Q3 2021 Full House Resorts Inc Earnings Call

Ladies and gentlemen, you're currently on hold for today's full house resorts third quarter earnings call. At this time I stood meaning additional participants do you plan to be underway momentarily. We appreciate your patience. Please remain in line.

[music].

Good day and welcome to the full house resorts third quarter earnings call. Today's conference is being recorded at this time I'd like to turn the conference over to Lewis Fanger, Chief Financial Officer of full House resorts you may begin.

Thank you and good afternoon, everyone welcome to our third 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.

Also like to remind you that the company's actual results could differ materially from the anticipated results in these forward looking statements.

Please see today's press release under the caption forward looking statements for the discussion of risks that may affect our results.

We may make reference to non-GAAP measures such as adjusted EBITDA.

For a reconciliation of those measures. Please see our website as well as the various press releases that we issue and lastly, we're also broadcasting this conference call. It full house resorts Dot Com, where you can find today's earnings release as well as all of our SEC filings.

And with that all said you're ready to go Dan I guess, okay.

Okay.

Hi.

The Atlanta CEO.

Well it looks like the headline said revenues were up 12, 6% over the prior year third quarter now last year, we had just reopen from the closure periods.

So there were some things that weren't fully opened yet like table games in some markets and so on.

And so now being fully opened is the main thing that's caused the revenues to be up.

Operating income was up some from last year's third quarter last year's third quarter was very strong last.

Last year. We also didn't have we had not yet ramped up all of our expenses.

And so the fact that our.

Operating income was up over third quarter of last year is a good sign.

And it's up I don't haven't haven't calculated that but what I guess seven or 8%.

Net income was down a little and that's the interest.

Funding for Chamonix, which is extended we have under construction in Cripple Creek.

We borrowed that money in February.

And it's basically sitting in a restricted account.

For construction, we're still early in the construction process, we're spending about $1 billion a week at this point.

And so the amount of interest expense was capitalized is still quite small as we move ahead each quarter that will get to be a bigger number until we open.

And so the impact that interest expense will have on the year over year comparisons will go down in the next few quarters as we put more into the project capitalize more interest.

Our adjusted EBITDA, which makes adjustments for all of that stuff was up to $13 6 million from 12 and a half.

So again, a good quarter.

The construction of Chamonix continues I was there last week.

It's getting pretty exciting the foundations are largely in in the.

Steel is supposed to arrive in the next three weeks and we will start going vertical.

First tower will top out in April.

And the third tower will top out in August.

Second towers in between so in the next few months.

Like all this construction that it usually seems like nothing is going on at first when in fact, you're moving utilities, which kind of a big deal in some cases or in this case we closed.

Two a street in an alley, and there were storm sewers and things underneath those streets, where you'd need to relocate those because you don't want to something like the storm sewer to be underneath your building because if something happens to it you can't get to it and so.

All of that got relocated them, putting in the foundation a lot of work and then very quickly. It will go up and then it feels like nothing's happening again when in fact, there is lots of stuff happening inside because you have electricians and plumbers, putting in the all the stuff inside the building and then the dry wall and then at the last few months. It all comes together.

The carpeting and the wallpaper.

And at this point and there's some language in here that.

We're pretty careful about that.

We are seeking from city council that permission to move back the opening date, we're not sure we're gonna make December of 2022.

And what's in the development agreement.

We probably could but then we'd be incurring some overtime and then use that creates budget side. So we're pretty comfortable that we will get that permission and frankly, whether we opened in December or April doesn't make a whole lot of different sets the slow period of the year.

Cripple Creek and so we think we're going to be a little bit later.

We had originally envisioned.

Don't think it changes much on the income side.

We are also at this point.

The hard dollar construction costs are more than we anticipated a lot of things moving around moving around I think it would be talked to anybody involved with construction, they're facing the same challenges.

<unk>.

Material costs were all over the place with the supply chain issues that are out there and the tariffs we had tariffs on steel for example, so you'd have to get the steel within the U S. The steel companies.

<unk>.

Premium for their steel because they didn't have to compete now the tariffs are off with Europe, but we've already ordered or steels that doesn't help us.

And lumber has been all over the place.

And then the unemployment rates low so the subcontractors have had difficulty finding people are at this point, though.

We're getting quite a bit of the risk is out of it about a third of our hard dollar construction.

As a bids we've received that we've accepted from subcontractors about another third are bids that we've received that we think we can.

Negotiate and value engineer some down so it kind of has a cap on what we think of them that are scheduled to work and about a third of the work is not yet to put out to bid.

Based on where we are today.

We're probably a higher than our original estimates.

But we don't want to quantify that until we have a little more of the risk and I don't want to.

Swing at this twice, we want to make one adjustment.

We are very comfortable that we have more than enough money to finish. This so it's not a financing issue.

But at some point when we have greater certainty.

We will indicate what that is and make adjustments to the restricted payment account accordingly.

Now on the flip side.

<unk>.

The recent numbers in Colorado are very encouraging in the month of September for example.

Our income was flat our revenue was flat.

And that's actually I think good given that we have no parking.

The all the surface parking lots of Bronco Billy's has been using for 25 years and now taken up with their construction and so we're trying to do valet parking from our front door and most of all of our competition is convenient self parking and we don't at the moment and yet we had flat revenues the market.

And we're probably the second highest revenue casino in the market.

The market was up 16% so some of our competition is up more than 16%.

Now what changed this is September this year versus September last year, what changed year over year. Two things. One is loss limits went away several months ago and one of our competitors opened a 100 room hotel, that's kind of a Hampton Inn quality hotel.

And so are the basis by which we are building chamonix was that the elimination of loss limits and creation of hotel rooms would bring more people to town and boost revenues and that certainly seems to have been the case in September but if you look over it.

Black Hawk in Central City, they were up 38% in the month of September.

And the thing that changed there is again loss limits they tended to have.

Our higher end clientele, because that the mayor of Star Hotel is pretty high end up amongst others and then monarch open their 500 room hotel a six months ago. It opened in stages several months ago, but it was not opened a year ago in September. It was opened this year at September and so again.

And that showed that building a quality hotel can drive visitation, so and in the overall picture.

We're very confident in this.

We did not want to go through and kind of is this rate the quality of the hotel. When we realize this is going to cost us somewhat more than we had originally envisioned.

Instead, we're focused on building the quality hotel that we've always said it would be and if it costs a little bit more we're pretty confident we're still going to get a very good return on investment.

I think that our dresses chamonix.

And then there are two other development opportunities out there let me let me first address the quarter and then I'll get back to those.

The details on the quarter and Mississippi.

We had 6.5 million of EBITDA T are essentially flat with last year.

That's despite hurricane, Idaho, which closed us for several key days.

This year.

As it came through we didn't have any significant damage from either but it did force us to close for a few days and.

And a lot of our customers from the west did have damage. So it was difficult to get to us in some cases. It. Nevertheless, we achieved flat with last year and on a nine month basis were $23 million.

Which would be the best.

Headed for the best view of the properties overhead.

In Indiana.

We were three eight versus $2 1 million.

But $2 1 million of that was the sale of pre play.

<unk> has a.

Progressive tax rate and you're allowed to sell you're allowed to exclude from your gaming taxes, a set amount of free play each year.

Since were in the lowest taxed here it makes sense for us to transfer that to the parties that are in the highest taxed here. So every year for several years, we have sold their free play too.

To competitors that are in the higher tax tier and that's permitted under the state law.

And that was $2 $1 million in the quarter, we had exactly the same.

$2 $1 million last year from the sale of free play, but it fell in the fourth quarter not in the third quarter and so.

We had one of those companies show up willing to pay it to us in the third quarter, we didn't see any reason to wait until the fourth quarter. So we took their money and.

And just to be very clear, we will not have that in this year's fourth quarter, because it's all been sold so that's all been told so.

And.

So it just fell in this quarter versus the fourth quarter. There were also a couple of accounting true ups that.

That fell in the quarter.

We're doing it added up to a 100 to 200000, so not very material, but that that kind of depressed this year's number compared to last year's number.

And.

But all in all I think rising Sun actually had a very good quarter, even if you back out the free play and the true ups and everything else.

And it's at seven 6 billion for the nine months are again, it's headed for the best year that it's had in many many years Angie and her team are really doing a terrific job there and we.

We just it just converted it this weekend to the Christmas theme that we do every year.

This year.

Every year, we had a few little twist to it and so it's called the Christmas Casino between now and yearend and that usually allows us to do better in the fourth quarter.

We had done historically before we came up with that Christmas concept and.

So that's although because free play was in last year's fourth quarter, there'll still be down in the fourth quarter, but but we'll end up the year at somewhere around $9 million, we'd be dead too which is.

Pretty terrific for that property.

In Colorado.

I mentioned that.

The it's operating without any self parking which is an issue in.

In last year's $3 1 million as we disclosed last year, there was a $400000 gain.

From the discontinuation we revamped the.

Frequent player program and expired the old points they were old points on our books that were no longer a redeemable and that gave us $400000 of credit where frankly, we've flogged everybody to please come in every day with your points and when it was all done we still had $400000 of accounting accruals for points that had not been redeemed.

Aimed and so we've got a credit for that in last year's number.

But obviously it was still down from last year and Thats, the parking and the construction disruption at everything.

And it's going to be a challenged property for the next few quarters as we complete chamonix.

And for example at this point.

The hotel rooms that we had we had 24 hotel rooms that were on site.

We don't have any of those at the moment.

20.

I'm, sorry, there were 36 hotels et cetera.

We don't have any of those some of those are being used for the construction people.

Some of them are being repurposed into.

A massage room some of that in the new Spa.

And some of them are being repurposed into other things of the property and.

And so.

The fact that we are continuing to do.

Decent business there.

As a good thing we don't.

The construction people would rather we just close it let them do their stuff around it we don't want to do that we want to keep our loyal employees when we want to keep our loyal customers.

<unk>.

And but frankly, they are putting up with a lot at the moment, we've actually torn down part of the building we are about to close up another part of the building.

Moving things back and forth and up and down and so we're operating a casino really in the midst of a big construction site.

There is a on the Bronco Billy's website Theres two webcams, you can look at and you'll see it.

Construction projects, a lot bigger than Bronco Billy's in fact, it's a.

It's the biggest thing that's happened in this town since they discovered Golden 18 19 so.

And northern Nevada.

The last year that was the weak spot.

It was doing better this year, we earned a $1 five an EBITDA T versus a million.

Summers the important season.

That is despite the wildfires, which we're not near US we weren't in any danger of the fire reaching.

Incline village, but the smoke blue airway and the smoke was as thick as fog in San Francisco.

Today and.

So normally the labor day weekend is pretty important and with the hotel full in the casino floor and this year the hotel was almost empty.

In the smokeless so thick it was it was hard to breathe.

Nevertheless, we made some decent money in northern Nevada, and I will say the.

The hotel in the quarter was sold.

Two an entity controlled and I think wholly owned by Larry Ellison.

The founder of Oracle.

It is still operated by Hyatt under a long term management contract.

That's a good thing we have a long relationship with Hyatt and a good one we have two years to go on our lease we hope to renew it.

And had they sold that too.

Another casino company, we would've been out.

The fact that they've sold it to Larry Ellison, I don't think Hyatt or Mr. Ellison, I kind of want to go through licensing and as long as we operated well in keeping with the quality that they expect that I think we're in good shape and Mr. Allison actually has.

Our history of buying hotels, and putting a lot of money into improving them and.

It was in the newspaper that he paid $345 million for this hotel.

He has a compound around the corner from the hotel that newspaper articles such as investment and that compound is about $100 million. So this is a guy who is going to I think improve the hotel and the fact that we operate the casino in it.

Hopefully that's a win win for everybody. It's a it's a phenomenal piece of real estate that he's purchased.

And after you purchase it I gave some more thought if I were in his shoes.

I'd, probably just retire but if I were in issues and wanted to keep working.

And because he is worth something like $120 billion of God love them.

But there are ways to.

Build more stuff on that site you got to satisfy the Tahoe Regional planning Commission stuff, but as I studied it a little bit and if you just Google Earth. It you'll see what I mean.

For example, Theres, Great Lake front real estate as part of the Hyatt and a good chunk of that is used for surface parking lot and so if you could figure out how to make better use of the land.

It becomes a pretty interesting development opportunity and now you've got a you've got to deal with the environmental rules that are there but.

But they're not there to say you can't build it there.

To say, how you can build and so I'm kind of encouraged about that.

Then the contracted the sports wagering, we now have five of the six sports book agreements up and running.

We keep hearing some markets is about to start.

In Indiana next week, but it always seems to be next week, we don't get there we don't control. It. So I think they are getting close.

They are up and running in Colorado, and and then we'll have all fixed up and running.

And.

We had something unusual in the corporate we're not no no that's consistent with the last few quarters, Dan Oh, Okay. Yeah. Okay. So so that's there now on the development of course, that's a.

Something we've been.

Working on for years literally in Illinois and <unk>.

Several months now in Indiana.

In Illinois, the legislature about three years ago, the less number of.

New casino opportunities.

We studied it and decided the one we liked the best was in Waukegan.

They also have legalized.

Legalized casino in downtown Chicago.

But that's a really big opportunity for somebody and probably too big for our company, but well keagan is a great market.

A lot of people there that are not convenient to any other casino mid.

Midway between Chicago and Milwaukee.

On a piece of land that's about 30 acres thats owned by the city and so we've put together a proposal.

And it's a very complex thing.

The way the taxes work is complex and so on but the city narrowed it down to three proposals that went to the state one of the three backed out in order to focus on the Chicago opportunity. So it was us versus.

Another proposal our proposal is quite a bit larger in scope.

And quite a bit advance here then the other one.

Both we and the other proposal made presentations to the Illinois Gaming Board about two weeks ago.

I'm biased, but I think our proposal is much better for the state and for the city.

We have far more development expertise than the other proposal.

And and we're fully capable of building it.

We indicated that if chosen we would be open with a temporary casino within seven months.

Now the gaming Commission hired a consultant who is going through all of that stuff and has reached out to us a few times for different.

He gave me board has reached out for.

Answers to different questions that he had and the gaming board has indicated that they hope to have a decision in early January.

So if they choose us in early January we will be scrambling to get a temporary casino open.

Within seven months, we said we'd have a plan within a month and we would be open with the six months.

We have since been trying to figure out how to do that we think we can actually do it even faster.

And we would use a sprung structure.

Actually we were all a little surprise, we've seen other casinos that use sprung structures.

And they are basically a type of tenant.

It turns out there's a company called sprung structures owned by a family whose last name has sprung who knew.

But they started as a tech company 100 years ago, and they've done 12000 of these and they can erect a 40000 square foot sprung structure 50000 square foot sprung structure in about a month. So you go in and you put down asphalt and you put down a platform floor and you throw up a sprung structure.

Harangue the slot machines to deliver a thousand slot machines and a bunch of table games and for foodservice, we'd bring in half a dozen and food trucks, hopefully run by local entrepreneurs, but if we can't find local entrepreneurs willing to do that which I think is I think we can find local entrepreneurs, but we'll do it ourselves if necessary.

And we were not going to bother to <unk>.

The kitchen or anything like that for a temporary building and matter of fact, we have a name and logo for the temporary because we want people to know that it's related to the permanent facility, which is called American place. So the.

Name of our temporary will be with a temporary by American place, where we actually have a kind of a fun logo with it and.

And then.

You can actually get everything thrown up and put together in like three to four months, then you've got to hire a whole bunch of employees and train them and get the doors open and so.

We think we can do that very quickly in a year from now we would be up and operating in a temporary structure and then working on the permanent one which would take two to three years to build.

So that's our Illinois, Meanwhile, in Indiana.

The.

Gaming Commission or the state.

State Legislature actually had approved a casino in Terre Haute a few years ago.

And only.

Only one party.

<unk> bid for that we didn't bid because there was a.

A fellow that was very well connected politically.

<unk>.

And we thought well we were busy with other things.

Sure, we could get it and sure enough.

Got it.

But then his lawyer has been indicted for making illegal campaign contributions there were a number of issues and.

And so he was a lost the key Guy lost as gaming license in the state has been kind of force out of the industry. His partner was from Terre Haute and he was supposed to show how he was going to put together a management team and financing by a certain date. He didnt make those dates and so a few months ago. The gaming Commission.

Revoked as license and he is suing the gaming commission, but they started a request for proposals for.

New operator to come in and build in AR and Terre Haute and they have four proposals.

One of which is Ah.

Under the hard rock brand and includes the Guy apparently Uh huh.

<unk> license was.

Revoked I guess and then Churchill Downs as a proposal and then Theres an individual as a casino in Mississippi as a proposal.

We set out to do something very creative.

With the unique design of the hotel base.

Based on our buildings, we've seen elsewhere in the world. We know of at least a couple that are shaped that way and it's and it's kind of a unique a curve to it.

Just interesting hotel and and then a large greenhouse along the freeway with restaurants in it.

Which is.

Emblematic of little bit of the new headquarters that Amazon has up in Seattle They call. It the Amazon spheres. These greenhouses as kind of a thing these days and there's also a television show on Amazon.

Apple TV plus I guess in the TV shows called home and the very first episode is about some dude in the suburbs of Stockholm, who wanted to live in our Mediterranean climate. So he built himself a log cabin inside of our greenhouse and it's really a fund show to watch and then he's got a very cool house and I watched that show up.

Boy, if we did this on steroids well the 25000 square foot greenhouse and put a building in it that's really a kitchen and we can have two restaurants inside this greenhouse. So you can sit in Terre Haute, Indiana in February and a Mediterranean climate and have lunch and and that.

The market isn't just about Terra Haute Wichita.

Terre Haute metropolitan areas about 150000 people, but there's 2 million people in Indianapolis, which is about 50 minutes away. There are casinos that cater to Indianapolis, but theyre on the east side. This is on the west side.

And then Theres also about half a million people in other places like Japan or banner in Lafayette, Indiana that are significant.

Small cities that don't have casino so.

So it's a pretty good market. There are 100 room hotel and it's very unique architecture, we are the.

Our proposal has the biggest investment are probably the most jobs most tax revenues et cetera. There are four proposals.

And we.

We are scheduled to make all four are scheduled to make a presentation next Thursday Wednesday next Wednesday.

And the gaming Commission has indicated that they expect to meet an executive session. After hearing the four proposals and to pick one that day is there a preferred developer.

And so they're.

They're moving quite quickly, whereas Illinois has been moving kind of slowly.

But all of this is coming to a head pretty quickly.

We are capable of doing both we'd be scrambling a bit both have temporary casinos.

Different ideas on how to do the temporary in Indiana and.

But it can be done.

We built two casinos at the same time that pinnacle when we built two of them in St. Louis we.

Built.

Back when I was at Mirage, we built Polasky, which was $1 $6 billion and at the same time, we were building Monte Carlo which became park MGM today in a joint venture with somebody else and we were building <unk> down in Mississippi, which was $670 million and so we were pretty darn busy in those days, but we got it done.

And that would be the same thing here, we would we would hire people retire and in each of these markets. We are very competent general contractors Huntsville Phelps in Colorado.

They're headquartered in Denver, and the largest construction firm in Colorado, and one of the largest ones in the country.

Chicago, we're planning to use a joint venture between Turner and a local company.

Which isn't MBE and Turner is a huge construction company. They may be the largest one in the U S. But they have a large.

The Chicago Office and then in in Indiana, We expect to use Wilhelm for chosen Wilhelms I think the second largest construction company in Indiana.

But they have probably built more casinos in indiana than anyone else they had built Bella Terra.

And when I got to Pinnacle Bell Terra had just opened and we added a 300 room addition, which will help did the construction of and frankly it was one of the smoothest construction projects I've ever been involved with so we reached out for them to see if they would be interested and theyre excited and we're excited at being able to work with them.

Again, they're based in Indianapolis.

And now just.

Let's make things simple where in a statistical business.

We're one of two proposals in Waukegan. So maybe we have a 50 50 shot there.

And one and four in Indiana, but where frankly the biggest proposal. So maybe we got a 50 50 shot there too and if you have a 50 50 shot two independent statistical events will test you all but we're in a statistical business. So this is second nature to US then you have a 25% chance of getting.

Both you also have a 25% chance of getting neither and save a 50% chance of getting one or the other so we have a 75% chance of getting one or both.

25% chance of getting neither in which case, we're still pretty busy building out, Colorado, and we'll figure out something else to do with the reinvestment of cash flow down the road.

And so.

So that's where we stand.

Did I Miss anything.

No.

Yeah.

And on that I guess, we're ready to take any questions.

If you'd like to ask a question. Please send them by pressing star one on your telephone keypad.

Using a speaker phone. Please make sure your mute function is turned off to lay your signal to reach our equipment.

Again that is star one if you'd like to ask a question.

Take our first question from Ryan <unk> with Craig Hallum Capital Group. Please go ahead.

Great good.

Good afternoon, Louis Dan Thanks for all the detailed.

Intro there.

Curious, if you're able to quantify how much of an impact to EBITDA the wildfires smoke in Nevada, and the Hurricane Ida was for the silver slipper.

The smoke was.

Actually both of them are probably a few hundred thousand dollars.

We normally would make at least a couple hundred thousand dollars on labor day weekend in Tahoe, and we've made nothing.

And it wasn't just that we cannot really affected.

Tahoe visitation for a couple of weeks it was all over the National News and.

The fires were down near South Lake Tahoe.

The Oh.

Maybe it would be at Liberty, what do you call that make our evacuated evacuate itself.

City of South Lake Tahoe, where 30 40 miles away from that so the fires weren't near us, but the smoke settled into the Tahoe valid. So we had.

Horrendous smoke and frankly, if you just watch the news you would like to thank the fires, where you know with inside of our casino and they were not they weren't weren't anywhere close.

It affected us for a couple of weeks really.

And.

In <unk>.

Mississippi, a little more complicated because we actually were closed for a few days, we never lost power a lot of our customers did lose power.

And so when we reopened.

We held the rooms in the hotel for our best customers. So we actually had a couple pretty good days because people didnt have power at home. So they came over to us and that helped offset it.

So not not a all in all it was still probably a negative.

But not a huge negative.

And I should mention looking forward.

The passing of this infrastructure Bill.

It is interesting and then there's this other build back better Bill you know people talk about the last.

Last year, we have two different stimulus packages and each time those checks went out we did see a lift in our casinos.

When people get a check in the mail and some of that money ended up on our slot machines.

And.

No it wasn't.

Each part of our earnings, but you're definitely thought that that weak and it's going to be interesting as all of this money is spent on.

Infrastructure, well, we have some high rollers, who are in the business of building roads and bridges and sell them right. So I mean there.

That money is not being spent blowing up things in Afghanistan.

Fact that the government is now focused on building stuff within the U S. A.

Ultimately could be good for us and in the in the next deal.

And it's like whatever your politics when the government starts cutting you know whatever it is three trillion dollars worth the checks over the next 10 years.

Now do they find a way to pay for it I don't know if they tax the heck out of Jeff Bezos, Elon musk well, they're not customers of ours and if they use that money to go build a freeway near us that might benefit us I mean.

And if they spend the money without raising the money, we end up with inflation.

So I don't know, but but.

At least looking forward I think the economy is likely to continue to be robust because you have so much of.

Spending going on and that's not really being called stimulus bonds, but the end of the day. It is a stimulus for the.

Our economy so.

I'm feeling pretty good about life are at least looking forward in our business.

There are a couple of numbers at you.

And they might be helpful. So if youre looking over at northern Nevada guest counts in the quarter were down about 30% for what it's worth.

So we absolutely got impacted for a lot of that quarter from from from the wildfires. The other thing that we had was just low table hold so it's on a table hold was about eight five percentage points lower.

Then there not only the long term average, but also the prior year that cost us about 600000 in gaming revenues about half a million dollars and the EBITDA.

Over at Silver Slipper.

A good weekend normally can be in the ballpark of half a million bucks of EBITDA, maybe a little bit less than that.

I don't know if those numbers help me a bit but a little more color for you there.

Yeah helpful. Thanks, Louis and Dan I'm curious a segue on the infrastructure Bill do you have any historical correlation or thoughts on government, giving away money and people, having a lot of time and nothing to do versus them, having to work hard in and earn that money, but what stimulus in that regard which one.

Flow more to the casino floor.

Now it's hard to know, but I mean, you can look back probably the best correlation I can think of is in the New Orleans region. There were two.

A major Ah.

Things that have resulted in government money going into the economy.

One was Katrina and what was the other store Amrita.

Which caused so much damage back in 2005.

And Ah resulted in billions of dollars being spent on levies and infrastructure to protect the city of New Orleans, and the city of New Orleans, and the consumables and New Orleans had a pretty robust period of time, because the people building those.

Well paid people, who were looking for something to do in the evening and so.

It was certainly help the new Orleans economy as all the billions of dollars being spent on infrastructure. So maybe that's the best comparison and then when you had the.

British petroleum oil break blow up off the coast and people talked about it was going to hurt the fishing industry and all that stuff well the the amount of money that went into the coast.

To remediate the effects of that oil break and that was again the same thing would have people be out there all day trying to get the oil off Brown pelicans in that on the evening then show up at our place so.

It's.

Generally when you.

To spend money on that.

Yes.

Yes.

Somebody making.

50000 knows you're building roads.

And in there you know, they're happy to have that job and they're making good money.

Throw all of that in the bank some of it gets thrown into our bank and so that's that's it.

And I look at it I don't really want to get political on you know what this paid for any of that stuff, but the fact that the government is cutting these checks is probably good for our business.

No.

Good one of the world and all getting Ryan.

[laughter] opened a can of worms with Dan there are curious on Bronco Billy's.

Dan you mentioned that it was flat year over year in September.

If I look at the quarter is down 17%. So it implies a pretty notable sequential change kind of within the month within the quarter excuse me. So can you talk to your kind of July to August to September this year versus last year and why September fared so much better.

I was talking about the.

Dan was talking more to the gaming revenues that we see that get published with the state relative to what we report.

Versus net revenue, that's showing up on the income statement damage.

Israel R. R R.

When in September was flat, so we were down more than that in.

June July or after that.

Yeah don't don't don't don't read too much into it Ryan if youre looking at net revenue so.

Again, Dan Dan is looking more at the published gaming revenue.

If youre looking at our net revenue in the month of September net revenue was down about 22%, so down a little bit more than what you saw there for the rest of the quarter that that that much is certainly true, but it's not off by the by the mantra or not that sorry by blackout, a quantum I should say that that.

That's being implied from from gaming revenues did that like like we had no debt.

The difference is and it varies a little bit from place to place but.

The in the state of Colorado. The revenue numbers you see include free play.

And the numbers that we show on our income statement, our net of free play.

Okay, We don't know what triple Crown as revenues are net of free play for example, and so.

I'm just looking at the growth.

Like when we compare how did we do compared to the market we have to look at it before the issuance of free play because we don't know what the market is net of free play.

That's why you end up with slightly different numbers, but we were we have been using more free play this year than we were last year.

And.

So that explains the difference, but I know on a gross revenue basis, we were flat when that when the market was up 16% that is true and for the quarter are using that same apples to apples, we were down about five 5% for the full quarter. If that helps you out of markets and the go to market was plus two.

3% plus 23% so.

Gotcha helpful. Thanks, guys. Good luck on the casino proposals here and geared to hear here what happens thanks.

Okay.

89 days away eighteens away I can't even 90 days away anyway, I'm going to say it.

Surprise me, if India and it takes a little longer but at least at this point theyre, saying theyre going to make the decision on one day.

Okay.

Thank you, we'll hear next from Chad Beynon with Macquarie.

Hey, guys, it's Jordan Bender on for Chad today, I see you obviously went through your financing for Colorado.

Earlier in the year and you talked about your private equity back at her in Illinois can you just talk about how youre thinking about the financing for a potential way in Indiana.

Well.

We'll know a lot better in the next three months because what you might do if you get if you get no licensing them Theres no financing to do rent and were wearing.

Good shape, we have enough cash to finish Colorado on our own we're generating cash flow and so on if.

If we just get one well the first hurdle is to build the temporary and the temporary like that sprung structure is less than 5 million Bucks you got to pay for parking lot you got to hire employees and then there's like $20 million of slot machines that you buy.

And in Illinois, there's a big upfront tax payment.

That's $15 million plus a tax per machine, which can be up to $35 million.

In Indiana, you don't have that.

So, let's just so to make it simple lets assume we get Indiana, but not Illinois, and that's not forecasting one way or another it's just to make the math simple because it's a simpler.

<unk> regime, I think the upfront fee is $5 million in Indiana.

Slot machines, 'twenty and everything else, you're going to be and it may be 40 or $50 million to get that temporary open.

And we've got extra cash on our balance sheet and an undrawn credit facility.

We could just go do a temporary casino.

Pretty much without if we need outside financing can be minor.

And and you get that open well then these temporaries would probably produce pretty good income right off the bat.

And a very high ROI and that that income is then equity going into the permanent.

And so.

And you don't really need the money for the permanent until a year or two down the road.

At that point the bonds that we issued last March start to become callable theyre not callable today, they could be redeemed, but I'm very expensive terms.

And so you know, we're kind of we sit and ruminate about all the different things, we could do to get it financed.

If we.

Get one or both of these licenses.

And so for example, if we got Illinois, and only Illinois, we do have a kind of back step deal with a large private equity firm, who would come in as a as a partner on it.

But we can probably finance it cheaper on our balance sheet, we'd have to pay them a breakup fee and frankly on a modest breakup fee and there are actually a friendly firm with ours and they said well they would be fine with that but they would then like to buy a big chunk of the bonds.

Probably make it work so so.

So when we know if and when were chosen for either of these then we can figure out what we need to do with their balance sheet I'm pretty comfortable that we could figure out how to do both.

Yeah, just look early in my career, we were just completing treasure island, when I went and bought the land for blush here and when we proposed last year. It was <unk> billion and a half dollars and we didn't have the money, but we were comfortable we could get it and ultimately we got it that's made $500 million a year ever since and it's.

Kind of the same thing here both of these projects make really good sense.

Just to give you if you go to the Illinois Gaming Board and look at the numbers coming from the rivers Casino des Plaines. They have not yet finished their expansion so theres still sitting on.

Somewhere.

They probably added some slot machines, but I think they are in the ballpark of 1500 slot machines.

And they are doing.

$50 million a month.

And the hard rock casino over and Gary which has been opened several months that was doing 25 million a month in revenue.

Both of these proposals we're making are.

Splash year more innovative casinos in either of those now the displays casino has incredible demographics, while kagins are good they're not as good as that.

But we think both of these are really good opportunities and if we.

Were chosen.

We will get it we'll get it financed and get it built so.

Awesome and then in the in your prepared remarks he mentioned.

Just do you expect it's starting to ramp throughout the year can you kind of talk about how much more you have to ramp in terms of expenses and maybe why margin should look like as we look out into 'twenty two.

They're actually not ramping sequentially.

Like our expenses in the third quarter weren't much different than they were in the second quarter.

But last year as we reopened our we have not yet brought all of our employees back.

And.

And we still had some employees who were.

Deferring income not getting paid their full amount currently.

We had negotiated deals where we were paying reduced rent in some cases and.

And so.

By the time, we got to the end of the third quarter of last year, we were back to kind of a normal.

Process.

We had been accruing for some bonuses this year.

This company has been doing really well and I think our employees deserve it and it's not.

Not only management, but we have now paid bonuses in two consecutive quarters.

To every employee in the company modest bonuses, but but theres been.

Pressure to increase wages because.

The shortage of labor and people have been trying to sundar.

Some of our competition has been offering starting bonuses and all of this and we've kind of gone the other way and said look we're doing well and we're willing to share that with people and so here's a quarterly bonus.

No guarantee that this will happen every quarter, but if the results continue to be good they could happen every quarter.

So we haven't seen a lot of turnover.

And and I and I think we've been able to keep our cost sequentially. The same but on a year over year of third quarter versus third quarter. There was some increase in expenses that are.

But not like first second and third quarters haven't haven't grown much.

Yeah.

If it's helpful Jordan.

So we've long now for probably the past year I talked about how we thought existing operations consolidate it should be in the high forty's or maybe $50 million of EBITDA and Theres been nothing recently for us to change those thoughts if that helps you.

That is helpful. Thank you.

Has it all nice quarter guys.

Perfect. Thanks, John.

Thank you we'll take our next question from Larry Haverty with L. J H investment advisors.

Hi, Dan.

Long time, no here, but anyway.

Looking at this a sports betting opportunity.

The amount of money I'm in Florida, and New York at this point and the amount of money that's being paid.

For advertising by purveyors in your industry is.

Thank God can only be described as a staggering.

And clearly someone thinks that.

This is going to be a very very big thing or they wouldn't be doing this advertising and it's more than one firm.

So as you look at the at the sports betting and <unk> been able to observe it in places where you're either operating or familiar do you think the opportunity is as big as the advertising would suspect or would suggest or do you think.

Perhaps that are.

The real opportunity is that it brings people into the casinos for many many more hours than they'd normally be in and you get the feedback from.

Putting bets in using mobile devices and.

Otherwise patronizing your facilities.

How are you what have you looked looked at this or is it all just a pipe dream.

No no alerted there's there's.

New Jersey is which I know you you know new Jersey, well as well, but they've had online sports gaming and online gaming now for several years.

And online sports betting is going to be a big business Interestingly online gaming and even bigger business like twice as big which is the ability to play a slot machine on an iPad.

And yet Atlantic City has not had a down year, it's it's grown some not much but it is growing some.

And so obviously people are spending more on gambling and the growth has been online.

Sports betting is.

It's not a new thing I still remember when I worked on Wall Street every Thursday, you Guy would come through with those sports sheet and people place their bets and he had to take their money and come back the next week and pay them off and so on and I remember looking at this guy I think and that's the mop that Bob is right here in our offices.

Collecting Betsy, there's a booking and it was totally illegal and so the illegal gaming activity.

<unk> has been estimated to be billions of dollars and I think the legalization of online sports betting is probably cut into that business pretty significantly because it's just easier to place a bet on sports betting and I and I think what.

What will you see all the staggering advertising and promotions that these guys are doing is they're all trying to get market share that trying to get People's accounts and it's reminiscent to me of 20 years ago. When Amazon was trying to get big quick and and they were spending money to diversify and everything else.

And they were losing money hand over fist, but trying to grow the revenues as fast as they could and you kind of knew at some point they could they could turn that faucet that expense faucet off and they'd be pretty profitable and the same thing is true of the sports betting operators, if they can get stabilized and get.

People signed up and they'll equalized at some point they'll stop that advertising.

And it'll be a highly profitable business, but at the moment, they're all scrambling to try to build our share we're not in that directly we get a percentage of revenues in each of our agreements were kind of allowing people to kind of park at our licenses under these 10 year deals.

And in the minimums in our contracts are high enough that that nobody has exceeded the minimums.

As of yet.

Now one of our two of our agreements are with win and win is starting to advertise pretty heavily and of course, they have a great brand name and so.

I think they will gain some market share Churchill Downs is another one of the people we deal with has been more conservative in their marketing.

And then markets is only up in Colorado, not yet up in Indiana and they.

They are a private company, that's pretty significant out of the U K and I think they are kind of standing on the sidelines to see.

They'll get tooled up and be in there.

You don't have to have a big market share in this to be profitable.

And so.

Even if you have a 2% market share.

If you run the business right they can be profitable even after paying us RFP now when you go to online gaming, it's not yet legal in the states, we're in but we expect it to be.

It is up and a few other places not just new Jersey anymore, and every places up and running and it's doing well.

And that's a business that we could do ourselves and we could do it with others and.

It might end up being a hybrid where we license some of our skins, and we keep a scanner ourselves and explore it.

We chose not to do sports betting it around because we're not diverse enough geographically they have are uneven.

Playing field in other words, if if the.

Denver Broncos ended up in the Super Bowl with the Dallas Cowboys, if I have this right.

Then we'd have a lot of bets on the Broncos and we wouldn't have anybody betting on the Cowboys and we could try to move the line, but then we wouldn't be giving our customers in Colorado as good a bit as they could get from our competitors and so it was a difficult thing for us to do don't have that issue in online gaming.

We don't have the expertise in the company for how do you market online.

You can read you can hire people to do that.

You can buy the software or at least the software to have the website.

Slot games themselves are owned by the slot companies they license those pretty readily so.

We don't have a division here yet it is not yet legal in any state we're in but it is something that we would consider doing on our own if it's legalized in one or more states that we're in and we think it will be like literally, Indiana, and Colorado might only be a year away and in Illinois, not very far off that either.

No.

And what.

If things stood still last question if things stood still what's your best estimate next two years, but nothing got approved of your you know.

Capex in both of the years.

Well shop, we complete Chamonix.

Monarch recently, well, let me go back the Amira start and Black Hawk.

We used to be able to get the numbers out of the <unk>.

<unk> financials in America was acquired by Pinnacle, and you could still get a pretty good idea of the pinnacle financials, and then pinnacle's acquired by Penn National and now it's grouped together with a bunch of other casinos, but they were headed towards like $90 million a year of E. P. D. I T and we think they are probably still.

In that ballpark.

Capex youre spending not how much you expect to make him well.

Firmly committed to spend.

Oh maintenance Capex is like $5 million a year.

And in the <unk>.

Project in Colorado has got let's call it a $200 million to go roughly and we're sitting on $270 million of cash no. We only need about 10 in operations.

And most of that spending will happen in 2022.

And we will generate free cash flow in the meantime.

Money is pretty close to free right now though.

It may well make proved to be smart to be a buyer.

Okay.

Other than the other sidebar I was saying is monarch on their earnings call recently said that they think they are now the most profitable casino.

They will be that they will be right. So they are there. They have a 500 room hotel them. They did a nice job, it's a nice place and so I think they're going to be.

B, if not 100 million that can be up there and and so the the Chamonix project. We're not 500 drums were 300 rooms.

But it has the capability of doubling the size of the company.

And then waukegan could double US again, so there's a lot on our plate here.

So well good luck with it.

Okay. Thanks, Laurie nice to hear from you. Thanks, Larry.

Got to know what you're going to be out here and let's have dinner.

And that is.

That's probably all we have time for that so we'll close it out.

Okay.

Thank you very much everybody.

Give me an exciting quarter.

Everyone.

Thank you that does conclude today's conference. We do thank you all for your participation you may now disconnect.

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