Q2 2023 Full House Resorts Inc Earnings Call
Yeah.
[music].
Uh huh.
Greetings and welcome to the full House Resorts, Inc.
Second quarter 2023 earnings call at this time, all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
This conference is being recorded it is now my pleasure to introduce your host Lewis Fanger.
Full of full house resorts. Please go ahead.
Thank you and good afternoon, everyone welcome to our second quarter earnings call.
Before we begin we did post some slides on the website. So if you go to investors got full hospitals arched dotcom youll see that Bob's banner.
And if you hover over a company and so you can go to the presentation section and find some of the slides that we'll discuss today.
Including a bunch of current photos of go.
Not at harmony.
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 Securities laws.
I'd also like to remind you that the company's actual results could differ materially from the anticipated results. In these forward looking statements. Please see today's press release under the caption forward looking statements for the discussion of risks that may affect our results also we may make reference to non-GAAP measures such as adjusted EBITDA for a reference.
Affiliation of those measures. Please see our website as well as the various press releases that we issue.
Lastly, we're broadcasting this conference call. It full hospital sorts dot com, where you can find today's planes release as well as all of our SEC filings.
And with that said I'm going to go down.
Uh huh.
That's kind of a complicated quarter, so just kind of figure out where to start but.
You know we're busy these days and the busyness kind of falls into four categories.
One is are still ramping up the temporary this was its first full quarter of operations and and it did well and is getting better.
The table games is starting to be a bigger factor and we're still hiring more dealers.
We're now ranked third in the state in table games as of the July numbers that came out yesterday.
Our steakhouse should arrive in late September disappointingly late but it's a it's basically a large diner, it's coming in seven trucks in there.
We're trying to line up the permits to bring these oversized trucks from Florida, Illinois.
And it's gonna be assembled an open so probably if it doesn't get up until sometime in the fourth quarter.
The sports book should be up and running in September . So you know, we're still pulling it together in a still hiring people.
The trends are pretty good and it's and it's profitable so it's it's.
Very much the way our most successful new casino scope.
The second Big task is completing construction of Chamonix in Colorado.
It's pretty unusual for a company our size to undertake two things at the same time, but Oh, we didn't pick the timing in Illinois, and that's that's how it ended up.
So we're preparing for it to open on December 26.
So it's not only completing the construction, which.
As a job and a half but also preparing for the opening along those lines. We made some pretty good progress with the staff.
The high end restaurant, which we intend to be one of the best if not the best restaurants in the entire state of Colorado, We've done a deal with varied the cake and you have seen from various prime done at circa they used to run the ninth steakhouse at the palms and before that Barry was with the army, all which as Charlie Palmer Company.
It wasn't Manhattan, and he moved to Las Vegas to open the one at Mandalay Bay, a quite a few years ago, but this is a guy who's had a excellent starz before it knows how to run high end restaurants and high end restaurants in a casino.
Casino setting so we're excited to have them as part of the team and set it up.
Outside chef deal very much like Oh, the restaurants that blog hill, but they get a percentage of revenue as a percentage of profit.
We're running it.
So that's our restaurants, but they're motivated to make it their restaurant as well.
We have the pretty soon.
It's a small part of the overall business, but nevertheless.
Nevertheless, pretty importantly, if a prominent a jewelry store on the property, we have a consultant from Santa Fe Who's got a successful business there called rock can feather and she's helped them pulled together are how to make our jewelry store a special.
And in terms of new hires we just hired a breath Odell, who I think started work actually today.
And that's a pretty important higher he's director of non gaming operations.
Recognize that this is a high end hotel that we're building here and and and.
Our team there has not operated a lot of this a high end stuff before and so we needed somebody with that experience.
Yeah, Brett grew up in New York City, but.
He's actually fluent Mandarin he's he's oh.
Fully American it's wipes from China, but he he trained at Wynn Macau.
In Macau and then he helped to open casinos in Vietnam in Nepal. He worked for I'm in research for Awhile in Bhutan I'm on is probably the highest end hotel chain that's out there.
And after working in China.
He was running a hotel and crested Butte, which is where we found him and he and his family will relocate them to a proto Colorado and we're excited to have him on board and he can make sure that the hotel the spa with meeting space to food and beverage.
Our lives up to the expectations that the high end customers expect subway he's an important hire and he starts today so.
Then the third thing of course is we have an existing company with existing properties and and that's had some challenges in particular in this quarter are the silver slipper had some cost issues.
Payroll went up quite a bit and and and the revenues didn't and that had an impact on the bottom line and we're getting that back under control.
Got a freeze on any raises when looking at our staffing numbers.
And and we'll get it under control.
In Tahoe.
There was such a huge winter in Tahoe and the snow has been a gradual going away that caused people to delay their returns that the summer in the summer is pretty important up there.
And now we're in the heart of it and it's doing better but in the second quarter that affected that its off season quarter. So the tahoe property and so it was down.
In Colorado, the construction of Chamonix has been affecting Bronco Billy's for quite some time.
That continues to be the case, a bronco billy's because of Chamonix doesn't have any parking.
We try to operate valet parking as best we can and we shuttled from an outside lot, but all of our competition is onsite parking and we don't we also don't have an onsite hotel, we have a bed and breakfast two blocks away.
All of that will change when chamonix opens but at the moment.
Bronco Billy's is making money in the summer, but it wasn't in the second quarter.
And then a rising star in Indiana is doing okay.
Especially considering that there is a competitor that didn't exist a year ago and that's the Churchill casino that carefully park.
Northern Kentucky, So it's a mature market. So when somebody adds a casino in a mature market like that it becomes a market share game.
And I think we're holding our own.
Then oh, the fourth test that where does he live is frankly designing the permanent American place, we're incorporating a lot of what we've learned from the temporary with quite a few things. We haven't started construction yet there's now but we are actively.
Designing it cost some money, but it's now there's a lawsuit are out there from the Potawatomi tribe who's a competitor of ours to our north and and they've filed a whole bunch of lawsuits.
Not against us, but against the city and the state that may end up delaying or start of construction and financing.
I think ultimately the suits, who will end up being resolved and everything to go forward.
But at the moment.
It's it's something that just happened last week, we thought this soup was pretty much gone and they had appealed something in the appellate court set back to a lower court so that puts it back into flux a little bit.
And and so that's a permanent theres a bunch of unusual stuff.
Because we have a lower tax rate in Indiana than most of the other casinos because we're the smallest one and theres.
There's a progressive tax rate in Indiana.
There was a an amount of free play that youre allowed to deduct every year.
We have found it makes sense for us to sell our free play two guys in a higher tax bracket and we've done that every year for about five years now and we did that this year in the first quarter for $2 1 million, we did it last year as well for 2.1 million, but it was in the second quarter last year. So looking at the year over year highways.
So it kind of affects it.
Generally we will do it early in the year as possible.
Cause you never quite know during the pandemic here for example, when we were closed for three months. Fortunately, we had sold the free play before that period them, because and everybody being closed for three months, we might not have sold it for as much as we were able to sell it for.
And so what then on the sports books Churchill got out of the online sports book business in the second quarter of last year and when they did that they.
They had paid us an upfront fee plus a percentage of the revenues the upfront fees of these deals go into deferred revenue.
Revenue.
When they pulled out of the deal that accelerated the unamortized deferred revenues there was about a $1 billion of revenue and income in last year's second quarter now one of those sports books that they backed out of we now have a deal with a with a new company, who paid us a new upfront fee and is paying us on a regular basis, but.
The Big number there is the sports book operation in Chicago.
Where are we repaid $5 million upfront, which again as deferred revenue and.
And we will receive a minimum of $5 million a year from that and that starts in the middle of August whether the sports book is actually up and running or not.
But we do expect them to be up and running pretty soon and if theyre very successful, we will get more than $5 million a year, but that's the minimum of 5 million starts in mid August and that's by far the biggest piece.
Illinois.
Indiana and Colorado.
In Indiana, each casino has allowed three websites.
Colorado each casinos are allowed to one website, but we actually have three licenses. So we ended up with three there as well and there's quite a few small casinos in the state each of which gets a license and Illinois. There's I think 13 total casinos, if I remember correctly in each gets one website and of course the population of bill.
It's much bigger than either Colorado, or Indiana, actually bigger than Colorado, and Indiana combined so each websites with much more so oh, that's why a higher higher agreement in Illinois at the very important and coming on stream.
We've taken as we have next week, then there was a some accounting issues and not unusual in a new casino you find them you.
When you start up and then you'll find some little things and so for example.
A R a.
Yes.
Slot machines, a number of them have a progressive take jackpot on them.
You don't start those zero, you get kind of starting about something else because it's not very exciting to look at a progressive jackpot that zero and that amount.
When you open would be a charge to our preopening costs.
And that's a liability it's I forget whether it's a debit or credit on the old T accounts, but it's Oh, there was about $300000 that we've missed so we took that charge in the second quarter, we have a new finance person, who helped us discover that.
And we moved him from rising Sun.
We think we have everything straightened out now, but that was a little bit of a surprise for us and we do continue to have training costs.
Hi, Illinois, because we are trying to hire more dealers than we ran her own dealer school and we pay dealers are there wage in order to go to the dealer school. We will also pay relocation classes get dealers and we're gradually getting there we have a enough dealers mouth have great 30 games.
Saturday night.
And we're allowed to have 50.
And as people get more experience. We can also increase the table limits right now we go to $5000 a hand, one of our key competitors would go to $20000 a hand.
We don't want to do that until we have more experience dealers and and so that's going on.
And then.
I guess, that's that's the me unusual stuff all of this stuff has got to get cleared up in the next few quarters.
Yes, no no oh, it should be a pretty mature at both of the new properties and are generating a lot of free cash flow. So.
If we go to the.
Presentation, we put online that Lewis bunch of everything I, just said I meant to be kind of a summary, but I guess I went into a little more detail than a summary, but.
Yeah on the.
A presentation that's online notes that our revenues increased 34%, that's really the temporary which.
Which is most of that sector more than all of it.
Adjusted EBT I T decline, but a good chunk of that is the timing of the free play.
The million dollars that I mentioned from the deferred revenue.
And then the temporary actually made 4.1 million. Despite the accounting charge I mentioned, if you. There's a couple of other small accounting charges. It was closer to four and a half to five if you back out the accounting charges.
Which as you know, it's it's not where we expect it to mature it but for the first full quarter of operations that's respectable.
And then when you start getting the Illinois sports guns here shortly and you know part of the reason for my.
My comfort with the results in Illinois as the next few slides if you look at admissions they've been trending up very nicely.
Since April now when we first opened you get a lot of tourists coming into town. When my kids when we used to refer to as Looky Loos people come in and look at the casino, but they don't Gamble a lot and over time, you build the mailing list and you'll start replacing our.
Tourists with gamblers and so since April we've had a steady trend of of admissions going up.
And you can see just yet as a result on the next slide you can see our slot coin in life sciences steadily going up.
And our table games drop steadily going up now on table games. It's also affected by.
The fact that we are offering.
More tables at any given time and we're operating them more hours of the of the week that we had before and we are also allowing larger bets overtime and so oh.
You know if you're if he needs to.
If you had these charts on the same scale you'd see that table games drop is actually growing.
Faster than a slot coin in and that's a result of adding more tables overtime and so a lot of hair growth is coming from tables at the moment, but we're continuing to show growth in slots slots will always be the preponderance of the business here, but.
But tables are going to be meaningful way since some of the markets that they're not very meaningful.
So going way back when we opened.
This is on slide eight we had 28 table games.
By Middle of May we were at 36 by now we have 48, but we don't have enough dealers to operate all 48. So we have about 30 open on weekends.
But of course, we will.
We pull people from potential shifts during the week in order to have more tables open on weekends, whereas we hired more dealers. It helps how many tables, we have opened on a weekend, but it also helps how many tables, we can open a during.
During the week generally we are table games are $15.
Minimum that we might have a do I sometimes of the week 110 dollar table as kind of a lost leader out there.
But generally we're 15 dollar minimum table went up.
And as mentioned in July we were third in the state.
Which is pretty good for free replaces its only been open a few months.
And then we expect to extend our weekend table games hours to pour yeah. Currently it's closer to two and so we're.
Picking that up.
The guest database you can see it's been building. We're now at about 40000 people in our database, that's pretty important and we started at zero.
And this allows us.
Eventually to be more efficient on our marketing class, we are still spending quite a bit of money on marketing and advertising getting our brand out letting people know we exist and so on but over time, we grab we are already being more targeted and that will continue to be more targeted as we have.
Uh huh.
A more a bigger database, it's it's almost like a we've talked about the advertising agency, it's like showing up at a lake and Wisconsin to go fishing, you've never been there before and you don't really know where the Fisher and so you end up going out in different places and dropping your bait and over time, you start to realize that certain.
Bay certain death certain areas have more fish and you start going back to those areas more and more and that's.
Effectively what happens when you open a casino in a market where you haven't been before at your.
You you gradually figure out, who gambles and who doesn't gambling and how do we incentivize the people actually Campbell.
So that's a mark in place on Germany on page 10.
We showed the original renderings of the project. It's a it's a very large by Cripple Creek standards.
I remind myself, sometimes that it's about 10% of the size of the casinos with built in Las Vegas 20 years ago, but we're also a small company. So this is a pretty big impact on us and.
It's $250 million at a very high end casino 300 Guestrooms.
I remember, Steve Wynn when he opened the Golden Nugget Atlantic City. It had 500 Guestrooms and it was doing 100 million a year of income.
25 years ago, 35 years ago right. So.
If you get the right people in the Guestroom. She can makes a lot of money I mentioned, the steakhouse, we've got a rooftop pool and spa, a nice parking garage and opens December 26th.
We will be having planed.
Play nights of construction we.
We will get turned over to US early in December and our employees will be practicing doing play nights and then we'll send the employees home for Christmas with their families and open the day afterwards so.
Yeah like most families I find you get together with your family and your all celebrate Christmas and the day after Christmas like what the Hell do we do now and you end up doing something else well, hopefully where there's something else that we hope that we can have a lot of people are there and then we're planning a significant.
Party on December 31st which is both kind of an opening party and they obviously new year's Eve celebration.
Page 12 shows the front of the facade and Oh that fancy brickwork is actual brick some of our competition.
One in particular use like a brick.
The new year.
<unk>, which is now peeling off so that's why.
I was just looks really nice we did spend the money to have some pretty fancy brickwork.
Which fits very well with the old buildings in town and then the hotel a lot of the hotel rooms were in that class thing up on top which is designed to kind of meld in and reflect the clouds in the mountains.
And kind of masked the size of what the building really is that one square or rectangular building you're seeing front. The one story buildings kind of ladder leaning against it that's a jewelry store and when we get the city's permission to close second street, because it's building squats right across second Street.
One of the commissioners have said they didn't want a big gap and the facades along the street they thought that would take away from it and there was some suggestion that we could take an old streetcar and put it there is no true tear up the street that uses tourist information because we didn't want to do that but we said we'd build a jewelry store.
There are that's the size of a streetcar so that's what that is.
Jewelry stores go very well with casinos are people people will.
When money in and then they have to bring home and voluntary jewelry as me.
Someone once called it and.
And so we think the jewelry store it'll be a nice amenity and it fits very well.
And it was important to the city in order to get permission to close second Street. So we addressed it in a good way the high end restaurant as those windows to the left.
You can see a chimney there that's because weather's valet pick up where you have a outdoor fireplace that keep you warm while you're waiting for your card. This is a cold climate.
And the main valley entrance is behind the jewelry store the parking garage is out in the back of the building.
The next page shows the main part of the casino at the table games part.
The those tall windows will be shaded in they've curtain suddenly insight because you don't want a lot of daylight into the casino, but we wanted the.
The outside to look Regal, so we teach windows on the outside but on the inside.
Not a big and a lot of light.
But it looks right on the outside the next page shows he didn't really click on it and then on slide 13 as well.
Important thing is just to see those blue warnings there that's existing profitability and so some of you that have never been to town often ask us how just how tightly are they integrated the answer is very.
Very tightly you you won't have to leave the Bronco casinos to go into the shiny casino as you can see they're there they're essentially attached yeah. It's a lot like going from tomorrow land to fantasy land at Disneyland 10 minutes.
One thing you have to go through an arch in one direction says well kind of Bronco Billy's. The other direction is welcome to Chamonix. Your points are good from one or the other but it has a different team chamonix is more modern European sophisticated.
<unk> is a European elegance with Colorado comfort and Bronco Billy's is more wild West Historic Cripple Creek like a lot of the casinos there are.
On page 14. This is the back of the property as a parking garage and you can look down the back one of his garage and it drops right down in the back of the casino.
There's a.
Some decorative stuff that goes up on the spare concrete that's not up yet but otherwise.
Pretty far along.
As you can see the parking garage and stare at it.
Yeah.
Yeah.
We could use it if we could get occupancy permits and so on except that the elevators from the parking garage go into the back of the Chamonix casino and so I can't use the garage to help Bronco Billy's. The next few months, because there's not an easy way to get from those elevators into Bronco Billy's.
Page 16 shows the table games pit.
This is when I mentioned earlier, the big window, and Oh on the outside well, that's one of those right and kind of see and that will get curtains, but the table games pit are quite elegant very intricate molding going in here to.
To the left you can see that our steel door, that's close that would normally be open that's a fire door that goes from.
Mm Slide 20 is the main ballroom.
Which is you know large by Colorado standards.
And.
This is an important difference between us and <unk>.
<unk> for example, we have pretty significant meeting space.
Monarch really doesn't.
Amira restrict us and I think it's important to helping Ameristar film the midweek and it's going to be important for us mid week as well and so we have a very nice meeting space.
That.
Our our site I mean monarch did a nice job and they have a nice casino, but they are in a very narrow.
Lot.
We're not we sprawl out pairing and that allowed us to have a meeting space, that's not wedged into a hotel tower and and that's important for when you. Even if you have entertainment or you have some function.
And and so that's important.
You'll see the meeting courtyard. This courtyard actually serves several purposes. One of those those are meeting rooms off the left and obviously we could have.
October party outside and so on it puts a nice day, which it often is there and but that's also a court or from the surface parking lot when those doors at the back and you're right at the top of the escalators that feature down to the casino and so it works very well.
Next page is.
One of our guest rooms, not all of our guest rooms have both a shower and a bathtub, but quite a few do that's the shower behind the glass door in the back and a nice freestanding bathtub in the front and the toilets or in every case and a water closet and nice stoneware consoling.
Page 24 shows.
We have quite a few rooms like this where there you can see the headboard for where the beds. Eventually gonna go. That's sofa, there is actually a murphy bed and that thing pulls down from the wall and that and that sofa kind of folds out of the way and supports the bed and so it's pretty cool Murphy bed arrangement. So this.
<unk> can be rented two a couple that once the extra space of kind of a sitting area or if you read it at two couples traveling together two queen size bed. So.
Nice room and.
And then page 25 is a picture of part of one of the sweets.
Uhm.
And 26, we have two of these two storey suites.
It is an upstairs downstairs element, which is pretty cool and a lot of glass lot of views of the mountains and the gold mine in the historic town.
Every room and replace her almost every room in our place is a nice view the handful that don't we've actually put nice patio. Saddam so that you can at least sit outside and that'll be popular with people who might want to be able to smoke because you can't smoke in the building in Colorado, but you could have a patio, where you could and.
And then you can see on 27, when I said, we we closed in bridge to Cross second Street well. This is looking down second Street and this is the view from one of our suites and then our pool deck.
Rooftop pool deck.
Now the pool.
Will be heated an open year round as is not uncommon at ski areas in places like Colorado.
We have a pretty high tech insulated cover that goes over it at night tried to reduce the.
He lost but the pool is as much an advertisement because from the competing casinos that you see in the background. That's a century casino with yellow on it is there and to the left of that is triple Crown.
They'll be looking at the steam rising off our pool, it'll be kind of invisible threat.
Town and and it's one of those hey look they have to pull up there I'll cool is that in one wall of the pool.
That's kind of in the foreground is actually plexiglas. So.
You could actually from certain angle see people actually swimming in the pool.
And it's not a huge pool, but it's enough to give it a pool deck and the pool deck, the a great place for events and parties and could even be.
If you have a warm summer day, you can turn it into a kind of a almost a nightclub out there. So the pool is pretty important.
We opted to let it be outside and let the steam go off it pretty common at a ski areas, whereas both monarch and ameristar have indoor pools on their highest deck.
Which is when the weather's nice I'd much rather be outside and frankly, if you Wanna have a polar plunge we have a sauna couple of saunas not far from the pool and you can get warm ago jumped in the pool in February of Medicine, that's always fun.
So then page 29 is just.
Segment results you don't need to go over the recipe and we've already talked through it I guess and.
And on that I think I'm ready to take any questions.
Alright, so I missed or anything, but I know, we're ready for questions operate okay.
Thank you.
If you would like to ask a question.
On your telephone keypad.
Okay.
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<unk> it may be necessary.
Before.
<unk>.
One moment please.
<unk>.
Question comes from Jordan.
G M B C. Qat's. Please go ahead.
Good afternoon, Thanks for taking my question.
Wanted to start on the funding for the permanent casino in Illinois. So I guess you know looking at my model at least it looks like you'll need to raise it.
Permanent funding sometime in the middle of next year I was just trying to get an update on when you guys are thinking about that timing as well as kind of optionality behind the source is the word that money could come from thank you.
Well, we've always said that that would be roughly the timing. We've looked at you know our existing bonds become callable in February .
And so refinancing the bonds gets a lot cheaper from February on that's still.
Seven months away the bond market has its ins and outs, it's not a great bond market today, it's not a horrible one.
Now have this.
Lawsuit that came back again and that that'll be something that factors into it.
The fact is on our license there's no.
Headline of when we have to be open.
And there are some limitations on how long we can operate the temporary you know it's possible that could be revisited you know we would like to move forward as quickly as possible. We think the permanent makes quite a bit more than the temporary we are continuing to refine the does.
<unk> as I mentioned, but.
<unk>, you're not wrong in saying you'd like to finance it in the middle of next year, but you know if somebody says well. It's gonna cost you 20 per cent interest or something then you'd you'd say well, maybe that's not the best way to do it we do still have a standby.
Facility with a large private equity firm.
That's that's there it's it's kind of expensive we hope we can do it cheaper than that.
Some other way.
We thank our stock at these prices is extremely cheap and so that would probably be the most expensive way to do it and so that I can I can pretty much assure you there's no issuance of equity being contemplated.
Not pretty much I can assure you that there is no issuance of equity being contemplated.
We could do a a root deal as they have for the downtown project wherever <unk> provides most or all of the financing.
And of course, the once we get Chamonix open we should be generating quite a bit of free cash flow and so the longer it takes US you know the.
The easier the financing is now we would still like to move sooner rather than later, but you know.
Delays and all the ads because it does make the financing easier and so that's that's where it is so I <unk> I don't have an answer but we have really.
Probably a year to figure it out so.
Okay, great. Thank you and then just turning the Colorado property historically has done about 10 to 20 per cent mortgage just giving given the year.
Is that property ramps up is it fair to assume that it charade exceed that 20 per cent mortgage I gets how should we think about what the ultimate margin profiled not property looks like <unk> fully ramp. Thank you yeah.
Yeah, I'd say I think we can have a pretty high emergency air as monarch does.
You know the gaming tax rate in Colorado is a progressive right, but of cats out at 20 per cent. So for regional gaming properties is actually pretty.
Pretty acceptable tax rate.
Also in general if you are the leading property and a market a few of the the.
The best property in a market.
You you usually have a better margins you don't have to market quite as much and.
I remember one time, a long time ago, let's see it's all a M. G. M called me up when I was at Mirage resorts and wanted to know what we spend on advertising and I went and looked up the number and it looks like $5 million. He said that's not possible M. G. M spends 30.
And I said well.
Does that include all the Billboards for <unk> <unk>. That's a good question. Let me go check and went back to I said, yeah. The preponderance of that is actually the billboards for Siegfried and Roy.
That's still not possible I said, you know what we had a volcano there was a really big attraction and a ton of palm trees and they had a second plastic lying on their front door that nobody wanted to walk through so of course, you have to spend money on marketing and we didn't and so we will have by far the best property.
In Cripple Creek, and I think the best property in Colorado in one of the best properties in the mid West and I think that I'm not right away. It takes a while to get there, but longterm that will play into good margins when a great return.
You know a little more colored for you too that's another way to think about it is over and and Mississippi with sort of a separate before we had that hotel. What you would see is a casino that would largely die out at seven PM eight PM really earlier than that mid week, maybe a little.
Later than that weekend, but largely because you got people that that didn't want to drive home.
An hour on the roads and be too tired or drunk or all the things that we don't want them doing either and and so when you have all of a sudden 300 rooms attached you end up getting much better utilization out of a lot of your existing assets, whether they'd be the slot machines, the the restaurants and all that other jazz and so.
You know the the the the margins you should see a pretty meaningful move just from that alone.
Great I appreciate it thank you.
No monarch does not break out Reno from Black Hawk.
But you can look back to when before they got Blackhawk open.
And it's and at what they were earning in Reno, and so and they only have the two properties and it's pretty clear there, making at least $100 million a year, there and they have 500 hotel rooms.
Now they are an hour west of Denver, where an hour west of Colorado Springs, but they have significant competition as well, including Ameristar and.
And we kind of don't really I mean, Golden Nugget is what the Wildwood and N as doing some minor fixing up and it has 100 rooms in kind of a Hampton and type hotel.
They're a good operator, I expect they'll they'll fix it up better and so down the road, we'll have better competition, but but but that's five years away. We're gonna we're gonna have a big lead on anyone else and it's not easy to assemble land and Cripple Creek took us your ears.
So for somebody else to try to assemble something.
That would compete with us <unk> will not be easy. So I think we'll be the leading casino there for quite some time.
Hey, Thanks, a lot.
Next question comes from Ryan.
Column capital quick please go ahead.
Good afternoon, guys, you've covered a lot so I'm gonna ask two more specific questions here both related to the temporary but curious how much the cost burden is related to the dealer school in totality I'd get it it's necessary, but curious that costs and then second.
A lot on the revenue side, but curious how the margins of trend it over the past couple of months and then into July with the the ramp up in revenue.
Yeah, the dealer schools not huge is probably you know.
Including the people were paying to actually be trained and their instructors, it's like 30 to $50000 a month.
But there's other training of other job titles as well, but the deal with school is is is something that is a dream it's not huge.
He margins will get better the one of the main things driving it is we're still got a pretty robust advertising and marketing campaign N N as we get a bigger database and get more focused.
Will be more efficient with the marketing and so yeah.
I mean, that's where we're comfortably profitable in our first full quarter of operations and a lot of casinos or not I mean, I can tell you. It back when <unk> first opened in Lake Charles <unk>.
First full quarter of operations it didn't make much money at all and then it's made 100 million you ever since <unk>. The first quarter of operations was so-so and everybody's like the same questions. You're asking me now and <unk> was done you know $400 million a year of income for 25 years now and so we're off.
Off to a good start no the revenues aren't where we expect them to be the profits aren't where we expect them to be the margins out what do you expect them to be but there Ain't no. There there, okay and training in the right direction I should also mentioned you'll notice.
I I realize investors, primarily look at E. B D I T, which is appropriate in this industry, but sometimes a newspaper reporters get caught up with the net income in operating income that accountants, and they're delusional craziness make us prominent.
Be more prominent because the temporary is operating for three years, there's a whole bunch of stuff. We're depreciating over three years now some of that will probably have ongoing valued like the parking lots and so on but that's why you see such a large depreciation charge over the three years now.
For tax purposes, it's not yet clear how fast we can depreciate it but when we close at three years will get an advancement charge. So so if you'll notice a very big jump in depreciation that's because the account is taken very conservative assumption that this stuff like for example, the the.
Restaurants and stuff of restaurant equipment. All this stuff. They just assume after three years, it's worthless and it probably is not worth us we.
We have two airstream trailers that are mounted in the middle of the casino floor that are like food trucks and it turns out they're pretty popular and so one of the things we've done and said hey, let's keep using those trailers, they're not going away so they're going to be in the permanent and and yet where I believed appreciating them over three years current.
<unk>, which is a very conservative approach.
It may it may be helpful to give you a little bit more there that right. So right now the the EBITDA margins are running in the high teens you know one of the things that are Dan hinted that as we are spending quite a bit more in marketing one one of the things that that any casino should do but one of the things that we had been hearing.
<unk> from players that had had not gone into our facility is is that they would see pictures of the 10th and think why would I want to go to that I'll wait until you have the real thing now the you know the I think what anyone would tell you once they go inside the doors as it is unbelievably beautiful on the inside not what you would expect from looking at on the.
Outside and so we're spending a little bit more to try and drive more players into that the building itself trying to build up that database and that's gonna be extended here for a little bit of time, there's a new AD campaign, that's getting ready to roll out so.
<unk>, let me see that for another quarter, but the maybe the right take away for you guys is that the trends are all their their upward. If you look at the month of July we did 7.8 or $7.9 million a gaming revenue in the month I was up about a million bucks in the prior months and.
And so so that the trends are there were feeling pretty good.
Recognize most of the casinos in the state.
Upgraded for 20 years rivers has operated for I think 12 years and the only other recent one is the one in Rockville, that's been open a year longer than us <unk> Rockford.
And hey, no for for Us all.
Oh already after only a few months b number three and table games and number six or seven overall is pretty remarkable given that everybody else is like a 20 year headstart on us I'll give you one more about data plan well I'll shut up the the if you take the first full month of rivers is rivers casinos.
Annualize that first one market gaming revenue you would've gone to a number of those around $409 million or so if you were there to look a year later and look at the actual trailing 12 month of revenues. It was like 406 or something but once you cross that point, you're starting to see some pretty big increases in that overall revenue line today as you.
You probably know what's doing close to $600 million a year in gaming revenue now they've gotten more position since then as well, but but even in those early years, you saw pretty meaningful upward move in an overall gaming revenue that's no different that will what we'll have here, it's been a pleasant surprise to see how well how quickly we've got a number three for the table games revenue line.
And the slot business always takes a little bit longer because you need that database and either free play to go out and and so that's why we're so focused on marketing and making sure that database builds up.
Great. Thanks, Dan Lewis Black guys.
Thank you.
Next question comes from <unk>.
Mcgwire. Please go ahead.
Hi, guys. This is Sam on for Chad, Thanks for taking my questions.
I was hoping you guys could speak to any consumer trends or change in the promotional environment that you saw during the quarter and into August .
Yeah, we got so many big things going on that that that almost seems less important but certainly.
The server slipper the property.
Complains about the competitive impact they're getting from a competitor down the road, but when we really got into the numbers. It was.
More of a wrong cause being up and so we're trying to get that more under control now I'm, not saying that it isn't a competitive environment I believe it is.
But does that mean, there's a recession in Mississippi that it's hard for us to know you know and and it and then like in Indiana. You know the revenues are a little soft is that a recession well you got a new casino across the river in Boone County, that's probably more important.
And so I I don't see anything that I can point out and say that's a recession.
I will tell you on the flip side, our contractor in Illinois is telling us that a construction costs, if not come down and so there's a side of me that's been hoping for a recession, because maybe construction class would get lower you could argue that we would benefit more from a recession.
Because of what it would save us in construction costs going forward.
And but I.
Sure the answers.
We're probably the wrong people to ask we got so many things going on it's hard for us to tell you know.
Somebody like Penn National <unk>, 25, casinos, all over the country. It doesn't build much that's probably a better company to ask.
That question too.
Yeah, I mean, we expect fair enough.
Yeah, I was gonna say like if you look at silver slipper in particular, we until that point, we do have a little bit going on our our our admissions are down but we also have a 21 and over policy today that we didn't have a year ago you have to enter the casino to go to the buffet as an example, so you would expect admissions to be down wind per admission is.
But again admit the the denominator is now down so so you'd expect that number to go up as well you know rated play seems to be pretty solid we are seeing more rated players. These days vs. On rated players. So so maybe some of that some of the froth of that I'm ready to play is going away, but it feels like the rated customers still hanging in there for what it is.
Okay. Good to hear I guess for a follow up any any updates on the strategy for your remaining sports betting skins, and potentially any future igaming ones that you might acquire in the states that you operate.
We have one.
One still outstanding which is in Colorado, Indiana, Indiana, one of the Churchill ones in Indiana, and we we had been looking for somebody to take it on we haven't haven't found anybody yet in terms that makes sense to us if I gaming comes to the states were in and I think it will eventually.
<unk>, we will look at whether we do a similar thing with outside parties kind of writing on our license or do we take it up ourselves and.
And and and it's quite possible will do both.
If if I gaming is legal in our state and we have three skins.
We might keep one for herself and <unk>.
Licensed others.
Posted you know this we didn't we didn't get into the sports.
Getting business ourselves because as a small company you can end up upside down on that if if.
It's one of the teams in the Superbowl is from a market we're in but the other team is not we would be out of balance and we can move the line, but then we would not be providing as good of terms to our customers is our competition and so we decided early on to leave it to people who have more experience in that field and just.
Take a percentage of revenue.
And that's a reflection that that there are certain games and this and notably the superbowl and.
Basketball March madness that are a very large part of the sports betting business. So you tend to have.
A lot of concentration on those events in <unk> gaming, where you're allowed to play a slot machine online. That's a large number of independent statistical events. That's the normal business. We're in we're comfortable with that and you can lease or buy the software that allows you to run that website the games.
[noise] shelves are owned by the slot companies and they'll they'll have license those pretty readily.
Would have to hire people, who specialize in marketing websites, but there's a lot of those people available. So it is a business we could do on her own but it's not yet legal in any market that were yet so.
But if it becomes legal it's a business would look at pretty seriously and.
And we don't you know it's also not something you you don't have to be.
Giant like you don't have to be draftkings or <unk> to make money in it I mean, we do have mailing list in each of these markets and so you go to people and say well.
If you can't come in.
You know if you're one of the 40000 people in our database in Illinois, and you can't come in or he ended up in the hospital or you ended up in a nursing home or you're on vacation, but you still want to play yourself up game. You know we have a way for you to do it and so having that database of a physical casino gives you a market to advertise too and you can go to the other.
Around two and say look when you Gamble online you accumulating points that allows you to come in and get a stay at our hotel. So we we would.
We don't have to be a giant marketshare for it to be a profitable business for us and so if it does become legal in the markets were in we would probably try to do it and and.
Financially responsible way.
Okay, great. Thanks for the color down on us.
Next question comes from.
[noise].
K M.
Go ahead.
Hey, Thanks for taking my question on the dealers I'm in <unk>, just curious if you're having any timeline when you could be closer to being able to operate 40 to 50 tables on the weekends cause it happened by the end of the year is that kind of just to stay as she goes I'm progression.
Probably a month away to be able to have 40 to 50 tables on a weekend.
Get in there.
You know <unk>.
He knows that the.
We are the people who had dealer experience were already will improve the rivers and the Potawatomi and so.
We've had to reach out and be creative so we are paying relocation costs for dealers, who are experienced it might live in the middle of Wisconsin, or something and we're training dealers from scratch and and we are getting there.
Henry by the way we've learned from that in Colorado. So we're trying to get ahead of the game in Colorado, but in Colorado.
The existing dealers at existing casinos looking at our building, which kind of.
It was pretty impressive in the town and drooling over the tips that they'd make it our casino. So it's probably an easier task, but even there we are reaching out to.
Dealers, who might work in tribal casinos in Oklahoma, and new Mexico, and so on and so we're trying to be ahead of the game. So we make sure we have enough dealers to upgrade the full table game pit when we open in December .
Helpful. Thanks, and then for when the <unk> the <unk>. The Sports me opening then September just curious if there's kind of any marketing events planned and I would assume that would be on there extend somebody than yours.
Well the the best one.
The online the the in House circuit place, we share the income from it.
And we haven't really worked out the details, but we would we would serve.
Publicize it and have some sort of event, but I don't think it would be particularly expensive. So.
Helpful. Thank you.
Yeah, I mean, it it you know.
We'd be silly to open it not publicize it but it but it it's not it's not a million dollar marketing cost so.
So.
Probably a time for one last question.
Last question any comes from Jones.
C. B R. E. Please go ahead Sir.
Hi, Dan Hi, Louis Thanks for squeezing me in here maybe.
Maybe two two questions and.
Circle back to the topic today, which is the margin at at Waukegan I Wonder if you could speak to where you think you can get the margin to at the temporary.
And and and that outlook you know, what's the what's the order of operations is it more cost normalizing on labor Preopening in marketing and some of the things that you've talked about or whereas the bigger driver of getting that marching up really the additional revenue did you would expect as the facility continues to ramp.
Little bit of both I may know that as the revenues continue to grow up and you can see from the numbers of the number of admissions are going up the the revenue per admission is going up you know that affects our gaming tax of course higher revenues.
A higher gaming tax, but it doesn't really affect the payroll very much. Yeah. You have the same number security goes the slot machines.
Or is the revenues on the slot machines could go up 50 per cent in our payroll probably wouldn't go up 10.
And then on the on the marketing side, you know you you gradually.
Get more efficient I'm in marketing never goes to zero.
But right now we're trying to tell people in this new campaign that you can't judge a book by the cover if you looked at the outside of the tent you Gotta come inside and look at it so there's that.
And actually in my last question I want to point out that one of the challenges in Illinois. The way the regulatory system works is they go through lots of different checks and balances and so on and then all of a sudden they're likely to say okay. You can open the sports book and and so.
I didn't Wanna give the impression that we would have a great Big party on the opening at a sports book, It's like literally open the sports book and then you you figure out how to advertise to people that you have it open and so there will be some cost involved I think the person who asked the question kind of set is there going to be a marketing event.
There'll be some marketing dollars I don't know if there's necessarily an event.
But it.
This this all takes time you also the other thing that happens in any new casino is you tend to have quite a bit of turnover and you know you you'll open I can remember when we open blusher with 10000 employees.
And you know within months you lost a third of them and it's because they find that they didn't really want to wear high heels, all evening and serve cocktails or they they didn't really want to be a dealer they they're they you know.
It didn't really want to be a waiter or whatever it is and so those people believe when you have the recruiting and training cost to replace those and then some portion of those leaf and have recruiting and training cost to replace those and so it takes a few iterations before you kind of normalize into.
A stable workforce and so you know even at the silver Slipper you know we have about out of about 500 employees.
300, who are with this year in year out who have lots of tenure with us and they were happy and we're happy and they're the core.
And there's like 200 that turns over every year or two and and so we're we're trying to figure out that court and in the meantime.
You do incur additional costs with recruiting and training and so on and so over over that's all part of the maturation I I I I I think if you had total access to all the data in the entire industry I think you'd be hard pressed to find a casino whose margins reached their highest point.
And their first full quarter of operations [laughter], It's never the case you your emergence <unk> sometimes.
Sometimes you have no margin and your first quarter reparations and and and you know two years later, you get to kind of a normalized margin and in this case normalize margins probably 30 per cent.
And in Illinois, and that's.
It's not higher than that cause they're very high tax rate there.
And with the gaming tax in Colorado, it could be higher than that.
So yep.
That's a good point down on a time to to get too stable margins I appreciate that that call. It maybe you know more detailed question just to sneak one and to the extent you guys can can comment as you spoke to the database a little bit of that ramps up you're curious if you give us any insight into kind of your rate it play mix at the proper.
<unk> now and you know at least maybe some primers, how how's that ramped over the last call at quarter.
And it may be where is it relative to what you would expect that stable or some of your other operations to kind of give us some insight as to how how much more runway you have to really get that database working for you.
Well, we're we're we're already in the high sixties in Illinois.
Some other markets where in the eighties.
<unk> hated play versus the total play, but but that doesn't.
What am I trying to say as you attract more people, you'll get motivated players as well and recognize that the 40000 people. That's the total names. We have eventually you start to figure out some of those names.
Don't come back right and other ones come out all the time and so you even within the 40000 people you you start to figure out Oh, well. There's 10000. These people that are pretty important so like any other business 80 per cent of the revenues come from 20 per cent of the customers and and so you you keep getting smarter and smarter it figured.
In it out and you know we.
We have customers at some of our properties, who are with us more than 100 days a year through in our casino and you gradually learn who they are and what what they like and and what appeals to them or what's important to them and.
Uhm.
Yeah.
A lot of times there either independently wealthy you're retired and it's just what they do for their entertainment and.
Button until you know who those people are you you're flailing around a little bit and.
But that's part of the <unk>.
Normal maturation of a new casino so.
Just like any other new business I suppose I mean, if you open a clothing store.
Just because somebody came in and bought a tie doesn't mean, you're gonna see them every month does anybody by ties anymore, but anyway.
The idea.
<unk> I appreciate it thanks Lewis.
You got it Okay I think we're done.
Okay. Thank you everybody, we're very busy and and and you.
Over the next six months this will normalize out and.
We're very excited to get Chamonix open and.
And then eventually to get going on the permanent but.
<unk> will get going when the time is right. So thank you.
This concludes today's teleconference. You may disconnect your lines at this time.
And have a great day.
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