Q1 2021 Full House Resorts Inc Earnings Call
[music].
Please standby were about to begin.
Good day and welcome to the full house Resorts first quarter earnings Conference call Today's conference is being recorded.
At this time I'd like to turn the conference over to Mr. Lewis Fanger, Chief Financial Officer of full House resorts you may begin.
Thank you and good afternoon, everyone welcome to our first quarter earnings call as always before we begin we remind you that todays conference call may contain forward looking statements that we're making under the safe Harbor provision of federal security laws.
I'd like to remind you that the companys actual results could differ materially from the anticipated results on 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 <unk>.
Please see our website as well as the various press releases that we issue.
Lastly, we're also broadcasting this conference call that full house resorts Dot Com, where you can find today's earnings release as well as all of our SEC filings.
And with all that said I want to start today dance back with US this quarter. So that's the good news.
We had a relatively busy quarter, mostly on the balance sheet side operations continued as you've seen over the last two quarters that gives US 10, 10 months now reset operations and as we stated pretty strongly last quarter, we expect those changes to be sustainable looking at the income statement.
<unk> revenues for the first quarter were up pretty strongly about 37% to $42 million. We were closed for the last two weeks of the quarter last year. So that's part of the reason for the strong gain however, even if you compare our recent first quarter to a more normal quarter like the first quarter of 2019 revenue still climbed about four.
Percentage that was due to strength in Mississippi as well as the continuing launch of our sports skins, which we'll talk about on just a second.
Adjusted EBITDA improved to $10 $8 million, that's an increase of more than $12 million versus the first quarter of 2019 and again, we went through a lot of the reasons why last quarter. So I won't go through all of them again here today, but they do largely come down to labor efficiencies marketing efficiencies and more refined operating operating hours for our amenity.
<unk>, where we're making sure that our hours match demand.
Again, we'll continue to reinforce we think all of that is sustainable.
I don't know of any first quarter over the last many years where EBITDA.
It's been stronger than where it is where it was in this current first quarter.
On a trailing nine month basis, our adjusted EBITDA is sitting at more than $33 million Thats, a great spot to be sitting at as we step out of our seasonally weaker fourth and first quarters and into our stronger are typically stronger second and third quarters.
For all of you astute press release readers out there youll see we switched up the operating segments on U. We broke out our sixth sports contracts in Colorado, and Indiana into their own segment, which is named contracted sports wagering that includes the on site sports books at Bronco, Billy's and rising star the three online <unk>.
Skins in Colorado, and the three online sports skins in Indiana, We felt it was wise to break out that segment for a few reasons. One is that investors seem to be valuing sports betting generally in a much different fashion than traditional brick and mortar casinos.
Very specifically it feels like companies in that business are being rewarded with much higher EBITDA multiples.
And secondly, the cash flow that we get from that segment is real cash flow. There is theres no maintenance capex attached to it we don't have to pay for a leaking roof. We don't have to pay to replace slot machines. There really arent many cash needs on that segment at all and that's probably part of the reason.
You put on Richard multiple on.
Regardless, we are giving you all that increase transparency by breaking out the contracted sports wagering segment.
That segment did increase from about $400000 on last year's first quarter to nearly $1 million on the current period Thats due to more skins being live we had three of our six skins alive in the first quarter of 2021.
<unk> added more very recently in the second quarter about five weeks ago, our fourth skin launch that was when launching in Indiana, and then about two weeks ago, our fits getting launched and that was Churchill downs launching with their twin spires skin in Colorado.
Skin left to go which is markets in Indiana, and we hope to see them go live in the next few months.
Regarding the balance sheet, we were very active in the first quarter, we issued $310 million of new senior secured notes with a seven year notes due in 2028, there are day debut issue with the high yield markets.
By the way they are quitting trading quite well.
The proceeds were used for several purposes. The first was to refinance.
$7 million of our senior secured notes due 2024, including a modest call premium on it.
The old notes were floating rate notes at LIBOR, plus 700 with a floor of 1%. So they were effectively 8% floating rate notes that were likely to go higher in the future.
Current floating they're fixed with an interest rate of eight on a quarter per staff.
So Dave as I did mentioned last quarter is that our new notes don't have a quarterly leverage test that we have to meet.
A pretty big advantage.
Versus what we used to have we did use $4 million of our bond proceeds to take out all of our all of our outstanding warrants those warrants gave the holders the ability to purchase about 1 million shares of our stock at an exercise price of $1 67 per share with those gone.
Pretty clean and straightforward balance sheet now.
The most important use of proceeds was to fund our Xiaomi growth project in Cripple Creek, Colorado, we have $180 million.
About $180 million.
Cost to complete that project, but there was only about 100000 of spend.
By the end of the first quarter for what it's worth.
Through May one we've invested about $2 $1 million of the $180 million into the project and if you take a look at the web Cam actually if you look a few hours ago, you would've seen the demolition of one of the existing buildings live it was kind of fun to watch, but I'll, let Dan give you a full or update on that project very shortly.
And then the balance of the proceeds from that bond offering.
Was the pay per deal expenses, and we put about $8 million of cash on the balance sheet.
While we have been pretty laser focused on our <unk> project, we do have two potential future projects on the horizon, both in Waukegan, Illinois and at our existing silver slipper property and so because of that in late March we issued $46 million on new equity.
This equity issuance strengthens our balance sheet, even further, especially as we prepare for the day when we can formally present, our project to the Illinois Gaming Board.
If you recall last October we did sign a commitment letter with a multibillion dollar private equity firm to fund our what Keegan project, but it would have required us to contribute $25 million of cash as equity. This.
This equity deal that we just did was our way of showing that there should be no doubt as to our ability to build what we think is the most exciting vision of the three projects.
That remain in that process and is something that we think the locals or waukegan will be amazingly proud of.
On a nice side benefit of the equity offering too as it should result in much more liquidity in the stock now.
And then on the last day of the quarter, we entered in entered into a $15 million revolving credit facility.
There are two quarterly covenants in that facility to note, but theyre both relatively minor one is a minimum liquidity covenant, we need to have at least $20 million of unrestricted cash for just two quarters. The first quarter that we just finished as well as the second quarter of 2021 I think it's we.
We should be able to handle that pretty pretty handedly for what it's worth.
The other is what is effectively a minimum EBITDA covenant, we need to have EBITDA on a trailing 12 month basis that exceeds the utilized portion of our of our credit facility and sort of dumb that down a little bit. We currently don't have anything drawn on the credit facility. So we need to have at least zero EBITDA.
If we drew down the full $15 million of the revolver, we would need to have at least $15 million of EBITDA on a trailing 12 month basis.
I don't really envision us using very much of that credit facility for what it's worth it's really there to provide us with additional liquidity should we ever need it and to help facilitate things like ordinary letters of credit that we might need to post.
And so all of that leads to our overall liquidity position. In addition to that Undrawn revolver, we have $278 million of cash at the end of the quarter that includes almost $180 million on that.
<unk> accounted for <unk> and.
And I feel like I said this last quarter, but it is true all over again, that's more cash than we've ever had in our history at this company.
I rattled off a few things that I am sure you have some things to add in there so feel free.
Yes.
A lot of things.
Lewis day last notes on it.
Free Wheeling here, but I'll add a little color on what he said he covered most everything but.
Yes.
In Mississippi.
Part of why we're doing so well as we refurbished the casino.
2019.
Upgrading the casino on the buffet quite a bit.
It was always nice we made it nicer.
And then there was no murder growth.
This year in New Orleans.
And.
Normally that's a strong period for us because people in New Orleans get out of town because with many of them.
Some of them come to us so that the fact that there was no murder growth.
Net of actually worked against us from despite that.
Bill.
Third I mentioned that.
That can October we had some damage from hurricane.
That's been repaired for the most part but.
As a result of those repairs.
Repainting the building and for the most part that's being paid for by the insurance coverage.
On the painting the building will have a different look we picked up a completely different color scheme, we thought as long as we're painting it.
If we change the color scheme too actually we picked the colors of the shutters and Santa Monica Hotel.
It will it will.
Effectively refurbish the outside if you will and that's underway as we speak.
So we've been working on this expansion.
And.
On the properties was not designed really to be expanded.
And it's a little bit landlocked. So it's a little complicated when we figured out the best way to expand it was on a peer out over the water. So you build a purely for Santa Monica Pier and it per hotel tower on it.
It's actually not that hard at everything down there is muddy so everything has to be built on pilot is anyway. So the pilot piledriver can be on the birds just as easily as it can be on a truck.
The Gulf of Mexico is quite shallow so it doesn't really matter.
Yes, obviously helped to design fire exiting in certain ways and so on but we've done that.
So going out over the Gulf of Mexico, and then.
We will need more parking and there is.
Under our lease we have a lot of wetlands that we would like to be able to fill in and create more surface parking.
And so those things require some approvals so the bottom of the Gulf of Mexico. After some miles offshore is actually controlled by the state of Mississippi. So we've been working with them and we think we have a draft agreement that we think everybody is in agreement with but they are jumping through hoops that the.
At the state house to the edge.
Executed.
That would give us a 35 year lease at about 100000, a year to lease a small swath of the bottom of the Gulf of Mexico, allowing us to build a peer.
And then to fill in wetlands.
It's also kind of.
Our process and we've done it many times in Lake Charles and other places.
But basically if.
If youre going to fill in a place where two ducks might get friendly you'll have to go find another spot where ducks might be even happier to get friendly and put it into trust forever.
Great Duck habitat or whatever habitat and.
And so we've identified land that we think works for that swap with negotiated a deal for that.
And so we're trying to execute all of this which would put us in a position to build that expansion.
It would have about 150 guestrooms.
On new restaurant, and then meeting room space and a small spa.
Property doesn't have any meeting room space at all.
So it's very awkward ones like new year's Eve, you don't really have a place to have a party or anything.
And that also makes it a little more challenging to fill the hotel given the hotel we have mid week, there's a little more challenging because normally as the meeting on space.
Help fill things midweek.
All of this has to be elevated 30 feet.
So we think we can do this.
For approximately $75 million and.
And we're kind of getting things ready to be able to do that.
On the numbers worked pretty well when youre, because youre not building a new casino youre, just adding more people to the casino you have now and so the returns on that end up being pretty good.
And the Indiana.
We also did pretty well was a $1 million one of income.
Historically this property it doesn't make a lot on the first quarter, it's seasonal and last year. It lost money in the first quarter.
So we're pretty happy with how it's going that was despite some pretty bad weather there in February I hate to say, whether it because theres often there is weather every year usually.
But we're pretty pleased with that.
Our general manager there has decided to move on with the Indian drives on the Midwest.
And so we're promoting.
<unk>, who has been our director of finance there an EVP.
And should become the general manager and then Jim Mccracken, who has been our casino manager will become the assistant GM.
Both are internal promotions, both through a couple of people who've been with us for a while and you worked at the silver slipper for many years before going up to Indiana.
Pleased that should be our first.
A female GM, it's past time for that to happen.
And she is very confident and very hard working and we're excited about that so kind of the news in Indiana is basically some management changes.
And.
And we're happy with that.
And frankly, the engie and Jim and the team there have been a big part of why this property is making more money now than it has on a long time and we want to keep that up.
Kind of a new style of operating where we focus more on casino.
<unk> that matter and less on people, who just want cheap at the buffet so in the <unk>.
Colorado similar to another.
We had a good first quarter best first quarter. The properties had a very long time, maybe forever.
And that's despite the fact the parking has been pretty much ripped up is as we are building <unk> in the early stages.
So they've had to scramble on offer valet parking at the front of the property we bought a couple of shuttle buses.
We've leased a surface lot as you come into town.
And we are waiting for city council approval to allow us to use that we will get that approval. There is a process that it takes and so at the moment, we have very limited parking other than what we can do through BLA, where we can per cube.
Kind of remotely.
And yet the property continues to do well.
Did by car manner.
Which is a bnb with about 15 rooms, it's actually pretty nice it was a school at one time and.
<unk>.
The couple that bought it fixed it up did a good job and so thats been popular with our customers and that's helping us offset the fact that we've turned down quite a bit if you do.
Go to the ease of the Bronco Billy's website or the Xiaomi, Colorado website, they both lead to two <unk>.
Webcams that we have up to show them. If you look carefully on the one you will see a backhoe working its way down the street.
Relocating utilities, along the street, because right now a lot of utilities across the property.
And you obviously don't want utilities underneath the building because if you have some revenue you can't get to them.
And then.
There is three buildings, we have to demolish.
One we did a few weeks ago. The second we did this morning, and that's actually the western most piece of the Bronco Billy's casino.
It was a building that was not actually historical it was built back.
30 years ago, which in local terms as modern recent building.
So we were permitted to share that down and we chose to to allow us to build a new building without posts and so on as part of Germany.
So that kinda on this morning, there is one other one which is.
Apartment buildings.
It will come down shortly.
And so we're underway.
About two weeks youre going to see a lot of foundation work out there.
The work as we know is very important and has to be done first.
That very impressive to see a guy out there on the back of relocating a storm sewer, but unless you do that you can't do the other stuff and so thats all.
Coming along.
Then.
In Nevada, we.
I actually had a pretty good quarter, despite everything that's been.
Kind of the most COVID-19 challenging place because the ski areas. This winter all had restricted capacity.
Because of COVID-19. The Hyatt has very little meeting and convention business because of COVID-19 and then the Navy pilots from their crews have been locked down on the naval Air station despite that.
We made some good money in northern Nevada.
I think as people get vaccinated and people start traveling again, the highest numbers will get better hopefully the local business that is the other half of our business there will stay strong.
Eventually the Navy will allow their people to lease base.
That'll be good for us so.
So I'm pretty optimistic about northern Nevada coming out of it.
Contracted sports wagering.
Guaranteed minimums are about $7 million, a year, which would be a little less than $2 million per quarter. So you can see we had $1 million in the first quarter.
And there is also there were $6 million of market access fees that were paid upfront.
That gets amortized capitalized and amortized over the life of the contract. So we really should have about $2 million of contracted sports wagering income per quarter.
We're almost there.
The end of the second quarter.
And we only have one more license to open so so that's coming along.
And.
The big jump in corporate I'll mentioned is.
With the.
Poor earnings last year on the good earnings this year.
We accrued for.
Bonuses.
Just for many months of my contract but.
Throughout the company there is some bonus accruals.
A big chunk of that increase there.
As long as we're showing results with good I think thats.
On the fair.
The.
Waukegan.
As exciting as this morning working with it.
The Illinois Gaming Board put out a request for proposals for an investment bank to help give them advice as to whether the different proposals can be financed and what they might do and so on they had done this once before and nobody responded.
I'm not sure why I guess I could guess that maybe they define something that only good Goldman Sachs, which satisfy and they had a fee that Goldman Sachs wasn't interested in or something but but they've got no responses. So they came back with a new RFP and.
They've said that they did have responses.
And.
And the gaming Board director of the Gaming Board had indicated that he thought that they would reach a decision six months from when they hire an investment bank. So they haven't hired one yet, but we think it's close.
At least that we know and so if you extrapolate that would be fourth quarter or they would be making a decision.
So we continue to kind of.
Work on the details of what this would look like and how it would work and how it could be exciting.
And.
And so.
Over time.
Our project frankly gets a little better it's essentially the same project, but with from.
Little improvements, we can make and then.
If we were chosen and then you have to negotiate a development agreement with the state which doesn't happen overnight.
But from the moment that's done we would be open with the temporary facility on six to nine months and then get going with the permanent facility that it would take a couple of years to build.
So it's late next year at the earliest that we would be.
Upload the temporary casino.
So we're watching this process pretty closely.
<unk> taken much longer than they had originally forecast it would.
And I mentioned on that because this expansion of Mississippi is coming along pretty quickly and I don't want to have that on hold indefinitely for Chicago.
Been kind of hesitant TIB three things under construction at the same time, just because we're not that big a company, but Colorado is going pretty quickly that'll be opened in two years.
It wouldn't bother me a lot if we were just doing the groundwork.
Building on the pier in Mississippi.
Colorado was open if they overlap some that wouldn't be the worst thing in the world. So.
So we're kind of going along multiple paths here.
Willing to go as quickly as possible in Illinois, if we were chosen.
But also looking at Mississippi, and saying, we don't want to leave this on hopes wherever we could go quickly there too so.
And financially we really could do all of these things.
So the balance sheets in pretty good shape.
And we're sitting on how much cash today.
Two $280 million per $180 million of cash today. So we're in pretty good shape. So.
Guess, that's it I'm missing anything.
We will take questions, maybe little point out other things on what I missed.
Can you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure that your mute function is turned off to allow your signal to reach our equipment.
Again that is star one if you would like to ask a question. We'll take on first question from Ryan <unk> with Craig Hallum Capital. Please go ahead.
Good afternoon, nice quarter, and Dan glad to have you back on here and here you're doing better.
Yes.
For those for those who might not know a crashed on like getting some exercise in Brooklyn colored bone. So I missed the last earnings call, but on back no longer have my arm in a sling.
Not yet on a bicycle, but im getting there no jumping jacks day, but we'll get on there by the end of it I did use my peloton. It this morning.
Okay.
Well good to hear.
And I always appreciate the color.
I'm curious how trends have been in April and thus far in May on gaming revenue and margins as well I know you said structural margin improvement you expect that to hold but let me comment a little bit what you've seen thus far.
Last quarter.
Yes.
It's been strong.
I will tell you the.
When we did the equity offering with you guys.
If you recall, we very carefully both people that we were comfortable with estimates that had.
$10 million <unk>.
<unk>.
In the first quarter.
And we did that deal maybe two weeks before the end of the quarter. So you still don't know.
But then the stimulus checks came out we ended the quarter with a flourish and you can see that in the results because if.
For 10 weeks into the quarter, you think you're going to do 10% in the quarter with $10 eight something happened right and that continued into April.
We're hoping the government will send out stimulus checks every month forever that would be.
Of course that won't happen.
But we did have a.
It has continued into April.
And we've stayed strong we haven't seen a slack yet so.
And so.
I would not expect the results of April to be continued through the year, though because.
Because we don't have stimulus checks all the time I think we get back to a more normal pace of.
If this quarter had been $10 million that would have been on track for Lee.
Something in the low <unk> for the year.
Think that would be if you were to take like the last week of March in the first week of April and extrapolate it you'd have us at $60 or $70 million a year.
Just not likely to happen so.
That's it.
And it varies a little bit from property to property, but in general businesses stayed strong and we're sticking to the new model I mean, even though.
Governments have loosened up on some of the rules.
And in some places we're allowed now to have more slot machines, and we no longer have to require face coverings in certain markets and so on but the basic.
Thing of being very careful on what we spend on payroll and on marketing costs.
That's not changing.
Sure.
And so.
We've been able to hold similar revenues to the past with much less cost.
And that's why you see the improvement you see and Thats continuing.
If that's helpful. Ryan generally, Mississippi, Indiana continues to do well Colorado.
Is dealing with the parking issues that Dan mentioned, although has been dealing with those issues pretty well now part of that is having people valet cars versus no valet at all before part of Thats running shuttle buses from a distant parking lot to the property. So there are some incremental costs there.
On a bit of construction disruption that will that we're trying to manage through and Nevada.
Stockman's knock on wood, but the county that stockman does in.
<unk> has been.
It feels like it's largely out of the woods with.
With the pandemic and so it feels like the restrictions on that base are probably going to start easing sooner versus later.
And what we hear from the Hyatt over at Grand Lodge is is that that could very well be a very robust.
Summer season for them so.
So while Nevada has lagged knock on wood hopefully some science that will start to see that go the other way in the next month or two.
But by the way if you look at the website in Colorado and see the building but for the.
Steam shovel out there is clearing out today.
That was actually part of the Bronco Billy's casino.
That was probably 15% of on.
Now turned out.
And so.
No.
We have plenty of slot machines to the revenues we are doing.
It's not what a casino revenue reserves based on the number of people on the place that based on the square footage. So I don't think that will have an impact on us, but we did tear down part of the casino.
That's a function.
Got it.
Helpful.
You mentioned, Dan that certain properties thinking Mississippi restrictions have lifted no more face masks et cetera have you seen a change at the silver slipper traffic kind of pre and post those.
Restrictions lifting.
The biggest change we're seeing which is heartening actually is our oldest clientele 60 and over which has always been.
Our most important segment and really at every one of our properties, we were off about 30% in those and the number of visits from what they were spending per visit it was off pretty sharply.
At the height of the pandemic and it now seems to be coming back.
And.
And so with our task is to try to hold on to the younger clientele, who were new to us and.
And during the pandemic offset the absence of seniors and then try to hold onto them and get the seniors back and so far we seem to be doing that reasonably well.
A little hard to figure out when the government suddenly shows a lot of money out.
And all that stuff, but.
But the most the biggest thing we see is as people are vaccinated.
Other people are willing to come back they were the ones who are most at risk and most frightened about filling out so most careful side.
I think we're doing better.
And then on Colorado with Amendment 77, passing have you added new games to Bronco Billy's and then secondly on Bronco Billy's it sounds like construction et cetera should we expect probably Q1 to be the high watermark. There just given those challenges or do you think it can grow right through that.
<unk>.
No. This is it's a seasonal properties. So the third quarter is seasonally the most important.
And so I expect our third quarter to be well above that I mean net property. It probably makes something like $8 million this year and did $1 seven on the first quarter. So.
And frankly the surface lots, we're getting are very large surface lots right. As you are coming into town and we will have signed on as Theyre, saying Park herself part for Bronco Billy's.
And we bought two shuttle buses and so we think we can offset this but these were surface lots that were used once before for technical reasons, you had to get city Council approval to use them again no question, we will get that approval.
It's a process.
Okay.
Technically what the process is the zoning in town and casinos are not supposed to have surface lots outside of the casino zone, unless it's been approved by city Council. So even though this was used once before it's outside of the casino zone and so we need the city council's approval, which means you'll get posted on the newspapers, sometimes on advanced et cetera et.
So that process is ongoing and I believe we have access to those lots within the next week or so and that will help quite a bit.
And then people actually frankly get excited about the new place in it.
On the fact that they can accumulate points at Bronco, Billy's and redeem them at Germany when it opens.
It is a big plus so I think Bronco Billy's will to fund the disruption is probably was worse in this quarter than it will be in the future quarters.
And so on.
Over the.
I'm not really concerned but attentive in other words, we're the ones looking at it I was the one who months ago that we need to figure out how to do valet parking we need to find surface lots, we need to do this do that to this to that I went out on board car manner. So they have a place to appeal to guests. So we are being attentive to do things.
To offset the disruption.
And if we didn't do those things we'd be hurt and most of those things cost us some money, but not big numbers. I mean, you can do the math if you have.
Two valet Parkers three valet parkers and a couple of shuttle bus drivers a bunch of hours a week.
Low hundreds of thousands of dollars a year not not.
For a place to make it $8 million a year, it's not that big a deal.
So.
That's it from me and I'll hop back in the queue. Thanks, guys. Good luck.
Okay. Thanks, Thanks, Brian.
Thank you we'll take our next question from Chad Beynon with Macquarie. Please go ahead.
Hi, Good afternoon, John Lewis.
Congrats on the quarter.
Wanted to start with construction cost on show many just given the inflation on the cost of materials can you just remind us I believe most of all.
The project is pre funded but can you just kind of frame out the $180 million what is.
Static versus dynamic and how we should think about that thanks.
Yeah.
Well it is all pre funded.
It's about $180 million from here to completion.
And in there there is a.
Contingency, which was $12 million $10 million.
So as contingency on net okay.
Sure.
We're early in the process and we are we had assumed that there would be challenges in material costs and challenges in labor.
Unemployment rate in Colorado is quite low and were.
And our up into the balance.
And.
So.
When it when I see different states talk about scaling back on the surplus unemployment benefits.
I would actually help us find labor, but.
Those are challenges and we're dealing with some of those were.
We're early enough in the process that youre finding trying to find changes that you can make to offset that so for example.
Our engineers discovered we could use micro piles instead of spread footings.
It saved us some money.
To offset some of those other things, but it's quite early in the process.
Now as a practical matter, let's suppose we blow through the contingency.
And go 10% over so it ends up being a $200 million projects instead of $180 million project.
We will generate $20 million on free cash flow, while it's being built and were sitting on a bunch of extra cash from the other equity offerings. So it is not.
And I'm not saying, we're going to have an overrun we're fighting those battles now, but it's kind of nice to know that if we can't find solutions and we did have a small overrun.
We have liquidity to fund it.
But we are fighting our way through that now with issues like well.
What sort of furniture do we have on this place do you have.
A woven carpets or it may be a less expense for carpet. So on so thats just part of the process. We've gone through it with every project I've ever done from.
With a place in Argentina to <unk>.
There are places in <unk> that we're going to have like barbell mosaics and it ended up being carpeted the customer doesn't really know.
But thats, where we are and so I'm pretty sure we're going to be at that number.
We're working to get that number from that.
$19 million for contingency, Dan, which is about 15% of the hard construction costs.
So.
Perfect.
I appreciate there are some challenges.
So for example, when you find the price of what is up a lot and so on some places we're going to use light gauge steel instead of wood.
You go to look for those things you may have been assuming that youre going to use.
Wooden certain areas.
We explored for a while using modular construction, where you could build some of the hotel rooms in our factory.
In another city and truck demand and stack them into place.
Our new development that no merit in particular is trying to use more and more for their budget hotels, and we spent a fair amount of time looking at that.
<unk> concluded that with the transportation cost to get it up to Cripple Creek at the end of the day, we didn't think we saved enough money to go through the trouble and so we're kind of back to not doing modular, but we explored that pretty hard they can it might save us money and concluded that it probably doesn't so.
Great. Thank you.
And then in the camp of something that could come in on the right side of expectations.
Louise Thanks for breaking out the annual online gaming in your income statement and that certainly helps us.
Just wanted to talk about.
Without getting into the economics of the deals that you have with your skins partners.
Certainly the expectations for sports betting and gaming I think you have increased recently by most analysts, particularly on the gaming side is there a chance if that rate continues to rise, but you could actually be generating more than $7 million of guaranteed revenues based on what youre seeing with your partners.
And what Youre seeing with analyst estimates increasing.
Within that.
Two questions within there really.
Each of our deals are slightly different we get slightly different percentages on each and then subject to a minimum guarantee so I will tell you one of them has a higher percentage of revenues that we would get.
Lower.
For us to exceed the minimum guarantee you kind of root for the guy with the high percentage to get a significant market share and exceed the non guarantee now.
Skins were all introduced a little late <unk> and draft Kings have the dominant market share. So at this point, our guys have lower market shares, but we know that each of our three partners have different marketing plans that they havent really ramped up yet.
And.
And so when for example is a great brand right, there and and we think when they take the gloves off and start competing they'll start getting some market share.
<unk> is a very unique way of operating in Europe. They know how to do this they haven't taken the gloves off yet right and so.
We will see but I wouldn't anticipate us exceeding the minimum guarantee for the next year, maybe not even the year after that.
Down the road, but I don't think its in the next few quarters.
Now on the flip side as we negotiated these deals every one of them wanted to lockup I gaming and we said no.
We said, we can negotiate that when the time comes that's actually a bigger market in New Jersey, where they've had both I gaming as two X what mobile sports betting is.
And and Thats, something we could actually do on our own.
Because youre not in mobile sports betting.
There is an awful lot of bets on individual games. So if you had.
The Denver Broncos against the Cowboys and the Super Bowl, we'd have a lot of bets on the Broncos net on the Cowboys and we could get screwed.
And so we chose not to do that on its own when you have I gaming. That's just playing a slot machine on line. That's the business, we're already in and so a large number of independent statistical events.
If it happens.
As it did with sports betting and we think that's possible.
Have three skins in each of Indiana and Colorado.
And maybe we do two of those with some of our existing partners and one of them we keep for ourselves.
And but that would be over and above the $7 million a year and it could be substantially more than $7 million a year, if that happens and the other thing is in Illinois.
We were chosen well, Illinois. It is a much bigger populations on either Indiana or Colorado. So if were chosen there.
We would.
Illinois is also going to have mobile sports betting and probably I gaming somewhere in the not too distant future and so that would be a pretty big positive on net contracted wagering line.
Thats.
Apart from the project and we're kicking itself now.
Mississippi will probably eventually also have.
Mobile sports betting on.
Relation of Mississippi's only a couple of million people, there's a lot of casinos there so.
And the same thing with Nevada, we could do it today in Nevada, we haven't we're pretty small companies a lot of big companies in Nevada, and the population of Nevada is only $2 7 million people and so the big opportunities or are the Colorado is $5 5 million people on growing fast and the analyst 5 million people in Illinois.
Yes.
<unk> 12 million people, Alex let's population of Illinois.
So lots of growth.
Yes.
Yeah.
It was a much bigger deal.
<unk>.
Great. Thanks, Congrats on all the work in the quarter. Thanks, guys.
Thanks Chuck.
Thank you and once again Thats Star one if you would like to ask a question on here. Our next question from John Decree from Union Gaming. Please go ahead.
Hi, everyone Dan good to hear you again on the call and thanks for taking the questions.
Just one from me I think you've covered quite a bit of ground, but Dan I was hoping you could maybe elaborate a little bit more on <unk>.
Puts and takes in on.
On demand that you've seen in March and April I know you talked about stimulus checks that can obvious one.
I was wondering if you can characterize.
Familiar faces in that in that older demographic that you've seen I think a lot of your peers have said that did that customers starting to come back, but there is still an opportunity.
Still seeing opportunity and maybe converting on rated play at a rate of play. So as you think ahead and stimulus checks.
Where do you see some of the other demand drivers coming as it relates to pent up demand.
Well I think the biggest thing is the seniors coming back and I would characterize that.
You just did that it's starting to come back. It's still has a ways to go but it is starting to come back and is starting to come back pretty solidly.
And we do that just by.
We haven't in the database, 85% of our play is tracked and so it's pretty easy to look at what are the people who are 60 and over or are we seeing them more often than we were last quarter than we were in the third quarter. How does that compare to 2019, we're not yet back to the 2019 levels, but we're doing better than we were at the low part of the.
Pandemic low in terms of that segment.
And then we have had a focus for a while now is making sure that younger people who show up.
We get them to sign up on our on our.
Data basis, and so we've installed marketing kiosks in Indiana.
They are not yet up in Colorado, but they are coming.
Looking at them for northern Nevada, and we've had them per well at the silver slipper.
Similar to what.
Station's casinos is out here.
Incentivize you to sign up you can literally walk up to the machine put on your driver's license get a card in some states not in.
The Indiana, yet, but in some states they make it very easy to get a card allows us to have less payroll.
<unk> club.
Does the kiosk handle it and so thats all kind of part of trying to do that.
And.
Some of this other stuff.
We're doing well and we're not marketing as much as we did we're not spending as much on marketing now it's much more targeted and I think thats helped us a lot.
And.
But I also think there's other things like the working from home studying from home.
Like in Las Vegas, the weekends are busy but midweek is still empty because theres no meetings and conventions.
It was interest in doing these roadshows for the debt deal and the equity deal because historically you would've chartered some airplane you would've been all over the country Limos buying you guys crummy chicken lunches, it's expensive hotel.
And.
Really grueling.
That you would do.
And the new World, we sat here and did.
<unk> zoom calls a day and it was far more efficient for us and far more efficient I think for the portfolio managers than the shenanigans, we used to go through.
Now that everybody is getting vaccinated I don't think you'll go back to the traditional roadshows right because everybody save money. It was more efficient with their time and you've got the job done right well that makes you wonder.
I think some of these conventions the employees looked at them as Boondoggles from there.
Adjusted <unk> to their management that hey, we need to send out a team to operate this booth in Las Vegas, because it will help our sales and what they really think it is we want to go get drunk and.
And so now as the pandemic is over and you are the person at Microsoft in charge of that travel budget might be a lot more hesitant to loosen up and let people go.
And so I think that's going to be the most difficult segment to come back here and it may take years for it to come back.
And yet that person who might want to go to a convention because they want to gamble once in a while they can't go to that convention in house like well. They can go up to Cripple Creek and Gamble or they can go to the <unk>.
It will slip from Campbell and it's the same slot machines. The same table games the same experience.
Also I think people working at home.
I joke about the person on a zoom meeting sitting on a slot machine, but it is entirely possible.
You can put a false I'll tell you if you've been on a zoom meeting with me.
You see a backdrop that looks like my office with a very clean desk I cleaned my desk and took a picture of that and that's my background.
Yeah.
And.
So you wonder how many people have a backdrop like that they are actually sitting in a slot machine at rising Sun and you don't know, but you also do know that if they're not commuting they have a newfound hour and a half and their day on average.
And yet at the end of the day, you want to get out of the house at some point and so having these regional casinos that are convenient to people.
No.
I have been on this household day I need to get out I need to go somewhere where can you go that's open 24 hours a day seven days a week well go to Eric Casino and so I think that has been a function.
I don't know what else to say I mean, our business has been good.
Frankly.
Recently, our business has been really really good but I am hesitant to Lake project that because I don't think stimulus checks are going to come out every month. So.
We may offer some stimulus cocktails and hope that it catches on.
Net.
Yes.
I appreciate all the color Dan I think you've given us some good ideas on how to handle our next couple of zoom calls so maybe we'll see it sooner than later.
We saved the slot machine for you John over at Bronco.
Wonderful I'm looking forward to it thanks.
Hi, everybody.
At this time that does appear to be the conclusion of our question and answer session I would like to turn the conference back over to Dan for any additional or closing remarks.
No that's all.
Go ahead.
Plugging along and I think.
This is one of those things I've learned in my life if you.
Go to work every day and try to make more good decisions on bad you eventually feels pretty good company and I think we're well on our way there. So we're just going to keep doing what we're doing.
Thank you everybody.
Thank you that does conclude today's conference. We thank you for your participation you may now disconnect.
Yeah.
[music].
Yes.