Good day, and welcome to the Full House Resorts First Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Lewis Fanger, Chief Financial Officer of Full House Resorts. You may begin.

Thank you, and good afternoon, everyone. Welcome to our first quarter earnings call. As always, before we begin, we remind you that today's conference call may contain forward-looking statements that we're making under the safe harbor provision 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 the discussion of risks that may affect our results. Also, we may make reference to non-GAAP measures, such as adjusted EBITDA. For a reconciliation of those measures, please see our website as well as the various press releases that we issue. And lastly, we're also broadcasting this conference call at fullhouseresorts.com, where you can find today's earnings release as well as all of our SEC filings. And with all that said, I want to start today, Dan is back with us this quarter, so that’s the good news. We had a relatively busy quarter, mostly on the balance sheet side. Operations continued as you’ve seen over the last quarters. That gives us 10 months now of reset operations. And as we stated pretty strongly last quarter, we expect those changes to be sustainable. Looking at the income statement. Consolidated revenues for the first quarter were up pretty strongly, about 37% to $42 million. We were closed for the last 2 weeks of the quarter last year, so that’s part of the reason for the strong gain. However, even if you compare our recent first quarter to a more normal quarter like the first quarter of 2019, revenue still climbed about 4%. That was due to strength in Mississippi as well as the continuing launch of our sports skins, which we’ll talk about in just a second. Adjusted EBITDA improved to $10.8 million. That’s an increase of more than $12 million versus the first quarter of 2019. And again, we went through a lot of the reasons why last quarter, so I won’t go through all of them again here today, but they do largely come down to labor efficiencies, marketing efficiencies, and more refined operating hours for our amenities where we’re making sure that our hours match demand. And again, we’ll continue to reinforce. We think all of that is sustainable. I don’t know of any first quarter over the last many years where EBITDA has been stronger than it was in this current first quarter. On a trailing 9-month basis, our adjusted EBITDA is sitting at more than $33 million. That’s a great spot to be sitting at as we step out of our seasonally weaker fourth and first quarters and into our stronger or typically stronger second and third quarters. For all of you astute press release readers out there, you’ll see we switched up the operating segments on you. We broke out our 6 sports contracts in Colorado and Indiana into their own segment, which is named contracted sports wagering. That includes the onsite sportsbooks at Bronco Billy’s and Rising Star, the 3 online sports skins in Colorado and the 3 online sports skins in Indiana. We thought it was wise to break out that segment for a few reasons. One is that investors seem to be valuing sports betting generally in a much different fashion than traditional brick-and-mortar casinos, very specifically. It feels like companies in that business are being rewarded with much higher EBITDA multiples. And secondly, the cash flow that we get from that segment is real cash flow. There's no maintenance CapEx attached to it. We don't have to pay for a leaking roof. We don't have to pay to replace slot machines. There really aren't any cash needs on that segment at all. And that's probably part of the reason we put a richer multiple. Regardless, we have given you all that increased transparency by breaking out the contracted sports wagering segment. That segment did increase from about $400,000 in last year's first quarter to nearly $1 million in the current period. That's due to more skins being live. We had 3 of our 6 skins live in the first quarter of 2021 and added more very recently in the second quarter, about 5 weeks ago, our fourth skin launch that was wind launching in Indiana. And then about 2 weeks ago, our Fit skin launch, and that was Churchill Downs launching with their TwinSpires skin in Colorado. Skin left to go, which is markets in Indiana, and we hope to see them go live in the next few months. Regarding the balance sheet, we were very active in the first quarter. We issued $310 million of new senior secured notes. Those are 7-year notes due in 2028. They are a debut issue with the high yield markets. By the way, they’re trading quite well. The proceeds were used for several purposes. The first was to refinance $7 million of our senior secured notes due 2024, including a modest cost premium, and the old notes were floating rate notes at LIBOR plus 700 with a 4.1%. So they were effectively 8% floating rate notes that were likely to go higher in the future. Instead of being floating, they’re fixed with an interest rate of 8.25%. As I did mention last quarter, our new notes don’t have a quarterly leverage test that we have to meet, which is a pretty big advantage versus what we used to have. We did use $4 million of our bond proceeds to take out all of our outstanding warrants. Those warrants gave the holders the ability to purchase about 1 million shares of our stock at an exercise price of $1.67 per share. With those gone, it's a pretty clean and straightforward balance sheet now. The most important use of our proceeds was to fund our Chamonix growth project in Cripple Creek, Colorado. We have about $180 million of remaining cost to complete that project, but there’s only about $100,000 of spend by the end of the first quarter for what it’s worth. Through May 1, we’ve invested about $2.1 million of the $180 million into the project. And if you look a few hours ago, you would have seen the demolition of one of the existing buildings live; it was kind of fun to watch. But I'll let Dan give you a fuller update on that project very shortly. And then the balance of the proceeds for that bond offering was to pay for deal expenses, and we put about $8 million of cash onto the balance sheet. While we have been pretty laser-focused on our Chamonix project, we do have 2 potential future projects on the horizon, both in Waukegan, Illinois and at our existing silver slipper property. And because of that, in late March, we issued $46 million in new equity. This equity issuance strengthens our balance sheet even further, especially as we prepare for the day when we can formally present our project to the Illinois Gaming Board. If you recall, last October, we signed a commitment letter with a multibillion-dollar private equity firm to fund our Waukegan project, but it would have required us to contribute $25 million of cash as equity. This equity deal that we just did was our way of showing that there shouldn’t be any doubt on our ability to build what we think is the most exciting vision of the 3 projects that remain in that process and is something that we think the locals of Waukegan will be amazingly proud of. A nice side benefit of the equity offering, too, is it should result in much more liquidity in the stock now. And then on the last day of the quarter, we entered into a $15 million revolving credit facility. There are 2 quarterly covenants in that facility to note that they're both relatively minor. One is a minimum liquidity covenant. We need to have at least $20 million of unrestricted cash for just 2 quarters; the first quarter that we just finished as well as the second quarter of 2021. I think it’s – we should be able to handle that pretty handily for what it’s worth. The other is what is effectively a minimum EBITDA covenant. We need to have EBITDA on a trailing 12-month basis that exceeds the utilized portion of our credit facility. To simplify that a little bit, we currently don’t have anything drawn on the credit facility. So we need to have at least $0 EBITDA. If we drew down the full $15 million of the revolver, we would need to have at least $15 million of EBITDA on a trailing 12-month basis. I don’t really envision us using very much of that credit facility; for what it’s worth, it’s really there to provide us with additional liquidity should we ever need it and to help facilitate things like ordinary letters of credit that we might need to post. And so all of that leads to our overall liquidity position. In addition to that undrawn revolver, we have $278 million of cash at the end of the quarter. That includes almost $180 million in that restricted account for Chamonix. And I feel like I said this last quarter, but it is true again. That’s more cash than we’ve ever had in our history that this company. I ran it off a few things, Dan. I’m sure you have some things to add in there, so feel free.

Yes, you accomplished a lot. I'll provide a bit more detail on what was discussed; nearly everything was covered. In Mississippi, one reason for our success is the refurbishment of the casino and buffet in 2019, which made an already nice venue even better. This year, we didn't experience Mardi Gras in New Orleans, a time when many leave the city due to the chaos, often bringing business our way. The absence of the celebration may have negatively affected us; however, we still performed well. Additionally, we repaired hurricane damage from October. We're repainting the building following these repairs, with most costs covered by insurance. The building will now feature a new color scheme inspired by the Santa Monica Hotel, enhancing its exterior. We are progressing with our expansion plans, despite the property being somewhat landlocked. The ideal solution is to build a pier over the water, similar to the Santa Monica pier, allowing us to add a hotel tower, which is feasible since everything there is built on pilings due to the muddy environment. Although the Gulf of Mexico is shallow, careful planning will ensure fire safety and compliance. We also require additional parking, and under our lease, we have wetlands we'd like to fill for more surface parking. This process needs some approvals from the state, as the bottom of the Gulf is controlled by Mississippi. We believe we have a draft agreement that will permit us to lease a small portion of the Gulf floor for 35 years at approximately $100,000 a year, enabling us to construct the pier. Filling in wetlands is another necessary process we've successfully managed previously. We have identified land to facilitate that swap and are finalizing details. This expansion will feature around 150 guest rooms, a new restaurant, meeting space, and a small spa, addressing our current lack of meeting facilities, making it challenging to host events like New Year's Eve. Elevation of all these structures will be 30 feet. We estimate the total cost at about $75 million, and we're preparing to move forward. The financials look promising since we're enhancing the existing casino rather than building a new one. In Indiana, we also saw good results with $1.1 million in income. Historically, this property is less profitable in the first quarter, which is seasonally slower; last year, it reported losses in that period. Nonetheless, we are pleased with our progress, despite some adverse weather in February. Our general manager is transitioning to a position with an Indian tribe, leading us to promote Angie, our Director of Finance, to General Manager. Jim McCracken, our casino manager, will become the assistant GM, marking significant internal promotions and making Angie our first female GM—a milestone that is long overdue. We're excited about her capabilities and hard work. In Indiana, our management changes are a positive development; Angie and Jim are key players in improving our property’s performance. Our focus is shifting to prioritize the casino customers who matter over the budget-conscious buffet crowd. We experienced a strong first quarter in Colorado, the best we’ve had in a long time, despite ongoing construction work impacting parking. We’ve adapted by offering valet service and secured a couple of shuttle buses while awaiting City Council approval for a leased surface lot. Although parking is limited, our property continues to thrive. We have also acquired Carr Manor, a charming 15-room B&B that was previously a school, which has been well-received by our guests. This acquisition helps offset the demand we might have lost. Our websites for Bronco Billy’s and Chamonix feature webcams showing ongoing work, including the relocation of utilities necessary before we can proceed with construction. We have to demolish three buildings, the first two of which have been taken down, including one that dated back around 30 years and was permitted for demolition to facilitate the new construction at Chamonix. We're about to demolish an old apartment building shortly. Currently, foundation work will commence in about two weeks, and while relocating utilities isn't very impressive visually, it's crucial for future construction. We’re making progress in Nevada too, with a decent quarter despite the heavy impact of COVID-19 on ski areas and limited convention business at the Hyatt. The local business remains strong, and we anticipate improvement as vaccination rates rise and travel resumes. Regarding contracted sports wagering, we have a guaranteed minimum of approximately $7 million annually, translating to nearly $2 million quarterly. In the first quarter, we achieved $1 million, alongside $6 million in upfront market excess fees, to be amortized over the contract's duration. We expect about $2 million in contracted sports wagering income per quarter, and we are close to reaching that target with one license pending. The noticeable increase in corporate numbers is largely due to accrued bonuses related to last year's poor earnings compared with this year's better results. Our Waukegan project is progressing; the Illinois Gaming Board has sought proposals for an investment bank to assess financing options for different proposals. They previously received no responses, but now they have had feedback on a new request. The Director of the Gaming Board believes a decision will be made six months after hiring an investment bank, although that process has yet to begin. If we were selected, it could take 6 to 9 months to open a temporary facility, with a permanent one taking a couple of years to build, so we anticipate being operational with a temporary casino by late next year at the earliest. We are keeping a close eye on this process as it has taken longer than expected. Meanwhile, the Mississippi expansion is advancing quickly, and we do not want to delay it indefinitely for our Chicago project. We prefer not to have three simultaneous constructions due to the size of our company, but we expect Colorado to finish in two years. If the Mississippi groundwork overlaps with Colorado's timeline, that wouldn't be problematic. We are pursuing multiple opportunities for growth and are prepared to move forward on all fronts as quickly as possible, with a solid financial position supported by our current balance sheet and cash reserves.

$220 million roughly.

$280 million of cash today. So we’re in pretty good shape. I guess that’s it. Am I missing anything? I guess, we'll take questions, and maybe that will point out other things I might have missed.

We'll take our first question from Ryan Sigdahl with Craig-Hallum Capital.

Nice quarter. Dan, glad to have you back on here and hear you're doing better.

Yes. For those who might not know, I crashed on a bike getting some exercise and broke my collarbone, so I missed the last earnings call. But I’m back; I no longer have my arm in a sling and have not yet gotten on a bicycle, but I'm getting there.

Good to hear. And I always appreciate the color. I’m curious how trends have been in April and thus far in May on gaming revenue and then margins as well. I know you said structural margin improvement; you expect that to hold. But can you comment a little bit on what you've seen thus far post quarter?

Yes, it's been strong. When we conducted that equity offering, we indicated our confidence in estimates showing $10 million of EBITDA for the first quarter. We completed the deal about two weeks before the end of the quarter, so there was still uncertainty. However, the stimulus checks were released, and we ended the quarter on a high note, evident in the results; if after ten weeks you expect to reach $10 million and instead finish with $10.8 million, something positively influenced that outcome. This positive trend continued into April. We're hopeful for ongoing government stimulus checks, though we know that's unrealistic. Nonetheless, our performance in April has remained robust; we haven't experienced any decline so far. However, I wouldn't anticipate the April results to carry through the entire year, as we won't have continuous stimulus checks. If we had been on track for $10 million this quarter, it would have suggested a low 40s range for the year. If we used results from the last week of March and the first week of April as a basis, it would imply an annual figure of $60 million to $70 million, which is not likely. Results do fluctuate by property, but overall, the business has remained strong, and we are maintaining our new operational model. Even though some regulations have eased and we can now have more slot machines and reduce face-covering requirements in certain markets, our cautious approach to payroll and marketing expenses remains unchanged. We've managed to sustain revenue levels from the past while significantly reducing costs, which is why you see the continued improvement.

If it's helpful, Ryan, generally, Mississippi, Indiana continue to do well. Colorado is dealing with the parking issues that Dan mentioned, although has been dealing with those issues pretty well. Part of that is having people valet cars versus no valet at all before. Part of that’s running shuttle buses from a distant parking lot to the property. There are some incremental costs there and a little bit of construction disruption that we’re trying to manage through. In Nevada, Stockman's, knock on wood, but the county that Stockman’s is in has felt like it's largely out of the woods with the pandemic. It feels like the restrictions on that base are probably going to start easing sooner rather than later. What we hear from the Hyatt over at Grand Lodge is that could very well be a very robust summer season for them. While Nevada has lagged, knock on wood, there are hopefully some signs that we'll start to see that go the other way in the next month or two.

By the way, if you look at the website in Colorado, you can see the building that we’re clearing out today. That was actually part of the Bronco Billy's casino. It was probably 15% of it. We have now torn down. Now that we have plenty of slot machines to do the revenues we're doing. What a casino revenues are based on the number of people in the place, not based on square footage. I don't think that will have an impact on us, but we didn't tear down part of the casino. So that's a function.

So good. Helpful. You mentioned, Dan, that certain properties, thinking Mississippi restrictions have lifted, no more face masks, et cetera. Have you seen a change at the Silver Slipper traffic kind of pre- and post those restrictions lifting?

The most encouraging change we're noticing is among our older clientele, specifically those aged 60 and above, which has always been our key demographic at all our properties. We experienced a 30% decline in their visits and spending during the peak of the pandemic, but we are seeing a recovery. Our goal now is to retain the younger customers who joined us during the pandemic to balance the decrease in senior patrons, while also encouraging the return of the seniors. So far, we believe we are managing this quite effectively. It can be challenging to gauge the effects of government stimulus and other factors, but the primary observation is that as vaccination rates increase, older individuals are more willing to return. They had been the most vulnerable and hesitant about going out, so this change is promising.

And then on Colorado, with amendment 77 passing, have you added new games to Bronco Billy's? Secondly, on Bronco Billy, it sounds like construction, et cetera, should we expect probably Q1 to be the high watermark there just given those challenges? Or do you think it can grow right through that sequentially?

No, this is a seasonal property. The third quarter is the most important seasonally. I expect our third quarter to perform significantly better. That property is likely to generate around $8 million this year and made $1.7 million in the first quarter. The surface lots we are acquiring are quite large and located as you enter town. We will have signs indicating where to park. We have purchased two shuttle buses, which we believe will help. These surface lots were previously used, but due to specific technical reasons, we need City Council approval to use them again. There is no doubt we will secure that approval, but it is a process. The zoning regulations state that casinos shouldn't have surface lots outside of the casino zone unless they are approved by City Council. Even though these lots had been used before, they are outside the casino zone. We require City Council's approval, which involves posting notices in the newspapers and other steps. This process is underway, and I believe we will gain access to those lots within the next week, which will be quite beneficial. People are genuinely excited about the new location. The ability to earn points at Bronco Billy’s and redeem them at Chamonix when it opens is a significant advantage. I think Bronco Billy’s will do well. The disruption we are facing this quarter is likely more pronounced than in quarters to come. I am not overly worried, but I am paying attention. We are monitoring the situation. I was the one who suggested we need to implement valet parking and secure surface lots months ago. I also acquired Carr Manor to provide accommodations for guests. We are taking steps to address the disruption. If we hadn’t made these preparations, we would be adversely affected. Although these measures incur some costs, they are not substantial. The expenses for hiring a few valet parkers and shuttle bus drivers for several hours a week amount to low hundreds of thousands of dollars annually, which is minor compared to a projected $8 million a year from placemaking. It’s not a significant issue.

We'll take our next question from Chad Beynon with Macquarie.

Congrats on the quarter. I wanted to start with construction cost on Chamonix, just given the inflation and the cost of materials. Can you just remind us, I believe, most of the project is pre-funded. But can you kind of frame out this $180 million, what is static versus dynamic, and how should we think about that?

The project is fully pre-funded, totaling approximately $180 million until completion. This includes a contingency, which we are currently estimating at around $10 to $12 million. We are still in the early stages and anticipated facing challenges regarding material and labor costs. With the unemployment rate in Colorado being quite low and our location being higher in the mountains, finding labor might become challenging. However, changes in surplus unemployment benefits in other states could potentially aid us in labor recruitment. We are proactively seeking ways to mitigate these challenges. For instance, our engineers identified the possibility of using micro piles instead of spread footings, which could help save costs. If unforeseen circumstances were to push our expenses 10% over budget, leading to a project total of $200 million, we would still generate $20 million in free cash flow during its construction. We also have significant cash reserves from previous equity offerings. While I am not predicting an overrun, having liquidity to cover any potential small overruns provides some assurance as we navigate these issues. Current considerations include what type of furniture we will use and whether to opt for more expensive materials or budget-friendly alternatives. This is a common aspect of project management that we have encountered in past projects, like in Argentina and Bellagio, where we adapted material choices without the end customer noticing significant changes. I am confident that we will ultimately stay within our budget, and we are actively working toward that goal.

So $19 million for contingency, Dan, which is about 15% of the hard construction costs.

That’s what it was. There are some challenges. For example, when you find the person, what is up a lot. In some places, we’re going to use like gauge steel instead of wood. You go to look for those things. You may have been assuming that you’re going to use some wood in certain areas. We explored for a while using modular construction where you could build some of the hotel rooms in a factory in another city and truck them in and stack them into place. That’s a new development that I know Marriott, in particular, is trying to use more for their budget hotels. We spent a fair amount of time looking at that and concluded that with the transportation costs to get it up to Cripple Creek, at the end of the day, we didn’t think we saved enough money to go through the trouble. So we’re kind of back to not doing modular. But we explored that pretty hard, thinking it might save us money, and concluded that it probably doesn’t.

Great. And then in the camp of something that could come in on the right side of expectations. Lewis, thanks for breaking out the annual online gaming in your income statement. That certainly helps us. I just want to talk without getting into the economics of the deals that you have with your skins partners; the expectations for sports betting and iGaming I think have increased recently by most analysts, particularly on the iGaming side. Is there a chance if that rate continues to rise that you could actually be generating more than the $7 million of guaranteed revenues based on what you're seeing with your partners and what you're seeing with analyst estimates increasing?

We have two questions here. Each of our deals varies slightly, with different revenue percentages and a minimum guarantee. One deal has a higher revenue percentage, while another has a lower one. To surpass the minimum guarantee, we need the deal with the higher percentage to gain a significant market share. Our skins were introduced a bit later, and FanDuel and DraftKings have a dominant market position, while our partners have lower shares. Each of our three partners is executing different marketing strategies that haven't fully launched yet. For instance, Wind is a strong brand and we believe once they start competing more aggressively, they'll begin to capture market share. Smarkets operates uniquely in Europe and hasn’t fully engaged yet. We don't expect to exceed the minimum guarantee this year, nor likely the next few years, although it's possible further down the line. During negotiations, every partner wanted to lock in iGaming, but we opted to negotiate that separately since it represents a bigger market in New Jersey, being twice the size of mobile sports betting. We can manage that independently, as mobile sports betting involves many bets on specific games, which poses risks. In contrast, iGaming is similar to playing online slots and consists of many independent statistical events, so if it grows as we anticipate, we could have three skins in Indiana and Colorado. We might partner for two of those and keep one for ourselves, potentially generating more than the $7 million yearly guarantee. Additionally, if we are selected in Illinois, which has a larger population than Indiana and Colorado, that could greatly enhance our revenue, especially since Illinois is expected to introduce mobile sports betting and iGaming soon. Mississippi will also eventually adopt mobile sports betting, though its population is smaller. Similarly, Nevada has a limited population, and while we could launch there now, we haven't due to being a smaller company amidst larger competitors. The real growth opportunities lie in Colorado, Indiana, and Illinois with their significant and growing populations.

Great. Congrats on the work in the quarter.

Thanks, Chad.

We'll hear our next question from John DeCree from Union Gaming.

Dan, good to hear you again on the call. Just one for me. I think you covered quite a bit of ground. But Dan, I was hoping you could elaborate a little bit more on the puts and takes on-demand that you've seen in March and April. I know you've talked about stimulus checks; that’s an obvious one. But I was wondering if you could characterize familiar faces in that older demographic that you’ve seen. I think a lot of your peers have said that customer is starting to come back, but there's still an opportunity. You're still seeing an opportunity in maybe converting unrated play at a rate of play. So as you think ahead in stimulus checks wane, where do you see some of the other demand drivers coming as it relates to pent-up demand?

I believe the most significant factor is the return of seniors. While it has not fully recovered yet, we are seeing a solid improvement. Around 85% of our activities are tracked, making it easy to analyze the frequency of visits from those aged 60 and older compared to previous quarters and 2019. Although we're not at pre-2019 levels, we have improved significantly from the pandemic lows, especially in this demographic. We have been focusing on attracting younger visitors to our database, and have implemented marketing kiosks in Indiana, with plans for Colorado and Northern Nevada. These kiosks facilitate a simple sign-up process, which allows us to reduce payroll costs at player clubs. Our marketing efforts are now more targeted, which has been beneficial. Working and studying from home has affected midweek attendance; weekends remain busy, but weekdays are often vacant due to a lack of meetings and conventions. Transitioning to virtual meetings for presentations, instead of the traditional in-person ones, proved more efficient and cost-effective for us. As vaccinations increase, I doubt things will revert back to the old ways of conducting road shows. Companies have saved on travel expenses and time, which could impact the future of corporate travel for events like conventions, as employees might see them as less necessary now. For those interested in gambling, regional casinos provide a convenient alternative to traveling for conventions. Many people are finding themselves with extra time at home and are looking for places to go. Our casinos operate 24/7, which attracts those seeking an outing. While our business is currently strong, I'm cautious in predicting future performance, especially considering that stimulus checks may not continue indefinitely.

At this time, that does appear to be the conclusion of our question-and-answer session. I'd like to turn the conference back over to Dan for any additional or closing remarks.

No, that’s all. We’re going to keep plugging away. I think this is one of those things I’ve learned in my life; if you go to work every day and you try to make more good decisions than bad, you eventually build a pretty good company. I think we’re well on our way there. So we’re just going to keep doing what we’re doing. So thank you, everybody.

Thank you. That does conclude today's conference. We thank you for your participation. You may now disconnect.