a.
And as people socially distance for what it's worth and I I personally don't think youre going to see much of a yeah I don't think you're going towards yesterday and I was going on.
Some of the I was thinking more of some of the local type things that around the you know sales or southeast southwest side and the city type of idea and it gets you a building and using their red rocks somebody told me Yeah, Yeah, Yeah No no. Good good question too and even there. It's oh, it's on the lower end of interest for us because.
And you know what station Red Rock resorts I guess now it does it does a very good job of other locals business.
They would be hard to compete against that.
And of happy with where we are look we take a look at everything but.
But if you had on order markets those those two stripping and and Las Vegas locals for us is going to be at the lower end of the west coast because.
For our stations and the monster, so they'd be do a great job.
Alright, and with all that said Sir.
That's a great answer and then and thank you so much and keep up the good work.
Oh. Thank you. Thank you.
Well that that all said.
Okay. Thanks, guys we are.
A little unexpected with and gone today, but as I mentioned he is gonna be grateful will have on back here and knowing Dan and I'll be back tomorrow, So our apologies, but I think thanks for everything and we'll talk to you next quarter.
Okay.
Well, thank you and that does conclude today's conference. We do thank you for your participation and have an excellent day.