Q2 2019 Earnings Call

Ladies and gentlemen, you are currently on hold for today's conference call. At this time were something today's audience and plan to be underway. Shortly thank you for your patience and piece continue to hold.

Good day and welcome to the full house resorts second quarter earnings call. Today's conference is being recorded at this time I would like to turn the conference over to do is find her chief Financial Officer full House resorts you may now begin.

Thank you and good afternoon, everyone welcome to our second quarter earnings call.

Before we begin a couple of things one we have some slides up on our website. So if you go to investors got full house resorts Dot com and click on a news and events and presentations on the side, you'll see those slides pop up as always before we begin. We also remind you that today's conference call may contain forward looking statements that we're making under the safe Harbor provisions of federal Securities laws.

I would 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 a discussion of risks that may affect our results.

Also we may make reference to non-GAAP measures such as adjusted EBITDA for a reconciliation of those measures. Please see our website as well as the various press releases we use.

Various press releases that we issue and lastly, we're also broadcasting this conference call at full house resorts Dot Com, where you can find the slides I mentioned that today's earnings release as well as all of our SEC filings and with that said, we're ready to go.

[noise] or good afternoon, everyone as just family with a bad cold so so so.

Little under the weather, it's just a cold actually so far.

We put the slides up because of pictures worth a thousand words helps keep me a little bit on.

Schedule.

And Louis already covered the safe Harbor language, so I'll start with slide three.

And know the story of the quarter and really for the company in recent times has been the silver slipper doing well.

This is nir based Saint Louis Mississippi closest casino.

In Mississippi to Louisiana and.

From New Orleans.

From Baton Rouge.

But it's also the closest casino to the 400000 people who live in the north troubling to train.

Please.

Quite a bit to this property in the last four years the.

Hotel opened in late 2016.

Yes, the swimming pool and and.

[noise] improvements to the since her arrival in 2017, the writer burden in 2017.

Sports the Sportsbook opened in August 2018, which is a joint venture with them.

Uh huh.

Well it was drawing a blank to William Hill of course, William Hill, ER and ER and then we just recently renovated the casino and the buffet first renovation a chat and 12 years since the property opened so.

Slide four shows the look of the property today, all those palm trees or as a hedy palm trees, which weve spent over $100000 on but vastly improved the arrival at the property and the pool right on the beach and.

The oyster bar, which we added.

Slide six shows the new Sportsbook, which joins the oyster bar and it's doing quite well and then slide seven shows the new carpeting and the casino. We also change the wallpaper changed all the see questions on the buffet.

And went to warmer colors, I kinda brighter colors and stuff that was a little more reminiscent of the beach a of our beach location put all that together property continued to do well as it has in most recent periods and ER and the second quarter revenue was 18 nine versus 17, five and the B D. T was 3.6 versus 3.2, so that was the bright spot in the quarter and and it's always good when your most important property is doing well and my hats off to John Ferrucci and his team who have really done a great job with it.

If you were to look back.

When Lewis and I joined this company four years ago. This propertys cash flow was less than 8 million.

And it's at a run rate of about 13, now and if you added up everything that's been invested the biggest part of that was the hotel Tyree, which is about 20.

Everything else, we've invested including the.

Updating the Konami system, which is about a million dollars and out of the pool everything else is probably a total of about 5 million. So we've invested about 25 million <unk> tea is gone from.

8 million to 13 or four year. So it's been very successful rising star.

A little more challenging locations, but again, we've been making improvements and we've recently made a whole bunch of management changes and I'm actually more optimistic, though rising star than I have been in a long time, although the quarter's results don't show that but explained a little bit why the RV Park, which we opened in mid 2017 was really too late and 27 and team to do much them and even in 2018 was was just so so the occupancy this summer's probably twice what it was last summer or add is really getting some good usage and I think it's the sort of thing that it takes time for RV owners to know, what's there and start using it and that's been a nice addition, we just a pretty extensively renovated the pavilion in the hotel lobby, it's not on here, but we also renovated the hotel itself. The original hotel in 2018. The ferry service began in the third quarter of 2018 and now we're getting ready for the opening of Ben's Bistro in the next couple of.

Weeks, which is the first new restaurant at the property and 25 years.

Next page shows the pavilion at the RV Park on a day when there weren't very many arby's. There holds about 50 and most weekends or did it in the summer. It has close to 50 and mid week, it's probably two thirds that.

Obviously, it doesn't do much for us in the winter, but in the summer this used to be just a vacant parking lot. So it's a pretty nice addition.

Slide 11 is the ferry service you can see it if it were limited to 10 cars per trip.

The ferry is actually capable of carrying 15 cars, but that Boone county, when they gave US approval. They were neighbors concerned about the amount of traffic. So we have a restriction we may try to lift that allows us to carry more than 10 cars per trip as long as we don't average more than 10 per trip.

If the radically it says 10 vehicles. So we built some they can carry two buses need cars, but it gives us some flexibility and <unk> and you could see from slide 12, the a fairy ridership has gotten better every virtually every month and it really improved in June and July when we started making it freed up part of the reason we made it free is that highway 50, which is the main road in Indiana, leading to US is being re paved and so there's pretty extensive delays on that road between Hollywood in us and so not surprisingly we think people are stopping in Hollywood instead of driving the extra 10 miles to us and so we decided let's try to make the ferry free.

Tough set that and the ridership is up quite a bit as you can see and when you look at the additional cars and I think we can do a better job of getting those cars into our casino, but first step is we have a lot more cars using it and the very revenues. We were getting were were pretty minor anyway. So we're going to keep it free for the foreseeable future and focus on getting more cars on the prairie and getting the cars and the ferry to come into the casino and.

And so that's going so when you look at E. B D. I T in the quarter or was down a couple hundred thousand mostly because the revenue was down and probably the biggest part of that was the road construction, which is still going to go on for another month or two but theres also some management transition costs that we have.

[laughter].

I'm sorry, our general manager Ben Douglas is just done is one year anniversary town.

How we've changed the finance person, we've changed or the food and beverage person just recently and we have a new head of marketing, who just joined US. So there's a pretty much a mostly new management team and in that second quarter result, there's some head hunter phase there some relocation costs, there's some severance pay in there.

And Ah Ah so it it there's some one time items that account for probably half of that decline and so it was really only off a little a wooden revenue was off almost a million bucks and so they've they've cut costs and and ER and appropriately now we hope to build revenues and fixing the place up a big part of that but this restaurant that's about to open we used to have a like at Delhi. It wasn't even a very nice deli called the Queen City Delhi.

And we revamped the facade moved the parking move the seating out into the pavilion and renamed it bends be stroke and there's a section of it if you're looking at page 14 section on the REIT has a sliding all that opens.

And and we now offer breakfast here and a and a free buffet breakfast.

This property is operated a buffet three meals a day seven days a week for 25 years.

It doesn't do enough volume to justify that buffet and the buffet loses over a couple of million dollars a year, but we didn't have another food venue, where we could have people have lunch or dinner or stuff like and so we've done a number of things to try to mostly get out of the buffet business or at least get out of the low volume buffet business, we still do enough volume up lunch and dinner on weekends for it to make sense and frankly, our buffeted out the silver slipper does extremely well, but it it runs much higher volume.

Here, we introduced a resort fee at our hotel of $10 per room per night, and we now give people a free breakfast well they used to get a free breakfast at the buffet that cost us a lot of people to operate now they get a free breakfast like you would get at a Hampton Inn or a Fairfield Inn, a which is a poor your own coffee make your own waffles type breakfast and frankly more people are reading that then used to eat the breakfast and the other buffet, where we were comping virtually everybody because they're all casino customers and so it affect people are paying $10 for self service buffet instead of getting a free ER extensive DAP rate. The face. So that was the one thing. We did was try to reduce our cost of feeding people breakfast were still feeding a lot of people free breakfast like three or 400 people a day and we're doing it much more efficiently than we used to second once breakfast is over this turns into a a waiter service.

Restaurant and the reason its not open yet is that they use the <unk> kitchen for construction staging. So we're now putting the kitchen back together to get the health Coelce aboard so approval to open once were able to serve.

People here for lunch and dinner than we don't have to operate the buffet lunch and dinner and a and that saves us a whole bunch of money, but it also frankly provides a better food you know if you go to a buffet where.

Volumes are slow.

You know when you start looking at the piece of fish sitting there it's been sitting there for two hours and that's driving that very appealing, whereas if we make that same piece of fish to water. We can I can fresh and that's probably better so.

And we think we have a little more creative menu here. So I think we're going to provide better food better service and to operate at less expensive like that in the buffet and on weekends. When we do run high volumes will operate the buffet and try to make the buffet really special on weekends.

Slide 15 shows some of the different angles of this.

This wasn't very expensive a few hundred thousand dollars, but part of what it gets added is there's a kind of a coffee kiosks, you see where it's just pick up here, that's a kind of a starbucks clone that sits out in our production and that's about to open two so.

The first new food and beverage facility at the property in 25 years, and it's pretty exciting, but we're doing it also because we think it saves us money, where we're still going to feed people for free and we could do it far more efficiently at pens piece. Joe then we could at the buffet, which was expensive to operate.

No, Indiana, we were actually pretty Lucky, we're a small company.

And there were two states that legalized sports books. This this past few months and one is Indiana, one is Colorado way up and operating both and so we we were kinda lucky on that.

We're not actually in the Sportsbook business ourselves.

That gets a little scary, because we operated it ourselves in and let's say the.

Indianapolis Pacers were in the finals, everybody is going to be better than the pacers or <unk> Bengals aren't likely to be in the vital but the bangles got it on the Super Bowl, everybody would better than the bangles and we wouldn't have anybody betting on the other side and so it's kind of important that we do this in partnership with.

People, who like William Hill, who know what they're doing.

But there's another aspect to all the big companies are paired up with.

Other big companies and and.

And so we're not.

And so we were approached by almost 20 companies a lot of European companies are already in this business in Europe at some some U.S. companies and to pharma partnership because [noise].

In Mississippi were allowed to epic Sportsbook in the casino, but in Indiana and prospectively in Colorado.

The are you allowed to operate online. So you can sit in your office in Indianapolis and make bets on on football games, but the online operations have to be tied to a brick and mortar casino and so.

We are in.

Negotiations were actually very close to an agreement to agreements with three different sports book operators.

Hang on one second.

[noise].

One of those agreements involves operating the sportsbook.

At the property and so we would build out as quickly as possible sportsbook at the property.

And that partner would also upgrade and the online website.

And and we share in the profit on property of course, but we also get a share of the profit of any online that's a made in Indiana.

On the web site tied to our property.

And the other two are called scans. The other two websites we would also share in the profits.

Being the <unk> being the brick and mortar connection that allows them to operate and so this is all going to be up and running probably in the next four or five months by by year end and maybe quite a bit sooner than that and just to give you. Some idea in Mississippi, our sportsbook in the first half of this year earned about 400000, that's our share of the profit after paying William held their share of the profit and that does not have an online characteristic. So we think this could be pretty material to this a small property and Ah Ah then not mentioned down here, but the other thing that happened in the law is the.

Tax rates were changed in Indiana.

And so because he knows with a low revenues and that then were the lowest revenue understate, our tax rate drops and eye drops on July 2021, and and that's probably a million and a half to 2 million a year to us.

I'm, sorry, two and a half million here to us and so this property is pretty bright future and not only does it have a new management team in some new things they can do things with and a new approach to the business. It's about to get a new restaurant, it's about to get a new sports book, it's about to be involved in the Internet Internet gaming ER and it gets a reduction in tax rate two years from now and then on top of that we're negotiating with well come out and say we have we have the economic system at silver Slipper, we're very happy with that we're negotiating with the Konami to try to put that same system into both rising star and Colorado, We don't have a deal yet but were very close and and we think that could Ami system frankly as the best system. That's it's designed for marketing a it has a lot of features that are good for the customer on the floor has a lot of features that our marketing department can use to help market to our customers.

We're very familiar with it <unk> at the silver slipper and.

And in this case the system at rising Star is a different company and its version three and if you were to buy their current version I think their own versions 17.

Our slot system here are so old we are the only people in the world still using that version that was not supported and anything else. So upgrading that system two could army would be a pretty dramatic improvement in the customer experience sitting in our slot machines. So a lot going on at rising Sun a bronco billys.

Which is near Colorado Springs, again, though we did the crippled cow, which is a just a small food and beverage outlet. We opened the Christmas Casino in November a we've got a parking garage. That's now under construction and then we're still figuring out how to finance space to add whether phase two is.

Hi, all Bonder out a partnership or do we you know bring in a partner on the property do we bring in to read.

All of which will explore in the next six to nine months, but they need to build the parking garage before we can build phase two and Ah. So that's under way and sports Wagering was recently legalized here as well very similar to a Indiana.

But it is subject to a statewide vote and it's on the ballot in November the polling shows it'll probably pass. So we think we're going to have sports betting at Bronco Billy's and the first half of next year.

And similar to Indiana, and Indiana, you're allowed three web sites per casino in Colorado, you're allowed a one website per casino license, but technically we have three licenses. There. So we would again have three websites or that we can deal with and.

And then again, we're going to try to put in that could Ami system, a and then frankly, Mark Murphy, who spend the general manager there for many years and did a fine job, but he he retired <unk> well earned retirement and we now have Baxter Lee there who was.

In relation to me, but he was head of marketing at silver Slipper and do a good job there for many years and also brand the hotel at the silver slipper.

And he's there with new ideas, and new energy and and I think it's going to make a pretty big difference at the property in the next few months. So now in in the quarter wasn't a great quarter and part of that is the Christmas casino, It's a leased building.

And most of the machines entered or at least we didn't want to buy new machines, because when they go to build phase two the first thing we do is tear down part of the existing casino and we're gonna have surplus machines, we didn't want to take machines and put him in a warehouse. So we opened the Christmas casino at least machine. So we can get back to the manufacturer and when we start construction on phase two but that means we have pretty significant lease payments both for the building and on the machines and in a in a seasonally strong quarter like the third quarter of the Christmas Casino as a plus and then certainly was in the month of July for example, but in in a seasonally weaker quarters or the incremental revenue don't offset all the incremental costs and so that was a factor in the quarter. There's some other stuff a play probably 100000 and that was an increase the minimum wage or that we're dealing with in Colorado. It went up like a dollar and a half which had not only affects people who are making the minimum wage.

But if all of a sudden a dishwasher is making $11 an hour and you had a cook who is making $11.20 an hour you end up giving the cook arrays also so when you work that through there's a an increase the minimum wage.

The Christmas Casino and a little bit of a relocation cost in there too for for some of the management changes.

You know again, I think going forward or will that better comparisons I'll be out of Colorado up but it certainly in the second quarter. It wasn't wasn't a great quarter.

You can see the construction the first thing they have to do for this parking garage.

[noise] Oh, sorry, this alley behind their casino has these big ugly Transformers and at the power comes in overhead to get into our casino and so the first thing and constructions take all that down from the power lines underground into the building in different directions. So that the parking garage can be the edge of the parking garage would be right, where you see the Sally and.

So that's under way the construction trailers. They are the precast people are working so and were probably six to nine months away from having a parking garage or what should be pretty important most of our competition has parking garages, we don't and so even if phase two never gets built the parking garage should be pretty good plus for US phase two you see the picture there slide 22 transforms the whole property really transforms the town much like Ameristar did for Blackhawk, a we think that that.

Hotel could double the company's earnings I mean, it's pretty significant ameristar and Blackhawk, we think is making like 90 million a year and the results before they built the hotel or public you can go back look and they were making that much at all until they added a big hotel to their casino and then it took off and so a little more modest scale, that's kind of what we have in mind, but we still have triggered how to finance it and we need to find a way to do it or that that makes sense for our shareholders. So.

Our board is up pretty soon even shareholders and the company myself included and we don't want to do anything silly. So we went to figure out the right way to finance it.

And then northern Nevada Grand Lodge went through a big renovation back in mid 2017, which was principally funded by Hyatt.

And and it and its doing okay that didnt have a great. It was an okay second quarter, but second quarter is not seasonally important there. It's it's really all about the summer and then the ski seasons also important.

This year, there was a great ski season, when the snow lingered and southern <unk> usual summer activities of hiking and stuff you really couldn't do because I'm still snow on the trails. So that didnt have a great second quarter seems to be having a real good summer now stockmans, we've improved quite a bit there there was a big naval Air station, there, that's where the Navy's top gun school is and these carrier when a care in the aircraft carrier goes in for maintenance the whole air crew with a meeting with the mechanics and everybody else. They fly to places like violent and trained over central Nevada, where you can break the sonic barrier and nobody hears it and.

And so are our business kinda ebbs and flows a little bit based on what's going on at the Naval Air station Little frustrating to us They don't tell us it's like top secret when these carrier groups come and go and so all of a sudden move fine.

Pilots start strolling in our place and we're doing well and then the week later, they're all going so.

But they navy seems to be a building something pretty significant at that naval Air station and there's lots of rumors about it but but they seem to be making some pretty big improvements there and we think ultimately that's that's good for our business. We're also just east of the Tesla <unk> battery plant and there's a big industrial Park, there that's getting built out and that most of the people working their commute from Reno, which is about 45 minutes west and we're about 30 to 45 minutes east, but we are getting some spill over it's a lot cheaper to live in Fallon and firmly than it is in Reno. So.

Anyway, the slide 24 shows the casino at the Hyatt.

Slide 25 shows Stockmans, which is a dramatically I. So look and then it was we are looking to renovate the steakhouse at Stockmans I'm not a big number but it would make a big improvement hasn't been renovated in 25 years.

Northern Nevada was off a little in the quarter, it's not a seasonally big quarter and I think it's more than recover that in the next quarter.

You could see on page 27 company has shown pretty good growth a lot of that anchored by the silver slipper, but you know the other properties holding their own and then the acquisition in Colorado.

And.

And if you look at D.P.D. I take it you know it was 10 million when we got here and that's now about 18, if you factor in the lower tax rate at the silver slipper.

No I'd rising Sun, you're probably it.

20.5, and then the different sports books, you know where our run rate is probably in the mid Twentys at this point, obviously, we've got to get all that stuff open and going but.

It's it's all in the works so.

Meanwhile, Illinois legalized a whole bunch of new casinos or it's on a fast track or maybe we didn't have a lot of time, we looked it over decided the opportunity. We liked was the city about Keegan, which is north of Chicago Midway between Chicago, and Milwaukee City is fast tracking because there's a.

Deadline and the state legislation the city wants to have a big say and who who is out operator.

[laughter] so they put out a request for proposals, we only had a couple of weeks to respond to it.

We looked at it put in a proposal for a new casino and resort destination. If it's in a high traffic area. We would lease the land from the city has 1500 slot machines 60 table games and a very high end boutique hotel one of the things. We realized is on the change of the legislation they dropped the tax rate on table games in Chicago, and the 16% and the tax rate on slot machines is pretty high.

Well 16 presented in table games, you can make money on the table game business and if you look at most of the existing casinos around Chicago, They're really grind places nobody is really tried to focus on the high end, who we thought you know we can have a casino that can accommodate ground business, but it could also have a 20 room Super high end boutique hotel kinda like the mansion at MGM, if if you've ever been in there most of the time, it's just a secret, but if you Google Earth MGM and look on the north West side of their property you can see the mansion, which is a really a beautiful setting for the very very high end of Las Vegas, and and we would where we don't intend to I think they invested in the hundreds of millions of dollars on the mansion, we're not doing that but.

For our Chicago gaming, we would have the preeminent accommodations and restaurants and so on to try to capture the high end of of all the gaming that it's done in Chicago, and we think it would be a an important asset for waukegan, a and then just because a lot of people in the area. There's also a nice grain business. So it's almost like a red rock station if you will.

And we'll see we know there's at least two other proposals I think there's probably five or six proposals, but there's two others that have been announced and and this this process going pretty fast.

Slide 30 shows kind of a rendering of what we proposed a those quickly done that blackie building in the back is not a library like it kind of looks like it's actually the the 20 room mansion, we're talking about there will be a lot more architectural detail on it and we have a a major problem and the front.

It's kind of a a different take and biologicals fountains. If you will a that's the rival as you go and I always thought that the most exciting way to see the fountain Sefolosha was from the maintenance both in the middle of the Lake.

And so we decided to do something like that but as you walk him as water coming every which way you don't actually get wet, but there's water falling in flying at all around you and and we think we can do that in a in a fun way to create a quite a sense of arrival. It happens that this piece of land was was called Fountain square because it was a small lot end up one time of that name. So it actually works pretty well and we own the name American place. We had used it for proposal we had <unk> sometime ago in Indianapolis and we thought it was very appropriate name here for what Keegan.

We also as as most of you know I have a proposal in new Mexico, where a year ago. The New Mexico Racing Commission started a competitive process for the sixth and final Racetrack Casino license. So we put in a proposal called blog posts I'd tell you I know we have option on land, we design something the racing Commission had an independent study the study had arbs being the best proposal on virtually every criteria, but then the new governor replaced all the members of the New Mexico Racing Commission, and frankly, they're pretty distracted by a hearse health issues. All these horses, who have died et cetera need a racetrack in California as the whole horse racing industry kind of.

[noise] not knowing exactly why are all these studies, that's pretty I think 24 horses or something.

And when you look at the statistics, New Mexico as the state does not have a very good record of course safety edits tracks down there. Its number of horses that are injured or died at the tracks is high relative to the number of racing days and so the racing commissions pretty distracted by by trying to resolve that and making sure that the racing done into Mexico is done and safely as possible.

And so they've indicated they're not going to issue the sixth racetrack licence at this time, but may do so in the future. We don't know how far in the future. We don't know what that really means.

But were still there if they're interested the economics for the state are pretty significant so I I think it's seems likely that the state would come back and.

Try to use that license at some time, but at the moment types that are not in any hurry to do so so and then we threw a bullet on here for acquisitions only because we look at them. All the time, we did it in fact by Bronco Billy's in Colorado, and it's been a good acquisition.

But we're pretty choosy on it and and pretty price sensitive. So we we don't have anything eminent but we do look for stuff all the time.

And with that I guess ill open it to questions. Louis.

Operator.

Thank you.

If you would like to ask a question. Please press star one on your telephone keypad, if you're using a speaker phone piece midstream its function is turned off to allow your signal to reach our equipment.

Again, Please press star one to ask a question we will pause for just a moment to allow everyone an opportunity just sitting in for questions.

And once again Thats star one to ask a question we take our first question from Chad Beynon from My theory. Please go ahead.

Hi afternoon, Dan Louis Thanks for taking my question.

I wanted to revisit your comments on sports betting because this is certainly one of the more meaningful things for the industry and it sounds like it could be a very meaningful thing for for you.

You noted some of the details and I think you said you would prefer to participate in a Rev share model with you is that the market access licensee holder and then you would bring in a partner who could provide the technology and the brand. So a couple of questions on this.

Firstly, how how big do you think this could really be how meaningful for the company. Secondly is it your intention to bring in a partner that would be exclusive to this.

The skin, you're providing and then lastly, why not just sell the license, bringing the cash right now let them run it and you know why do you think the Rev share model is best thanks.

Well if it's a.

I don't think we really have the option of selling license to sell the casino cancellations has to be tied to the brick and mortar.

And but there is a.

Couple of aspects I mean, obviously when there was an on site sportsbook.

Sounds like the one we have in Mississippi, we split the.

Revenue and we pay for the employee who's actually there.

Ah So William Hill.

It kind of sets the odds it's their technology is there a everything.

And they paid for it they built it out and we get half the revenue and then we have to pay for the employees there sometimes two employees a it. Nevertheless, we still made 400000 in six months.

We're pretty close to 800000 over the past year, it's been open roughly and.

And so that's just the on site.

No.

We will have an on site one in rising Sun.

That is actually.

A bigger sportsbook than the one we have at the silver slipper, but we don't have as many people coming to the casino every day.

So I'm not sure it's going to do more.

Do similar but you know if we made even if we made 500000 a year I know sportsbook at rising Sun is pretty significant for a place that's doing <unk> T have two or 3 million a year.

Then.

I guess, it's almost anyone's guess as to.

What the online component would be but you know we will get a piece of the revenues.

Of you know somebody sits in their office in Indianapolis signs up.

For Uh Huh.

An account it starts making sports bets the deals were considering would give us a piece of the revenues was really none of the expenses and and that could be pretty material and ER and we know.

Some of the deals were negotiating that they're willing to guarantee us money in the first year, we don't have those deals signed yet but you know.

They're material.

And so the.

I think it's fair to say, we could do we the sports betting at rising Sun could be as important as the rising Sun casino itself, which is making two to 3 million here. So it it could be pretty material Colorado.

ER is a state with a 7 million people if I remember correctly, it's a.

And so it's Uh huh.

In the Indiana is four and a half million. So you'll you'll have the online gaming in the state that's bigger than Indiana, So, it's probably a bigger business.

And <unk> and frankly, we get a piece of the revenues with none of the expenses. So it's all upside to US and you know helps return on equity a lot. When you can get a piece revenues no expenses no investment.

And were pretty small company. So this this could be pretty material at both places how does it take us from $20 million a year VB deal data 40, no probably not but but still pretty important and.

And I and you know, we're still negotiating a really six deals.

They were pretty close to it I think we'll probably get them signed all six of them the next month or so.

Okay, great. Thanks for that.

[laughter].

And then turning to Colorado, So phase one parking garage you mentioned that that's under construction and you kind of give an opening date, what's the total expected capex for the project where were all leverage or what's your expected peak leverage before the property opens and then do you have any type of ROI analysis on what you can get on a just just phase one thank you.

Well, we've got a 24 million of cash we're sitting on.

About 10 of that is used in operations. So.

The 14, they'll deck Raj I mean it it's.

Obviously, we've spent some money already in design phase and everything, but 14 million should get it completed.

I think the all in cost is around 15 16 million, it's not just garage a there's a back of the house building that goes in between because of the gradual will will block the access to the back of our casino, which is where goods and supplies come in and our garbage goes out. So we had to create a back of house corridor in there.

A couple of million Bucks and relocating utilities as you saw on that slide that's not a cheap thing either that's being done at so there's quite a bit of stuff. That's being done that is a precursor for phase two allows us to get ready to roll into phase two but if we never built phase two you know I think the garage probably adds you know one to 2 million of a year a BBD annotated the property just a I guess a I know we looked at what some are competition there was periods, where they added a garage we looked at how much the revenues went up when they added it we worked backwards. It said, yeah, we probably get a pretty decent return on it now we've designed our garage to be easily the best garage in town. All the floors are flat all the other garages or kind of slanted floors.

Except for Wildwood, which it buried underground, which is inherently not if you have an underground garage. It could also to weird smells and and exhaust fumes and so on and while there's underground. The other ones are all like the cheap garage is where everything is on a slab. So you opened your car door in a sampling of the current XT or vice versa.

And then you have to walk up pillar downhill to get to an elevator. This is it a cripple creek that 10000 feet or clientele or elderly. So we will have a garage where you drive in every floor as flat there's elevators that take you directly down into the <unk>.

Lot of the credit for the silver slipper. The last couple of years I use the marketing guy in the silver slipper kind of.

Boxes out of its weight class, a little bit and part of that is pretty smart marketing stuff and so we have them up there and he's only been there a few weeks and already he's just to find to buy ideas. So I I think I think that's going to be important at the property effect that that may be as important the properties the garage, but but were you know you pull it all together in <unk> and <unk>.

And I think it'll be an upswing at that didn't never great quarter, but to hang with US there I think it'll it'll it's already doing much better than the third quarter and I think it's going to have a good second half.

Okay, and then lastly, Dan on Mississippi properties doing exceptionally well as you noted that's kind of been the bright spot for several quarters and actually a couple of years here I believe that the Mississippi Gaming Commission just approved a another casino proposal down in the region and Hancock County, if memory serves this is not the first time that this has happened so others have gone [laughter] agent and you haven't seen competition as somewhat of expected.

Can you talk about the real likelihood of a competitor opening up the timing of that just you know what your team on the ground believes is and could happen in that market. Thanks.

Well I think there's there has been a discussion a at the gaming Commission putting a.

Worth tortilla, my new licenses or new permitted spots and that's made a bunch of landowners nervous so people have rushed in to try to get.

Approval of their sites thinking that they want to beat a moratorium it for more term happens the particular site you're talking about is actually owned by our landlord weight that the land underneath the silver slipper is leased and we have an option to buy it out for 15, and a half million, but its leased for 37 years and at the moment, it's kind of a wash, whether we buy it out or not its a.

The rent is like a million fiber million six a year and the buyout price is 15 and a half million. So.

And but under our lease we have the right of first refusal to buy that other piece of land. If he was going to sell to somebody else. The land is basically a swap. It's a you could live with it it's it's a.

A lot of wet wins, but just a little sliver of of dry land.

Along the road.

I don't think it's really practical to put a casino on there and and if you did I don't think the numbers work. There's a another casinos own piece of land right off the freeway overdone Diamond head and it's a far superior piece of land.

And it's hard to make the numbers work. There are you know if you take the silver slipper.

Ah the original cost, but I think it was $80 million that we spent 20 million on the on the hotel if you'd just all that took place and it's probably 150 million. If you were to build it today.

And it's making you know 13 million of B B D. I T. A year. So you would if it got wiped out by Hurricane and we got a $150 million insurance proceeds I'm not sure you'd rebuild it and by the way it did that once Wynn casino magic in Biloxi got wiped out we got 200 million out of an insurance claim and when I started looking at the numbers I said, we were better off building in St. Louis that maybe we're rebuilding in block C, which is what we in fact did now I'm not saying, we're abandoning based Saint Louis and wavelength, we hopefully don't get hurt by Hurricane we do keep good insurance just in case, but my only point is is it's hard to make the math work on building a new place.

Even if the silver slipper got wiped out and if somebody looks at trying to build the casino down the street from US we're not going away. So it's not like they're gonna make 13 million a year because we do we're not going away that can make less than 13 million here. So I don't think they can make the math work a and I think this was just a landowner trying to keep the entitlement on those lanchester cases moratorium. So its it and there's no new casinos been built here in quite some time and the only new casino built on the Gulf Coast anywhere in the last I guess 10 years, a was the one in Biloxi, the Scarlet Pearl and an economically it's been a disaster I mean, they spent $300 million 93, BD ideas less than 10. So this is a pretty mature market I don't I don't think it makes sense for anybody to build anything new in this market.

Okay. Thanks for all that color and better but by the way I've and I know that I've said that you know we do look at building out an additional hotel tower, but that's because if we had more hotel rooms, and maybe some meeting rooms, and we don't have to add a front desk. We don't have to add to the casino. We don't have to add another buffet, we could make that math work and and I think you'll see other casinos doing the same sort of thing of just adding to their existing plant you can make that work its just hard to make a whole new casino work. So.

Sorry.

Thank you very much.

He kuni Chen thinking Oh.

Oh, sorry, sorry about that H., I don't Wanna add and some some a couple of comments too.

Dan there at the end of a long long table, because he's [laughter] six today or the <unk> the thing to keep in mind for leverage is we're at a point right now where where leverage is on the decline we don't need to borrow anymore to build as parking garage and so we won't borrow anymore and when you look at EBITDA EBITDA, certainly going up between sports betting you should expect a <unk> or a <unk> I should say you've seen market access Ah payments for for recent deals. They're there you should expect that we are trying to get the same but EBITDA itself is inherently going up and if you were to look at middle of next year, just on a total debt to EBITDA basis I'd be disappointed if we were meaningfully off of five times. So some food for thought there for you. If you look at July as an example, you know we had a hurricane down at silver slipper, which affected.

Business, there, but everywhere else, we had a pretty solid month and so even despite the hurricane we showed some pretty decent growth.

In the month of July now one month doesn't make a whole quarter. So we'll we'll we'll see if all that continues but.

That's right and then Dan Dan mentioned as well that even despite the hurricane now.

Silver slipper still is going to pull out a pretty decent July so.

Little color there for you.

Okay. Thanks, Louis appreciate it.

[noise].

Thank you once again, ladies and gentlemen, if you would like to ask a question. Please press star one.

This concludes today's question and answer session. At this time I would like to turn the conference back to our host for any additional or closing remarks.

I guess try to ask all the questions everybody else was thinking about itself.

Anyway, well, thank you everybody and I don't feel as bad as they sound as is the later stages of this cold but.

Thanks for bearing with me and.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.