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

Thank you and good afternoon, everyone. Welcome to our third quarter earnings call. As always, before we begin, we remind you that today's conference call may contain forward-looking statements that we are 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 broadcasting this conference call at fullhouseresorts.com, where you can find today's earnings release, as well as all of our SEC filings. With that, I'll make one big point before I turn it over to Dan. This is a very big call for us because it is the last time you'll hear from us without Waukegan open. The next time we talk to you, Waukegan should be open, and Dan will give you some more color on that timeline and everything else. I'm going to reinforce that point right from the start. With that, I'll turn it over to you, Dan.

Recognize Waukegan has probably, but certainly the permanent one will be bigger than our whole company and the temporary one might be bigger than our whole company. So it's pretty significant. The recent results show that the Rivers Casino, which is about a half an hour to our South, is doing about $600 million in revenue. The Potawatomi Casino in Milwaukee, which is just over half an hour to our North, does about $400 million and the Grand Vic, which is to our Southwest, is doing about $120 million. So the existing casinos in our neck of the woods are doing $1.2 billion. If we just take a small piece of that business and then we'll actually grow the market, there's 700,000 people in Lake County. It’s one of the wealthier counties in the country. We're the only casino in Lake County, we're kind of in the middle of it. So I think we'll grow the gambling by people who live there, because it'll be much more convenient. We might nip a little bit away from our competitors, and then we probably take a bite out of the video lottery terminals, which are doing about $109 million a year in Lake County. But I think the biggest piece of it is we'll grow the market. So anyway, let me go ahead.

Let's just speak up only because people, I think.

Okay, I'm speaking clearly. It's come along very quickly. You can see it on the website, which is AmericanPlace.com. The parking lots are paved, lit, striped, and the kitchens are in place. You can kind of see it on the right side of the building, they're in nine shipping containers at the kitchens. On the webcam, you don't see behind it, but behind it, we have basically an office complex that's a bunch of construction trailers, kind of a modular office complex, and that's where the employee locker rooms and everything are. The decor is going up on the inside. This week, we'll be rolling out carpet and putting in slot bases, and starting to install the slot machines. We should have all the machines in by the end of the month, about 1,000 slot machines and 50 table games, with two restaurants. We have a third restaurant that will open probably in February, a little behind everything else. And then we're hiring people; probably the biggest challenge is that 50 table games takes a lot of employees. My guess is we will open with less than 50 and open more tables as we hire dealers. It’s going to be hard to find enough dealers and get them all licensed and trained to open everything at once. But generally, once you are open, it's easier to get people to accept job offers, especially since if we open with less than the maximum number of tables, the tip rates will probably be quite high. So recognizes a very big checklist that we have to go through, a lot of different checklists. You got to remember each of these slot machines is basically a computer, and imagine if you had 1,000 computers from different manufacturers and different games and they all have to be hardwired back to a server that's not done with Wi-Fi, so there are miles and miles of low voltage cabling that runs in the floor of this place to hook all those up to a server and make sure all of them work properly. It's got to be proven to us and proven to the Gaming Commission, and there are also hundreds of cameras all hooked up to surveillance DVRs and everything has to function properly. If everything went perfectly, we could be open in late December. We’d be the first casino in the history of the Midwest where everything went perfectly. More than likely, it’s going to slip into January, but it’s somewhere in that timeframe we think. We're not going to open until we're confident that we're ready. You certainly don't want a flood opening like has happened at some casinos. When we're confident we're ready and the Gaming Commission is confident we're ready then we'll open. But it’s coming; it’s not very far off at this point, and we're excited about it. We are hiring people and having job fairs and so on. In Colorado, we're also making good progress. We're closing up parts of the building now and starting to get cold up there at 10,000 feet in the mountains, and you can see that on the webcam for ChamonixColorado.com. We're making very good progress there wrapping it up so we can heat the inside to continue the inside work through the winter. The drywall is going up in some areas. The glass is up on a lot of the building, and the brick is up in the lower parts of the building. We have had some challenges; there are three different hotel towers there, for example. They are erected with medium gauge steel. We had difficulty finding enough workers. We would have had three teams of workers working on the three towers. We only had enough workers up there in the small town in the mountains to have two teams. The third tower really didn't start until the first two had topped off. So it's a little behind. It's now going up whereas the other towers went into enclosing. Most everything else is doing pretty well. We're aiming for mid-2023, but some attributes, notably that third tower, might be a little bit behind. So less certain on the opening date there than we are in Illinois, because after Illinois, we’ll be installing slot machines, so it's looking pretty good. We're making good progress there as well. We’ve also been refurbishing Bronco Billy’s, which is next to Chamonix. In this past quarter, about half of it was closed, including the steakhouse. So it's currently operating with much less gaming capacity than it has had in the past. It's got no on-site parking, and no on-site hotel rooms; it’s kind of amazing that it makes any money at all. It wasn't making much and lost a little bit in the quarter; if I may, it was about break-even. That gaming space, which is really the center chunk of Bronco Billy's, will reopen by the end of December. Now we're going into the slow season, but it'll be nice to have that gaming space back. It matters really especially on weekends. The restaurant, which was a steakhouse, we opened as an Italian restaurant in the first quarter. We did that in part because Chamonix has a high-end restaurant in it, which would be the highest-end restaurant in the complex. So we took what was the high-end restaurant in the complex and are rebranding it as kind of a more modestly priced Italian restaurant. In the quarter, there were a lot of pre-opening costs, about $2.5 million, which of course affects net income, even though we back it out for EBITDA, that's a lot of payroll; we’re hiring people and so on. There's some rent that goes in there, a lot of professional fees, but that all gets expensed as incurred these days. Historically, it was capitalized sometimes, but today it's all expensed as incurred. Obviously, it's a big drain on current net income, but it's really not a current expense. It’s an investment for future net income. Some other noise that was in the quarter, there’s a progressive gaming tax rate in Indiana, and we're one of the smaller places, so we have a low tax rate. Indiana law allows us to not be taxed on a certain amount of free play, but it also allows us to sell that untaxed free play to other casino companies in a much higher tax bracket. For several years now, we have sold our free play; we’ll go ahead and pay the tax on our free play, sell the ability to not be taxed on the free play to a different casino company, and we kind of split the benefit of that with the other party from that casino company's spend. This year and last year, both years, we got $2.1 million for selling the free play; this year we did it in the second quarter, last year we did it in the third quarter. It confuses the results on both quarters. The counterparty wanted to do it in the second quarter, we didn't really care. It may be a little better if you do it in the second quarter because during the pandemic, we sold the free play, but the counterparty kind of didn't get as much benefit as they might have thought, because they were actually closed for a period of time. Other than that, we're pretty indifferent, except that sooner might be a little better. So selling it in the second quarter instead of the third quarter is what happened, and that confuses things. There were also stimulus checks last year; I don't know what everyone else has been saying, but pretty much across our markets, we've been swimming a little upstream because the stimulus checks went out in the later part of the second quarter last year. No, middle of the second quarter actually. That helped the later part of the second quarter and the first part of the third quarter because some of those stimulus checks ended up in slot machines. Our insurance costs are up quite a bit because we have a big casino on the Pacific Gulf Coast that tends to get hurricanes. We haven't had a hurricane there in a while, but it is definitely in a hurricane zone. It's a big part of the company, so we've always maintained our insurance at a very high cost. We've maintained very good insurance because if it did get hit by a hurricane, it would be pretty monumental for the company. That will probably change pretty significantly in the year ahead relative to income, both because we'll be more diverse and probably negotiate a better deal with the insurance companies as well. We might be willing to accept a little higher deductible and things like that on the Mississippi property because it won't be half of the company anymore; it will be much less than half the company. To put that in perspective, the increase in insurance under the current contract is running about $0.5 million a quarter, and the insurance contract comes up for renewal on May 1st if I’m correct.

Yes, May 1st.

We have another few months of that, and then I think we'll have much better comparisons on the insurance thereafter. We do have some new competition out there, not huge, but in two different markets. There's new competition at our Mississippi property; there is now online sports betting in Louisiana. We did have the closest sports book to Louisiana, so we would get some people coming over and gambling at our sports book. Now that they can do it on their iPhone from home, we're seeing that business being up quite a bit and that was not a big part of the property. It was like 5% of gaming win, but it's down quite a bit. There is talk about Mississippi eventually having online sports betting as well, and I suspect that does happen and we would participate in that and maybe get some lift. But at the moment, Mississippi doesn't have online sports betting, and Louisiana does. A competitor put these historic racing machines, which are really slot machines, into a racetrack in Boone County. They actually tore down a pretty decrepit building there; if they hadn't torn it down, it probably would have fallen down. They put up a building, which is not the most beautiful building in the world, but it's there and it's got a bunch of historical racing machines in it. As typically happens, customers go and check out the new place. When they realize that the new place is kind of a dark airplane hangar that sells hot dogs off the cart in the back, they'll come back to us, but that has had a little bit of an impact on us since September. We're not the closest casino to that competitor; if somebody opens a new casino that really is nice, it tends to have a chance of growing the market, as I think we will in Waukegan. In this case, they're not growing the market. They're just taking a little bit of market share. The revenues that they get are mostly from downtown Cincinnati and Lawrenceburg and a little bit from us, and actually the closest casino to them is Belterra Park, which is on the Southeast side of Cincinnati. There is a new competitor in that market, but talking about going into the election, the cost of food is up, and that has affected us some too. On the positive side, we did not have a wildfire at Lake Tahoe on Labor Day weekend this year, and so that helped us out. This was one of those quarters; considering everything that's going on, it was an okay quarter. It wasn't a great quarter, it wasn't an awful quarter operationally. But frankly, we're spending so much time getting these two new places open because they really are the future of the company, and we're very excited about that. I think in future quarters, it’s almost like it’s not even worth talking about some of the smaller properties.

But before we take a question, I'm going to underscore everything that Dan said there. To put it all in perspective, if you go back to pre-COVID, the properties on a year-to-date basis back in 2019, property margins were about 13.5%. Compared to today, year-to-date margins are about 25.5%. So we've gotten a good 12 percentage points of property level improvement, and that's with Colorado essentially at a breakeven margin. That's with the additional insurance costs that Dan mentioned in Mississippi. Fast forward to a year from now, two years from now with both Waukegan and then Chamonix opening, I strongly suspect you're going to see those margins continue their way back up for what it's worth. I'm just going to end it down with this is our last call before Waukegan opens. The next time we talk to you guys, that thing will be open.

And I actually failed to mention on the online sports betting. We have three licenses in Colorado, three in Indiana, and one in Illinois. Last year, all six of those in Colorado and Indiana were earning their minimum guarantees that we have. Churchill pulled out of the business, so we have one available in Colorado, one available in Indiana. We're looking at whether we contract them out again or maybe just keep the opportunity. In the meantime, we've signed one in Illinois, and Illinois is by far the most valuable because the population of Illinois is bigger than Colorado and Indiana combined, and there's only one license permitted for each casino. There are fewer licenses and a lot more people. That license is $5 million a year, which exceeds the minimum guarantees on the other four. If somebody comes along and offers us a great deal of money for those licenses, we'd probably contract them out again, but we have been looking at the possibility of doing it ourselves not to compete with DraftKings and FanDuel who are in these big marketing wars that we wouldn't want to spend the money to try to be in. But we could offer online sports betting, you can purchase or at least the software; you can even buy and lease the people who set the odds and all that stuff. Just do it really for our own customers. We can tie it in; say if you bet on the final four games and so on, we will give you credit towards a round at the Gulf or towards a weekend stay at our hotel. It’s a lot easier for us to do that than it is for DraftKings or FanDuel, because they don't actually own the hotels; they're a little more complicated. We think we could probably do it and make a little bit of money. But more importantly, the bigger opportunity in that area is online gambling where you can actually play a slot machine on your iPad; that's not yet legal in any of the states we're in. But in the states where that's happened, that's been a much bigger market than online sports betting. That is a field we could do on our own. We think it will be legal in the states we operate in the not too distant future. One of the appeals of trying our own online sports betting is we'd have to hire a handful of people and learn how to market it, learn how to run it and so on. We would be developing the expertise to get into online gaming when it comes along. Anyway, that's where the online sits. But in the quarter, you were comparing four licenses versus six last year, because Illinois will not be up and running until after we get our casino open, probably in the spring. We have a temporary down comparison on contract sports wagering, but contractually it’s going to be up once we open in Illinois and then when we figure out what to do with the other two licenses, potentially up even more.

Yes. All right. With that, let's take some questions.

Thank you. Our first question comes from David Bain with B. Riley. Your line is open.

Awesome. Thank you. First to Lewis, I appreciate your strong comments that you're going to be open with Waukegan by the next call. But at this point, what are the major items that determine a Waukegan opening next month versus January or February. Is it the Gaming Control Board reviewing everything? Or are there more structural items that you need to tackle?

Let me clarify. Our goals with the Gaming Control Board are fully aligned; we want a seamless opening. We want everything to function correctly when our customers arrive. I recall the opening of the Taj Mahal in Atlantic City, which didn't go well and had to close just hours after opening due to issues, despite having Michael Jackson performing that night. The venue's reputation never really bounced back. We aim to ensure everything operates as it should. While we don't need all 50 table games up and running, we require the slot machines and systems to work properly. As we approach our target date, likely around Thanksgiving, we will need to decide when to start putting people on the payroll since a significant number will be in the licensing process. That can be lengthy. They’ll arrive and need training to understand the usual requirements of starting a new job. We also plan for practice nights using fake money, inviting friends and family to help the kitchen and wait staff get accustomed to operations. If that goes well, we can open afterward. However, sometimes during practice, discrepancies may arise, like the cage not balancing, and we’ll need to troubleshoot. Once we’re sure everything is functioning well, including having the appropriately licensed staff, and the Gaming Commission is satisfied, we can agree on an opening date. I understand everyone is eager for a specific date, but it’s not productive if we’re not ready. We're narrowing it down; I believe it will be within about six weeks, complicated by Christmas. It’s likely in January, but if the servers or coordination issues arise, it may push to early February. We’re getting closer to that timeline, but I can’t provide an exact date now.

We have one in our heads just so you know, David.

But David, if I tell you it's January 15 and we're actually ready to open on January 5, don't you want to open on January 5? If I tell you it's January 5 and we're not really ready to open, then we'll have a screwed-up opening. So when we're confident we can open, we will open.

I'm going to give you a little bit more color and maybe a different perspective on it, Dave. Part of it is keep in mind, usually when you're opening a normal casino, you're building it for two or three years. We're condensed. If you look back in May of this year, we had a site that was green. There was no strong structure on it; there was no digging; there was no pavement, there was nothing. What does that mean six months removed from that? We spent about $1.5 million to $2 million on it already. The good news is when the slot machines are on-site, that's how you know you're very close and those do start to be installed starting this week. I don't want to trivialize it, but a lot of what we're really looking at from the slot install point of view is really going through the checklist, making sure things are communicating right. When we did the slot install up in Northern Nevada, as an example, we had issues with the economy server where we had to spend an extra couple of days just working through some of the kinks. That sort of stuff does happen. Just complicate it a little more than usual; if you get delayed by a couple of days, you've got a whole slew of holidays right around this time of year as well. A couple of days might throw you off by a week or two; that’s the reason for some of our hedging. We feel very good about where that process is right now. It's actually looking pretty darn spectacular now. I think on the inside, people are going to walk in the doors and be very pleasantly surprised at what we've done on the inside. I know you saw it with no walls. Now we've got walls; we got cameras and we have decor hanging from the ceiling and very, very soon slot machines. It's looking pretty cool now.

The other thing I will add is in early December we will start the advertising campaign with a banner or a voiceover that says opening soon. Then as we start to zero in, like when we're starting the play nights, we change the opening soon to opening on X.

Right on, okay, perfect. Is there anything you guys are seeing from a macro perspective or as you continue to visit both Cripple Creek and Waukegan during construction that would change your return calculus either direction? Lewis, I mean you mentioned I did visit Waukegan; I got a deeper appreciation for the surrounding hotels and potentially drivers with that and the ingress. I mean, either direction? Are there some things that you can identify, one or two that would make you more excited about either project? And then just the macro; anything that you're seeing there that changes your calculus?

I mean, I don't want to speak for Dan, but I feel better than ever for what it's worth. If you look at Waukegan first, part of the optimism comes from the fact that Rivers opened their expansion back in April. Since that expansion, they've been making pretty consistently $48 million, $49 million in gaming revenue per month, $600 million a year on a run rate basis. When you look at the numbers that we're striving for, we don't need to make $50 million a month to make our math work and get $50 million a year in EBITDA; we need $10 million, $11 million, $12 million a month. I will tell you, I am more optimistic as we watch their success in realizing that they’re ramping up their own property by getting their own table games up. Over at Chamonix, it's pretty true as well. Even versus a year or two years ago, the population that we have to go after right in that Colorado Springs market has continued to grow. The whole state population has grown, especially Colorado Springs and even south of Denver going down towards cities like Castle Rock have really grown. At this point, we have a bigger potential customer database than I would have envisioned three, four years ago. We've watched Monarch open up to great success; I think most people two years ago would have said, wow, I don't know how Monarch is going to get the numbers that they're going to get. We were on the other side saying, well, absolutely they're going to do well, because the gaming spend per capita is so low. Fast forward to today; they're doing much better than people gave them credit for. None of that costs the others, without hurting the others, and none of which caught us off guard; it was always we thought pretty apparent in just that gaming spend per capita figure. They’ve kind of proved the concept all over again, and that's ultimately good for us. So we're feeling very, very good despite all that you see on the news. By the way, even if we are off by a little bit, cycles come and go, but you can haircut our numbers all you want. But anyway you haircut them, you're still going to get pretty meaningful growth off the numbers that we have today.

Actually, this is showing the old analyst in me. If you dig up the Churchill 10-K, they own 62% of Rivers, but they carry it as an unconsolidated entity, because the decision-making is still shared with Neil Bluhm’s company. They only have two material unconsolidated entities; they admit that themselves in their 10-K. The other one is Miami Valley, which they own 50-50 with Delaware North and similarly share control. In 2021, before they built their expansion, the EBITDA from unconsolidated entities was $306 million. If you go back and look at Miami Valley, which has been an unconsolidated subsidiary for several years, it does about $100 million a year of EBITDA. That says Rivers is doing about $200 million a year of EBITDA.

Pretty expansion.

Pretty expansion and $400 million or $500 million of gaming revenue. Now, you got to be careful if you're just looking at EBITDA and gaming revenue in the regional markets; the margins are very different. The margins are more like 25%, 30% when you have non-gaming winners around us. I don't think those margins are so unfortunately high, and a recession is two quarters of recession. The Federal Reserve is trying very hard to bring down inflation and threatens to cause a recession in order to do so. What’s an ideal world for us? If there’s no recession and inflation goes back to a modest number and maybe they get rid of the tariffs. When we built the permanent, we can buy steel and glass from China. That’s an ideal world. But we're doing okay. We're starting the design process for the permanent casino in Waukegan. The temporary is just about done. We need to get into the details, the working drawings and precisely what the restaurants and all that stuff will be. We’ve interviewed different architectural firms to help us with that. We’ll spend the next year doing the design, the engineering, the interior designs, and all that stuff. Then it’ll take about two years to build. We are allowed to operate the temporary for two years and then the Gaming Commission can give us permission to go a third year if necessary to build a quality project we’re building. It probably will be necessary. There's no certainty they'll give it to us, but I think it’s highly likely. We promised a nice permanent casino and we intend to do that. I know that’s what they want as well and you can’t do these things overnight. Prior to the matter, we haven't been harping on this, but we should because it's kind of a tough time in the equity markets and bond markets and we don't need any money, which is a really good thing. All of our debt is fixed-rate debt and we have more than enough to complete the temporary and Chamonix. Then we have about two years before we have to figure out how to finance the permanent one in Illinois. We still have a standby financing commitment from a large private equity firm that is kind of a backstop if we need it. It's expensive; we hope not to need it. Bond markets open and close; we have a lot of REITs calling us all the time on whether they'd like to do Waukegan as a REIT-owned entity or do a sale-leaseback component for other places. We have a lot of different ways we can finance the permanent; the real answer is we've got two years to figure that out. There's no reason to do it now, and frankly, you don’t want to rush into it now because the negative carry would be high, and our bonds are not callable until February of 2024. So we have a long time to figure this out; currently, we're in great shape. We don’t need money.

I know we said a lot, Dave, but Waukegan opens soon.

I'll take another question. I'll take a half hour to answer that one.

No, we're looking forward to a lot of good stuff very near-term from you guys. Thanks, Dan and Lewis.

Thank you, Dave.

Our next question comes from Chad Beynon with Macquarie. Please go ahead.

Hi, good afternoon. Lewis, Dan, thanks for taking my question. Appreciate it.

Hi, Chad.

Just kind of following on some of the numbers there. Can you help us with CapEx in the quarter? And then what's left to spend as a temporary including the license? And then at Chamonix? Thanks.

Yes. At Chamonix, we spent about $34 million, $35 million in the quarter. The balance sitting in that construction, that restricted cash account is basically what we need to finish it; about $156 million left to spend. Here in real time, we're spending roughly $12 million, $13 million a month in the near-term, so you might get a $30 million spend for the fourth quarter and the balance in next year. Over at Waukegan, it's pretty hefty spend at opening and just after opening, for what it's worth, in part because that build is so fast. But we spent about $15 million in the third quarter. You could have a $30 million, $40 million spent here in the fourth quarter. The big chunk is really going to be in the first quarter because that gaming license fee is $32 million and change that gets paid; we expect shortly after opening, not before, and then you get a bunch of construction payables that lag as well. So hopefully that helped you.

That's perfect. Thank you.

Actually, the $30 million might be delayed too because if we don’t open all the table games, we don’t pay all the tax right away. Once we hire dealers, the tax becomes due.

A very good point, Dan.

Okay, great. Next, just kind of on the current business. Firstly, I know it's probably hard to dissect this, but any trends you can talk about within your databases? I know we're all expecting the lower end of the database and maybe some of that retail end to slip a little bit? Secondly, if you can help with anything that you were seeing in October?

You're

So far has been pretty good; October is first.

What I’ve seen, but anyway it depends on the property.

Yes, you're not wrong there, Chad; that lower end of the database has seen a little bit of that play go away. Part of that has been by design, for what it's worth, where we're actively trying to incent people in the upper tiers versus the lower tiers. If you look at using Silver Slipper as the example, gaming admissions have been down. Part of that is sports book, but part of it is just slower end play not coming by customers and sales are the ones that are coming in the door spending relatively similar amounts for what it’s worth. That cost line is what's really hitting us over at Silver Slipper for what it's worth.

Which is property insurance and food costs.

Thanks again.

Thanks, guys. We’ll be looking at our mailbox for the invitation.

We'll ensure you receive it. Yes, please take care— we'll send you an email a week in advance.

By the way, to be clear, similar to Monarch and some other casinos, the actual grand opening party will be at some later date.

Yes, that's what I was saying, Chad. We'll probably find out a good week before what the opening day is and then maybe a month later we'll have the grand opening for guys like you.

Thanks guys. Appreciate it.

Our next question comes from Edward Engel with ROTH Capital. Please go ahead.

Hi, thanks for taking my question and looking forward to the grand opening. You talked about Chamonix, the hotel potentially not being open by mid-2023 not at least part of the hotel. Can you just talk about some of the puts and takes for that property to open in? Would you consider a phased opening at Chamonix, or is it just much better to open everything at once?

No, we would consider a phased opening. That's one of the things we're trying to figure out. What’s essential and what isn’t essential? Like, I know when we opened L'Auberge in Lake Charles, the swimming pool area and the spa weren't done yet. It was no big deal. We just told people to come back when the spa or when the pool was done. Even though we opened going into the summer, it opened a month or two after the hotel opened. In terms of guestrooms, when you stay in a hotel, you don't really know how many rooms are in the hotel. If we ended up opening with 200 rooms instead of 300 rooms, the guest experience would not be significantly different. But obviously, you want the casino open, you want the restaurants off the casino open, the parking garage open, you want a lot of things open. We end up looking at saying, well, you don't really want to spend overtime to try to speed up tower three. When you say it's not done yet, it'll be enclosed. From the outside, it'll look finished. There might be guys inside still installing carpet. We're still several months away. It's not certain that we can't catch up, but I think it's pretty likely that we end up opening most of it, and some other features catching up later, which is similar to what happened with Monarch. These are small projects in very small towns. Finding the construction workforce isn't the easiest thing in the world.

Great. Thank you. And then I guess relative to the topic of the part you had in September, just any comments you have on maybe connectivity or your guests have, like you said it's a smaller town. Is it a town that you could take and can handle some larger events that you're hoping to host? Or is there still some connectivity that you need to be approved?

Yes. I mean, we're 45 minutes from the West Edge of Colorado Springs and about an hour and 15 from the East Edge of Colorado Springs. We're an hour away from Colorado Springs. Teller County, which we're in, has about 25,000 people. It includes Cripple Creek and Victor, which is nearby, but also Woodland Park, which is pretty good size town. It’s about 25,000 people, so that's where a lot of our employees come from. To put it in perspective, Black Hawk as a casino industry is probably five times what Cripple Creek is today in terms of number of employees and so on. It's in Gilpin County, and the population of Gilpin County is about 6,000. Their employees all come from Golden and Evergreen, which are 45 minutes away. Finding employees is a challenge in Cripple Creek, but it's actually an even bigger challenge in Black Hawk because we do have significant talent not that far away from us. The customers principally come from the Colorado Springs area in the whole Colorado Springs MSA, which is Colorado Springs and Pueblo and Canyon City. Now Pueblo is closer to two hours away, but we're the closest casino to it. Canyon City is a little less than one hour away. We have a strong secondary market; that's Denver itself. Now Denver is one hour from Black Hawk and two hours from us. But if you live on the South side of Denver, which is like Castle Rock going down in there and take into consideration the traffic issues Denver has these days, you're probably closer to us. There will also be regular guests from Denver who will go to Black Hawk once a month; maybe once or twice a year they make the extra drive down to our place just to experience something different. That’s not unusual. Given Denver's 4 million people, if we get a small slice of Denver, it’s nevertheless pretty material for us. Recognize what we're building is really big for Cripple Creek and really big for Full House Resorts; it’s 300 grounds; it’s ten percent the size of Treasure Island. When you say we're going to have meetings and conventions, I'm not talking about Comdex. I think we already have booked the annual convention of Colorado Morticians, for example, which I know in Las Vegas is a pretty good gambling group of people. They have to be very subdued in their hometown, but when they come to Las Vegas, they party pretty hard. We have some groups like that that we're booking, but they're not 1,000 rooms; they're 100 rooms. We are putting things on the books now for meetings and conventions, and I think we'll do a pretty good business of that as does Ameristar. Ameristar and Blackhawk have a nice meeting room area and they keep it very busy and it helps fill that hotel midweek. Monarch has very limited meeting area; just the confines of their site, they didn't have a place. We actually have more meeting room space than they do, even though they have a lot more hotel rooms than we do.

Great. Thank you. Appreciate the color.

Yes.

Our next question comes from Ryan Sigdahl with Craig-Hallum Capital Group. Go ahead.

Good afternoon, Dan, Lewis. Just maybe one from us; you've covered most of it here. But can you talk through the margin cadence throughout the quarter, kind of month-to-month, and then in October? Mainly trying to think through, you mentioned a lot of different costs within each of the properties? Curious if Q3 margin is the right run rate going forward or if they sort of impact you more in the back half of the quarter? Thanks.

I mean Q4 is seasonally slower than Q3, so you would normally in a normal year have some margin compression going into Q4. Looking at Q3 itself, like the food costs were up pretty steadily through the quarter. Obviously, insurance costs were up pretty steadily through the quarter; they're very steady. I mean, it's all annual cost; it's amortized, right? The Turfway Park, their new facility opened in September. That affected Rising Sun in September. I think it will over time have less of an effect on everyone else in the market, because there’s a natural tendency to everybody to go see the new place, and then, okay, we saw it and go back to your favorite. Some market share you lose forever, but most of it you get back. At this point, there's different things that happen. I know we had one of those great events that happened this past weekend because we had a Golf Tournament in Mississippi. We invited all these high rollers, and they came in on Friday night. Late Friday, I heard that it was supposed to rain and be very windy on Saturday, so they weren’t going to be able to play Golf. I haven’t seen the numbers yet, but usually, that leads to a very good weekend. You have things happening like that on a month-to-month basis. The fourth quarter, we don't get that gaming capacity back in Colorado until probably mid December. So the Bronco Billy's will still be struggling through the fourth quarter. I think the Silver Slipper is much easier comparisons compared to the fourth quarter of last year. That was doing okay in Northern Nevada going into the fourth quarter. So I don’t know. What’s really going to matter is what are we doing in Waukegan in our first month, because we're all guessing a little bit. Even if it’s at the low end of the range, it's going to be a very important property for us.

Yes. No, I was more so thinking sequentially. It felt like a lot of the costs from Louisiana, competitive pressures, et cetera; Louisiana and the reset on insurance, et cetera, would have impacted Q2 as well. There were just some sequential stuff.

Yes. I mean, I don't want to harp on it too much, but if the Silver Slipper, literally half of our food cost is crab. We give away a lot of crab in our buffet. When you look at the cost of food sold, it goes up and down with the cost of crab. So it's not material; just jokingly, because a couple of conference calls ago, I got a little carried away with it and talked for 10 minutes about the cost of crab. At the end of the day, it's never material.

But those property insurance costs are pretty meaningful and Dan's rate. That resets on May 15 of every year. You really didn’t get a full quarter of that for the second quarter that we just had.

Right about now is when you wonder whether we had to make a tough decision last spring: do we maintain platinum insurance on the property? Insurance rates went up so much. We opted to do so just because it’s so important to us relative to the company today. We’re right at the end of hurricane season; we didn’t get hit. We could have gambled a little bit. We would have been fine, but it’s easy to say with hindsight.

Good. Thanks guys. No follow-up questions from the crowd. Good luck.

Thanks, Ryan. Waukegan will open soon, by the way. Yes, I think we have time for one last question.

And our next question comes from David Levine with MidOcean. Please go ahead.

Hi, David.

Hey, guys. How are you? Thanks for taking my questions. First question, I just wanted to firm up the unrestricted cash point and just an expectation for the next couple of quarters. It seems like if my math is right, unrestricted cash is around $85 million. You guys said that at Waukegan, which is where more unrestricted or rather the CapEx would come from that's within earnings and unrestricted cash, would be around, Lewis, I think you said like in the low $70 million range over the next two quarters. Then you have the interest payment, the bond interest payment of like 15-ish. So that's like into the mid-80s for call it like fixed costs? So if you have kind of like 85% of liquidity away from, kind of, Chamonix, and then that gets me to like 85% of the CapEx and interest. That leaves your EBITDA to provide just like the rest of liquidity there. Is that kind of the right way to think about it? Obviously, we’re modeling.

No, we have a $49 million credit facility.

The revolver is something you probably feel comfortable not needing to draw on, especially since I laid out the CapEx and interest, and your EBITDA can cover the remaining costs.

Yes, we will probably draw some of the revolver because you don't really want unrestricted cash going to near zero. The revolver is not very expensive so we will probably draw some; just not close to the line.

Yes. I think you're thinking about it the right way, David. There's more liquidity from that revolver; not a bit, but a lot more liquidity from the revolver. The other thing I would just tap on is I kind of put numbers out there that assume all these builds come in a timely manner. Based on our experience, what you tend to see, especially with those construction payables is those last payments actually lag on a bit longer than what I'm modeling most likely. So there's that piece too.

If you model our existing properties, they're paying the interest expense on our debt. When you start having free cash flow from the temporary, it could repay whatever you draw on that revolver in the next couple of months. You're going to repay it in the couple of months after; it could be very quickly. When we say we're confident we have enough money to do all this, that's including a $40 million credit facility that is undrawn. If we didn’t have that, we think we’ll be okay, but it's a lot tighter. That's the math you're doing.

Yes. Yes. Okay. And then I just had a couple I don't want to squeeze in. Any word on the Hard Rock Menominee process? I mean, I'm sure the election tomorrow night might be somewhat important, although I'm not entirely clear now. But any kind of perspective on that since the last time we spoke?

I’ll make two quick points and maybe Dan will add something. I do think you’re right; it’s important to watch the election. It keeps changing regarding who’s going to win. However, a more significant point is that if you look at a satellite photo of that area, much of the land between us and Kenosha and Milwaukee is primarily farmland. The denser areas are to the south and west, near rivers. Considering the proximity of our casino to our feeder market, even with the potential new casino opening in that direction, we will still be the closest casino. Although we may not reach $1.1 million anymore, we are still looking at a very high number. We haven't disclosed it yet, but the impact will be relatively minor due to the lower population density as you head north. Additionally, we will have speed and proximity on our side when we open. With the permanent facility, we'll also have quality to offer. Having one of these advantages is beneficial, but having all three should lead to great success.

And they pay 1.5% of gaming revenue in a contribution to the city, and you get into the city's municipal budget and back into it. They're doing revenues about $400 million a year, gaming revenue, and have for a long time. This is a very successful travel casino and has a tribe with significant resources. Kenosha would have a much bigger impact on them than it would on us because it would draw from Milwaukee, which is their core. We're not assuming we get much from Milwaukee; we might get some. There will be two tribes fighting over this.

You think tomorrow night is significant; you think the election is relatively important though for that?

Well, I don't know because it's not clear whether either candidate would necessarily be in favor of this.

Yes, I would agree with Dan on that.

My guess is both of them have been kind of, as often happens in something like this, noncommittal so that they can raise money from both tribes, because they need it for the election. After the election, you find out where they really stand.

Fair enough. Thanks a lot guys.

We think we should be okay anyway, David. Thank you, everyone.

We’ll talk next quarter, Dan, when American Places opens, yes.

They won’t do this from American Place. All right. Thank you, everybody.

Thank you, guys.

This concludes today's call. Thank you for your participation and you may now disconnect.