Full House Resorts Inc Q4 FY2023 Earnings Call

Greetings, and welcome to the Full House Resorts Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to Lewis Fanger, CFO. Thank you. You may begin.

Thank you, and good afternoon, everyone. Welcome to our fourth 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 that said, I'll give a few comments, and then Dan will chip in with any cleanup here. But as we said in our earnings release, we're at a transition point now with our company. We borrowed in large part to fund two large casino projects. Our legacy properties have historically carried the burden of that debt, largely covering interest expense on their own. Post-COVID, business at our legacy properties feels like it has largely settled down to around $30 million or $35 million or so of adjusted EBITDA per year, again, largely covering our annual interest expense. With American Place and Chamonix both now opened, and construction CapEx winding down, we are now set up for significant free cash flow generation. We have long said we expect $100 million of incremental earnings in total from our temporary American Place facility and Chamonix after they have ramped up. And we continue to believe strongly in those figures. Those amounts are on top of the $30 million-plus generated by our legacy properties. And so, when you start looking at those figures, hopefully, you also see that our company is transitioning now into a large free cash flow generator. Somewhat related, we recently received all of the necessary approvals to operate our temporary American Place facility until August 2027. That is an important development that many have missed. For casino construction projects, you'll typically spend 40% to 50% of your project budget in the six months before opening. That means we won't start investing large dollars into the permanent American Place facility until the second half of 2026 and into 2027. That's important for two reasons. First, contrary to what we have heard from many investors recently, it means we do not need to be in the debt markets right now. We don't expect the need to finance the permanent American Place casino for a few years. That additional time should be our friend. Over the next few years, the debt markets have the potential to show continued improvement, with the potential for interest rate cuts between now and that future financing day. It also means that our two newest casinos will have time to season, allowing their EBITDA to ramp up into the full potential that we expect from them. If we hit the EBITDA levels that we expect, gross debt to EBITDA should be around three times, which is the low figure, historically, for any gaming company. And most importantly, the August 2027 extension offers us more time to generate even more positive free cash flow, allowing us to self-fund a large portion of our permanent American Place facility. Going back to American Place for a second, our temporary American Place facility has recently kicked into a new gear. In December, American Place reported gaming revenue of $8.2 million. That record will be short-lived. For February, you'll see a figure north of $9 million. At American Place's anniversary party, a few weeks ago, we did double the coin-in of opening night and had coin-in that was about 50% higher than our previous record for a single day. March is also off to a good start. At Chamonix, we purposely crafted a phased opening. Despite some brutal snow storms recently, two things are clear to us so far. One is that there is no high-quality gaming product in the Colorado Springs market akin to what we offer at Chamonix. And two, guests are clamoring for something nice in town. It appears that our rooms will be very easy to fill on weekends when we can easily fill those rooms above 80%, and even 90% occupancy. For the midweek period, group business will be important. Group business will start to come into play over the coming months now that meeting planners can see the beautiful facilities that we've created and can be assured that construction will not interfere with their meeting plans. We also have our high-end steakhouse on the verge of opening. Chef Barry is renowned for his Barry's Prime Steakhouse and N9NE Steakhouse in Las Vegas. And he'll be bringing his culinary talents to Chamonix around the end of the month. Once that's open, while we won't have our full breadth of amenities, we will have the most important elements, our casino, our parking garage, all of our hotel rooms, and our high-end restaurant. We can then turn on our marketing heading into the summer months, which is seasonally the strongest period for the Cripple Creek gaming market. That's what I had. Dan, do you want to do some cleanup there, or should we do Q&A?

We have been highly focused on opening Colorado. At the same time, Illinois has been developing nicely. I was reviewing our 10-K today and noticed that historical references to Mississippi as our most important property are no longer accurate. While it remains significant, we are now generating more revenue from Illinois. Colorado is also expected to contribute significantly soon. Completing the project in a small town at the back of Pikes Peak has presented challenges, but most of it is now finished. The high-end restaurant will open later this month, followed by a jewelry store, a major bar, a tie-in restaurant, and a spa. We have indicated for some time that the company is on track to triple in size, which is currently underway. This is reassuring because we issued bonds and borrowed all the money needed for construction in advance. We have been incurring interest expenses while the development was not yet operational. As a result, our total cash balance has been decreasing monthly. However, we are now seeing an uptick. Analyzing our free cash flow per share after interest shows that we are comfortably positioned regarding taxes, thanks to tax-loss carry-forwards and significant depreciation from our new projects, resulting in minimal income tax payments. Currently, our free cash flow per share is about $1.00 and projected to reach $2.00. We anticipate generating substantial cash over the next three years to complete American Place permanently. We committed $500 million to the state and have invested about $175 million so far, leaving $325 million remaining for a permanent casino with a small upscale hotel and various food and beverage options, comparable to half the size of Durango Station. We aim to generate about half of that internally and plan to secure $150 million in debt later. We won’t pursue this financing until the resolution of the Potawatomi lawsuit, which we believe is merely an attempt to delay our construction. They are seeking to have the city or state restart the selection process, but an independent consultant rated their proposal as the least attractive among five options. Although we expect to win the legal dispute, if we don't, we have other legal avenues to explore. In the meantime, we are continuing operations at the temporary location and will hold off on seeking additional financing for the permanent site until the lawsuit is resolved, likely a year from now. By that time, our EBITDA will likely be three or four times our interest expense, leaving us under-levered compared to most casino operators. Raising $150 million for American Place’s completion should not be a challenge. We may even need to refinance our bonds, which are callable and due in 2028. Once American Place is operational, we will be able to pay down debt rapidly. Those are my additional thoughts, somewhat overlapping with what Lewis mentioned, and I welcome any questions.

Thank you. Our first question is from Jordan Bender with Citizens JMP. Please proceed.

Great. Good afternoon, everyone. Lewis, you reiterated the $100 million EBITDA target. I believe that half of it's coming from Colorado, half from Illinois. But in Waukegan, can you just talk about how much of that is coming from revenue uplift? You talked about some of the records in February versus how much of that is coming from more right-sizing the cost structure and just seeing margin improvement off current levels? Thank you.

Well, it's mostly revenue improvement and a large portion of that falls to the bottom line. We're trying to get a little more efficient in our marketing, but it's more about trying to get more revenue numbers for the same dollars of marketing, but targeting the marketing better. But as you go through the numbers, at least half of the incremental revenue has fallen to the bottom line. And that'll probably continue to be the case.

I mean we did have some extra marketing spend. So, in the fourth quarter, as an example, we spent about $1.2 million more on media and advertising in the fourth quarter than we did in the third quarter. We did kind of mention that in passing on our last earnings call, for what it's worth. But you do those things not necessarily for the sake of the quarter, you do it for the sake of the longer-term of the business. And a lot of that has been stripped back here in the first quarter. There is the question of did we run a lot of extra spend and then it helped.

At the time we did it, we kind of wondered, 'Well, that didn't seem to work.' We ran a TV ad, and so on, and it didn't see a lift in our revenues. But then when we stopped running it we did see a lift in our revenues, so maybe it was a delayed lift. So, it's a judgment call. But I think most of the improvement, going forward, will be from revenues.

I was reviewing our monthly gaming revenue from last year, and it consistently ranged between $5 million to $7 million. When we reached $8 million for the first time in December, I shared with everyone that we considered $8 million to be the new baseline, rather than $7 million. January was an exception due to severe weather affecting the entire country, including Waukegan, which impacted our numbers. However, looking ahead to February and March, I believe that $8 million is definitely the new baseline, and $9 million might also become the new standard. It's important to remember that casinos typically do not have their highest revenues during the first 12 months after opening; the best months usually come later. Therefore, we are confident that you will see an increase in revenue moving forward.

Yes. And, basically, if half the incremental revenue falls to the bottom line that brings up margins, because the margins are still lower than they will be at maturity. But most of the way we get there is improve revenue.

Great. And then just on the follow-up, the legacy business that you talked about, the $30 million to $35 million of EBITDA. Just some commentary out there has been labor levels or wages continue to go up and impact margins. How should we think about that legacy portfolio and maybe the growth profile into '24?

It's somewhat different across various regions of the country. For instance, Colorado continues to raise its minimum wage annually, currently around $15 an hour, which is approximately double the rate in Mississippi, where there's been no increase in a long time. We've had a presence in Mississippi for many years. Staffing in Cripple Creek is particularly difficult as we're trying to hire for a facility that will accommodate 400-500 employees in a town with just 1,200 residents. Attracting individuals to commute to this mountain community is challenging, but we've made progress. In Waukegan, the population is larger, making staffing easier. However, even for roles like dishwashers, there's a licensing requirement from the Gaming Commission that involves a complex 25-page form, which has posed some challenges, but we've navigated that and established a relatively stable workforce, which we are pleased with. Overall, labor conditions vary by region, and as with any business, rising labor costs and tight labor availability prompt us to seek more efficiency in our workforce. Whether it's technology that helps operate the casino floor more efficiently, someone pitched me on artificial intelligence. They mentioned video blackjack games that have a recording of a dealer. They suggested that using artificial intelligence could enhance the experience by providing feedback like, "Hey, that was a good bet." This is a possibility for the future, and if we can make interactions more engaging, it could lead to needing fewer actual dealers. Currently, we have higher minimum bets in some places, which dealers appreciate because higher minimum bets can lead to larger tips. We have several dealers earning significant amounts, with some markets paying double what others do. Similarly, in the food and beverage sector, as airports modernize, they offer iPad ordering systems where diners don't see the waiter until their meal arrives. Eventually, customers could become accustomed to similar systems in our facilities, enabling waitstaff to serve more patrons. We are continuously exploring ways to improve payroll efficiency. Ultimately, this is beneficial for employees too, as we can offer higher pay if we have fewer staff, provided we maintain good service. If executed properly, this creates a beneficial situation for everyone involved.

Great. Thank you very much.

Our next question is from Ryan Sigdahl with Craig Hallum. Please proceed.

Hey, good afternoon, Dan, Lewis. Two on Chamonix, so first, firsthand experience, it is beautiful. It's going to be remarkable in that market, but with the soft opening, several inconveniences, I'll say, that negatively impacted the player experience in the first days, weeks following the soft opening. So, I guess fairly minor, corrected with the ongoing construction, but what feedback have you heard from those early visitors? Have you got them back to try it once more things are done? But just kind of curious the trends you've seen from visitors and feedback?

I understand that in the initial weeks, the hotel primarily catered to invited casino guests. We acknowledged some issues, particularly with the television service. For example, one day, the cable went out because ice slid off the building and damaged the dish. We realized we needed a new dish and possibly a better placement for it. We faced several such challenges, and we're open about our mistakes, inviting those early guests back for another chance. After all, they are casino patrons, and we would gladly welcome them again. Although we have some minor issues that are quite frustrating, there was a design flaw in one of our towers. The guest rooms were intended to have expansive glass windows, but our architect mistakenly included solid panels, thinking it was necessary for energy efficiency. It turned out it wasn't the case, and it seemed to stem from a preference for the outside appearance. By the time we realized this, some of these panels had already been installed, resulting in about 25 rooms where solid panels obstruct views when the curtains are opened. We can't resolve this until spring, so for now, we've placed a lighthearted sign in those rooms, acknowledging the oversight and offering guests $20 off their room rate or in free play as compensation. Interestingly, the CEO of one of our competitors stayed with us and ended up in one of those obstructed rooms, opting for the $20. These issues are typical for a new hotel. It's a significant project, being one of the largest buildings constructed in rural Colorado, surpassing anything in Vail or Aspen. Similar establishments faced comparable challenges due to limited labor resources. Unlike Durango Station, which opened everything at once, we had to focus on the casino and hotel first, and then gradually on the steakhouse and spa. We are progressing with a phased opening.

And it's a little fortuitous in a way as well. We open into the winter. It's seasonally weakest in the winter. And so during this ramp-up phase, it gives us the chance to kind of season our employees, get all of our amenities up and running before you get the big summer seasonal rush, before we put our big marketing spend out there as well. So we knew that there were going to be issues with the opening. Every single casino opening that I've been to, that Dan's been to, has had some issue. And I can tell you about issues at Wind Palace. I can tell you about issues at Fontainebleau, Bellagio, Mirage. You can go through the list. And unfortunately, it must have been a quiet news day because some of our issues got made it into the local paper. But look, we don't like having issues. We want everyone to have a good experience. And for us, it is about making sure that the people that were inconvenienced will have a very, very good experience there the next time they come back.

Yes, I recall at L'Auberge, we had a vertical column in the hotel that lacked hot water due to a mistake, affecting several rooms. At Bellagio, we invested significantly in the fountains, which were designed to operate in different conditions. On windy days, they would be low, and on calm days, they would be at full capacity. Initially, we decided not to use the lower settings because guests would be disappointed, expecting a spectacular display. Now, if it's too windy, they simply don't run the show. On opening night, everyone was dressed up, and since it was a bit windy, I sensed they were about to start the fountains. I told my wife we needed to go inside, knowing Steve Wynn wouldn't let the low fountains run. She hesitated, but I urged her in just as the fountains activated, soaking the crowd. Every place has its challenges, but I believe we've made significant progress. Unlike when we opened Bellagio, there weren't platforms like Yelp or TripAdvisor for guests to voice complaints. Often, satisfied guests don't express their opinions, while the dissatisfied ones do. We are addressing our challenges, and I honestly think we have created the most beautiful regional casino in the country. It may not be the largest, but it's on par with Wynn and Bellagio in terms of quality, thanks to many of the same designers. I see it as a long-term asset for us, and it’s receiving numerous accolades. However, we've faced some setbacks, such as lacking a dinner restaurant, which we have been temporarily managing with a buffet in the meeting space. We expect to resolve that soon. At American Place, it took a while, but we finally completed a steakhouse in a modular structure that resembles a diner. It’s more upscale, drawing comparisons to Fog City Diner in San Francisco. It's been open for just a couple of weeks, and guests have previously noted the lack of dining options, but now we have a high-end restaurant with a lovely atmosphere, serving competitive steaks and more.

Anyway. Good. Well, despite all that, I did pay for my room, so you got some money out of me, and the casino floor was packed. So it was good from that standpoint.

I will tell you an inside story that when you say there's always a surprise. Lewis and Adam and I were there the night before it was supposed to open, and we were checking out the Ice Palace down the street. We walked back into the place at about 10:30 at night, and there were some dealers doing last-minute training. And as we walk in the building, they come running up to me and said, 'Mr. Lee, there's water coming out of the ceiling.' And they show me where it's in the elevator lobby. And as we're standing there, it went from a trickle to a flood. And what had happened is it had been very windy and very cold, and it blew some of the flashing off one of the expansion joints between the building, and was allowing cold air into the attic part of the building. And coincidentally, one of the heating units had failed. And so there was this attic area that had gotten very, very cold, and it froze the sprinkler pipes. And there was a three-inch sprinkler pipe that froze, and it broke the end cap on it. But nothing happened because it had a plug of ice in it that kept it shut. And the contractor had figured out the heating issue and got the heating unit back up and had put temporary insulation where the flashing was missing. And we happened to walk in just as that ice plug had melted a little bit, and it kicked in. You know, when it leaks a little, the fire suppression system says, 'Oh, the pressure is down in the sprinkler system.' Turn on the fire pump, which is like 1,000 gallons a minute. It's going to put out the fire. And when it did, that plug of ice went through a wall across our server room and embedded in a wall on the other side, and the water came gushing out. And right on the edge of our casino, where we had spent $1,500 a foot on decor and everything, and I went running up to the second floor. Fortunately, I had the speed dial for the construction guys, and they'd all gone to bed. But the third one answered his phone. And I told him, we got water. And he hung up and came running down. And he and I almost ran into each other on the second floor. I'm looking for where the water's coming from. He knew where to turn off the fire pump. And he opened this closet, and there's a thing that looked like a wheel out of a submarine. And he turned off the water of the property. And then we had everybody from Bronco Billy's and everything there with towels and shop vacs and everything else soaking up all the water so it wouldn't get to the casino floor. The water sailed over our servers, but didn't actually damage any of them. And the next morning, we had the pipe repaired. And the state fire marshal, who we were trying to get his permission, kind of shrugged and said, it's Colorado. Pipes freeze all the time. That really wasn't an issue for him. And we opened the next day at noon. And I will tell you, midnight the night before, we were very close to having a river of water going right through the middle of the casino. And so every opening has its surprise. And hopefully, that's the worst surprise we're going to have at this one.

But now you know why your visit was a little affected.

Yes, look forward to the next one. Maybe a quicker one, Lewis, just on the West, flipped a negative EBITDA in the quarter. I guess how much was that from the last week in the quarter with the opening of Chamonix versus pre-opening versus maybe performance from the two smaller properties in Nevada?

Yes. Well, we made money that last week from Chamonix for what it's worth. You saw the casino was a pretty packed casino. Really, that was a carryover of the money that Bronco Billy's was losing for the rest of the quarter. We only had Chamonix for what, four days in the fourth quarter.

Great. Thanks, guys. Good luck.

Yes.

Yes.

Our next question is from Ricardo Chinchilla with Deutsche Bank. Please proceed.

Hey, guys. Thank you so much for taking my question. I was wondering if you could quickly comment on the first quarter in terms of have you seen any impact from your competitors in Illinois having the ability to operate 24/7 and to market more effectively? Is there has been a change in dynamic? You see more competition? And how's the promotional environment there?

Well, you know, we're quite a ways away from the Bally's facility. Our main competitors are Rivers and the Potawatomi to our north and the slot machines at bars and liquor stores around us. And they've been 24 hours a day, seven days a week for quite some time. And Billy's being not only an hour drive away, but on the other side of Rivers. In other words, to get from downtown Chicago to us, you have to drive past Rivers and you're halfway to us when you drive past Rivers. And so what happens there doesn't have much impact on us. I mean, probably the biggest thing we've seen is we lost some employees to Billy's when they were opening and they've come back, a number of them. So I wish them well, but they don't have much impact on us.

Got it. Perfect. When thinking about the space opening of the property, do you guys have like a target margin or like a target EBITDA generation for the year? Or, how should we think about the cadence of the profitability of the Cripple Creek property?

We certainly have targets in mind, as Lewis mentioned, but predicting when we will achieve them is more challenging because we're building towards those goals. For instance, I expected American Place to perform better by now based on earlier projections, but it is improving each month, which is encouraging. It's worth noting that Bellagio didn’t generate $500 million in its first few years, but from its fifth year onward, it has consistently done so. Similarly, Chamonix is moving in the right direction, but we haven't yet reached our expected profitability as it develops. On quieter days, we often have as many construction workers on-site as guests, as we continue to finish construction. Weekends draw a large crowd, but, as Lewis pointed out, locations like Las Vegas thrive on weekend visitors and weekdays are filled with meetings and events. This is also true for Cripple Creek and Black Hawk. However, securing meetings and conventions before opening can be tough; planners prefer to see and experience the venue first. Currently, we are using our smaller meeting room as a temporary restaurant, so we’re not replacing any scheduled events. In the upcoming months, we need to transition out of that space to accommodate the meetings already booked, as getting midweek traffic is crucial for reaching our financial goals, which will happen gradually. During the summer, attracting midweek guests will be easier due to the pleasant mountain weather, but the offseason and winter months rely heavily on meetings and conventions, which present numerous opportunities. I recall visiting Ameristar before construction, and I observed a busy meeting there hosted by the Colorado Association of Court Stenographers. It’s intriguing to think there are enough court stenographers to keep Ameristar bustling for several days, highlighting the variety of meetings we might not usually consider. Perhaps one day, we can host them in Cripple Creek.

January was a challenging month for the entire system with heavy snowfall affecting many areas, including Cripple Creek. As a result, we don't expect to report significant cash flow for January. However, as we transition from winter to summer, we anticipate a notable improvement, especially as the snow clears.

But at the moment, if you've seen the news, Tahoe has like 10 feet of snow. And so, all the roads going in and out of Incline Village have been closed. I don't know if they're open right now. But they were closed this weekend. On the other hand, our casino's still open. And there's a bunch of people at the Hyatt who couldn't get out. So we did a little bit of business. But Tahoe always has weather. You just don't know what the weather is. But it always has weather. But February in general is shaping up to be a really good month. And we don't have the final numbers yet. But we know it's going to be pretty good.

I appreciate all the color. That was very helpful.

Our next question is from Chad Beynon with Macquarie. Please proceed.

Good afternoon, guys. Thanks for taking my question. Maybe first, just kind of thinking about CapEx, Lewis, you talked about the permanent project CapEx being pushed well into '26 and '27. How should we think about just kind of overall CapEx for '24 and '25 either from a maintenance standpoint, paying the rest of the bills on Chamonix, kind of what's left here in the first half, just trying to bridge that free cash flow? Thanks.

Yes. So, Chamonix, just think of the restricted cash account largely taking care of that. We had about $38 million left in that restricted cash account at the end of the year. I think in real time, literally as of today, I've got $20 million sitting in that account now. So fruitful thought there. So we'll work through that balance before the end of the second quarter. Maintenance CapEx historically has been on the lighter side, so we've been trending close to $3 million. I tell people generally $3 million to $5 million a year for maintenance CapEx. Maybe that creeps up slightly as we buy things like more slot machines. But the nice thing is while we have some newer properties, they are new, and so there isn't a lot of maintenance CapEx outside of things like slot machines. So it's not going to be a crazy year. As you go into kind of end of '24 and into '25 and we start generating some pretty meaningful cash flow, we'll start looking at things like completing the construction quality blueprints for American Place and things like that maybe even doing some site work, but that work is very, very small in terms of cost.

Yes, I mean it might be 10 or 15 out of the $325 million.

Okay. Perfect. Thank you. And then as we think about kind of the completion of American Place Permanent, any updated view in terms of that $325 million that's left to spend, what type of return we should get on that will the property significantly change in terms of who's in the property, how much it'll cost to run the property, how are you thinking about that kind of medium term, what that can mean in that deep population market?

Yes, it's somewhat of a complicated situation because we can't operate the temporary structure indefinitely. The temporary setup is functional but not visually appealing, resembling a storage space for salt during the day. At night, we enhance its appearance with projected images, but it still lacks the attractive curb appeal that would make passersby say, 'Wow.' However, once inside, the experience exceeds outside expectations, though attracting people remains challenging. The permanent structure will offer much better curb appeal and an even more appealing interior, plus it will be slightly larger. I recall that Rivers generated around $300 million annually in EBITDA, while Potawatomi was approximately $200 million per year.

That sounds great.

We are aiming for $100 million, which seems achievable with a permanent facility but not with a temporary one. A temporary facility might reach about half that amount. If we consider the additional $50 million potential from a $325 million investment, that’s a reasonable return. To date, we’ve invested $175 million, much of which will contribute to the permanent facility. For instance, we have around $20 million worth of slot machines we plan to relocate. Additionally, we have invested in storm sewers, parking lots, and fencing, all of which are part of the permanent setup. We have also incurred significant expenses recruiting and training a workforce, which can easily transition to the new location.

Three years or four years of marketing the place, right, it's a lot of that sort of stuff.

So, there's a lot of ways to look at it. You can look at it as the temporary, what it earns, if you say, well, maybe of the $175 million we've spent so far, maybe a $100 million is the temporary and $75 million is stuff that's really for the permanent. I'm making these numbers up now. And so the temporary will pay for itself and then produce cash towards the permanent. And so, the net cost of the permanent is not really $500 million. You end up building the permanent for $400 million net of what you did in the temporary and then you make $100 million a year. There's a lot of different ways to analyze it. It's kind of a complicated algorithm. But just about any way you analyze it, you get a pretty good return, which is what happens if you have the closest casino to 1 million people. I go to Durango Station, and I kind of drool, because frankly, they did a very nice job there. In fact, there's some stuff they did there that we're going to kind of take note of when we complete the designs of the Permanent American Place. They are probably the closest casino to three or four hundred thousand people. That slice of Las Vegas that's on the southwest side of town. And you look at how many people they have in the place. And part of that is in Las Vegas, we're very accustomed to thinking, well, we're going out to dinner. Let's go to Red Rock Station. Let's go to Durango Station. And that isn't here yet. We don't get a lot of people who come in to have dinner at our place, and then they'll gamble before or after. And so there's a learning process that will come on. But the demographics of what we have here is significantly better than what they have at Durango Station. Now, we're not going to spend the type of money. We're not going to be as big as they are. I think we could be the same quality that they are, but they spent $750 million. We're not, we're going to spend about half that. But we can be the same quality, just not as big. And we've designed it in a way that it can be expanded later quite easily.

It's funny sometimes, Chad, because when you think about where we are, we're located in one of the wealthiest counties in the entire country. And when I look at our gaming database sometimes, we have customers in there that have already gambled and spent five, six figures in our casino. And I scratch my head sometimes and I say, 'Wow, they, despite the tent look on the outside, they have come inside.' And then saying, 'Oh, my gosh, this is a great place on the inside.' The people are unbelievably kind. The service is great. But the thing is, there are a lot of other people in this very wealthy county that will never get past the fact that, that is a tent on the outside. And where the Permanent will make a lot more sense as that, that building in itself will be a draw for the first time for a lot of people.

Thanks, guys. I appreciate it.

Yes, I would tell you, Rivers is a great location, but it's not great curb appeal.

Our next question is from John DeCree with CBRE Securities. Please proceed.

Good afternoon, Dan. Good afternoon, Lewis. I just wanted to revisit an earlier question. We've been getting a lot of questions about the temporary in the quarter. I think Lewis, maybe earlier you've talked about elevated marketing if I heard correctly, about a $1.2 million or so in the quarter. But I think even adding that back, the margin was a step down sequentially than we would have expected. So just wondering if there's any other costs in the 4Q at Waukegan, either temporary or permanent, structurally that we should think about. And then to follow up, I'll just tag in so you can answer all at once. Marketing, obviously a decision that you guys made, but is there more of those decisions to be made in 2024? I guess to pick your question, how do we think about the margin going forward from here or the cost structures kind of see marketing normalized next year or might you still think about kind of picking some spots where you see opportunity to grow the database or get some new customers in the door.

Yes, well, you had a couple things going on at the temporary here. You did have about a million less in gaming revenue, so the reverse flow through, I guess, it dings you on the other way, right? And that really was a function more of just a little bit of winter seasonality versus the third quarter. We had some actually, I'm looking at Adam as I say this, we actually had some catch-up accruals that benefited us in the third quarter as well. So it's not quite an apples to apples between 3Q and 4Q. So, a little bit of color there.

Great. Thanks. That's helpful.

And seasonally, the fourth quarter is our weakest quarter in most markets.

Yes, thanks.

Did you have a second part to that?

It was related to the cost structure in 2024. You specifically mentioned the increased marketing expenses that we also discussed in the third quarter, and I believe in the second quarter as well. Should we anticipate more opportunistic marketing spending in 2024, or will the marketing budget begin to stabilize this year?

As of now, it seems like we will be operating more normally in 2024 rather than in an excessive manner. Opening a new casino is always challenging because it requires general marketing efforts. In this situation, it was particularly tough since we had no customer data available on the day of the opening. Currently, we are approaching 65,000 people in our database, allowing us to target our marketing more effectively. Additionally, we can refine our focus on specific zip codes and other demographics. This makes our marketing strategy much more precise compared to a year ago.

Got it. Thanks, Lewis. And congratulations, guys, on getting Chamonix open in December.

Yes, it's interesting how everyone is trying to ascertain this quarter's or next quarter's earnings, and we are too, honestly. Our goal is to trend positively towards reaching $50 million in each area and $30 million from traditional sources. Whether we achieve this in three, six, or eight quarters is less critical than actually reaching it. We are committed to this goal, but we aren’t overly concerned about it. I sometimes feel that analysts focus too much on the immediate earnings, while I’m more concerned with getting the steakhouse open and will provide updates accordingly. We just concluded a year with $48 million in EBITDA, our best year ever. We had an interest expense of around $35 million in cash before any capitalized items. We comfortably met our interest obligations without contributions from Chamonix, which only operated for the last four days of the year. The property in Illinois was still ramping up, contributing minimal cash flow in the first half of the year. We often hear questions about financing for American Place, but the answer is no, we are not seeking that now—not even close. The bond market is slowly improving, yet we do not currently have a need for funds, and requirements for the future are less than anticipated due to our strong free cash flow, which is projected to increase over the year. How many stocks do you know that are trading between three and five times free cash flow? That’s roughly where we stand, which seems a bit irrational. People seem to perceive the need for financing to build the permanent American Place as a significant number; however, it isn’t that large. We have already invested a substantial amount needed for the permanent American Place. So, that’s our current status. Let's take one more question.

Yes, probably time for one last one.

Our final question is from David Hargreaves with Barclays. Please proceed.

Hi, I understand that I might have missed some information in the press release since I'm at the airport. I believe you opened the steakhouse in Waukegan in February, and I’m interested to know what impact that has had. Additionally, I would like to inquire about your liquidity expectations and any plans you might have for it.

Well, that that's easy, I mean we're going to build up some cash here, and then supply cash to the permanent American Place that we could build two to three years from now. So, that's your second question.

Yes, we're not out in the market for dividends or, quite frankly, our indenture doesn't allow for meaningful stock buybacks or anything like that. So, it really is for us taking that cash, preserving it, and then investing it in the permanent American Place for now.

Yes. I think Lewis mentioned, we have, I think, $23 million drawn under our credit facility. We'll probably pay that down this year.

$27 million, Dan.

$27 million. And what was the first question?

The first question was about the steakhouse.

Yes, David, what you might have missed is that February is set to be our best month ever for this property, following December when we had $8.2 million. We expect February's published gaming revenue to exceed $9 million, which we are confident about. So, it was a very successful month. I arrived on Saturday afternoon, walked through the casino, and had dinner with our General Manager, Jeff, at the steakhouse. The first thing I told him was that there is a completely different energy in the building now, which is great to see. The casino floor is very dynamic, especially on weekends.

Yes, that was the last part we needed to address. It's difficult to determine if we can claim that we had the best month in the property's history solely because the steakhouse was open that month. While it certainly contributed, we likely would have achieved our best month regardless.

Yes, it is an important addition for a strong high-end plus market that is needed.

And Jeff's right here. You did how many people through the building today?

Through the building, 2,000 a day.

Yes, we get 2,000 people a day at the front door, and we're doing 120 covers a night?

Yes.

And it's still a relatively small portion of the people coming in the front door eat in the steakhouse. But the people who do are the more important customers.

Yes.

And if I recall, February, you have the Ice Festival of Cripple Creek is a pretty important month. How's that going?

It was a very good week for us in Cripple Creek with that Ice fest.

Yes.

Okay, great. Thank you so much, and congrats.

Hey, congrats on your new job too, David.

Thank you both.

Well, I'm just going to say we're in the process of tripling the size of the company, and we're making progress every quarter. So, we'll talk to you next quarter. So, thank you very much, everybody. Thanks for your support.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. And thank you for your participation.