Full House Resorts Inc Q3 FY2024 Earnings Call

Good afternoon and welcome to the Full House Resorts Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Lewis Fanger, Chief Financial Officer of Full House Resorts. Please go ahead, sir.

Thank you, 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'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 we also have a presentation today on the website. If you go to investors.fullhouseresorts.com, click on the lower banner, click company info and then presentations, and it will take you to that presentation. Maybe the most fun piece of that is on Page 4. There are two video links for an ad that we're about to start running this week for Chamonix, as well as a drone fly-through of the property. And then 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, you ready to go, Dan?

Yes, I'm ready. Okay. All right, everybody. There's kind of no way around it. It was not a good quarter, and I'm not happy about it. Colorado in particular was disappointing. Just reminding everybody it was partly open in the first quarter. It opened just before New Year's and with only part of the hotel. And then it was more open in the second quarter, but in the third quarter it was mostly open. I mean, most of the spa opened early in the quarter. The only thing left from a customer perspective today, is some fancy lights and curbing in the parking lots. Everything else that a customer would see is open. Now, the expenses are up, not surprisingly. Back in 2023, for example, the total expenses in the four quarters were $4.3 million, $4.2 million, $4.8 million, and $5.0 million. That was really just Bronco Billy's with a little bit of Chamonix right at the end. And then as we opened the new property, it jumped in the first quarter to $9.1 million, then $10.3 million into Q2 and a $13.7 million in Q3. The bad news is, while revenues have been growing, they've been growing only as fast as the expenses. So the revenues back 2023, Q1 was $3.7 million, $4.1 million, $4.7 million, $4.5 million. And we weren't making a lot of money in 2023 because we had a lot of construction disruption. So it was understandable. In 2024, the revenue has been $8.7 million, $10.8 million and $13.0 million, which is good growth, but only as fast as the expenses have grown. This results in little income and in fact, a small loss in the quarter. The good news is that when you look at the magnitude of the market, and particularly results from comparable casinos in Black Hawk, our revenues have considerable room to grow, while the growth of our daily operating expenses is largely behind us. I mean, there's some things like gaming taxes that grow with revenues, but things like payroll should not grow going forward, and our revenues should be able to grow. That should bode well for profits in 2025. And we also made some marketing expenses that didn't help the quarter. When we opened, we had an active sort of traditional advertising program around that opening. There was kind of a cute ad that was filmed amid construction. Then, we essentially went dark in the spring and summer, as we focused on getting the rest of the building open and building occupancy. Occupancy has built significantly, and in the third quarter it reached over 80% in September when it was back at 50% in the spring. And when it was at 50%, we were like okay, let's get the occupancy up and let's be targeted about it. Part of what we did was we started offering a program where we purchased mailing lists and provided free rooms on midweek days for rooms that would otherwise be sitting empty. That did help build the occupancy. Well, it turns out that not all mailing lists are created equal. So there's one mailing list that we bought that was reasonably successful. It was a well-defined list, 15,000 people on it. Recognize the way this happens, you pay somebody to mail the people on their list, they don't give you the names generally. Then you find out who responds to that, and then you find out the names. Well, somebody had a well-defined list, 15,000 people with a propensity to visit Colorado casinos, cost us about $1 per person to mail it. We offered a free night midweek stay, which is when we would generally have had empty rooms. That particular mailing list, about 3% took us up on the offer. So 462 people out of 15,000, and that's not unusual. 3% took us up on the offer. So since you are mailing out 30 offers at $1 each to get one person, you have a customer acquisition cost of like $30. Of those 462 people, 380 actually played. So you have an even higher customer acquisition cost if you get down to people who are actually playing. Now, there may be some people— we make them have a card to get the free room. Some people played without having their card, so maybe the actual play was a little better than that. But in general, I think people do use their cards. On that mailing list, the average win per person was $180. Now, that more than covers the customer acquisition costs, the gaming taxes, and the cost to clean a room that would otherwise sit empty. So it's not hugely profitable. After all, it's only 300 or 400 names. But it added 380 people to our mailing list who we didn't otherwise know. Now we don't have the customer acquisition cost to go back to it. That's frankly how one builds a business. Now, we had another larger mailing list that we bought that was less successful. It had 176,000 people on it. It was kind of a black box. Somebody said, you know, these are people who have a proclivity to gamble, but they wouldn't tell us how they knew that. You guys have all experienced this where you subscribe to a newspaper or something, and then it has a little questionnaire of what things interest you. People click casinos. Therefore, somebody comes to us and says, hi, here's a list of people who are interested in casinos. Well, we don't know exactly what it is. They didn't charge us much for the mailing list, and they wouldn't tell us the criteria. Honestly, we should have tested it with a small subgroup, but we didn't. We were eager to try to get the hotel filled, so we sent out 176,000 offers at about a dollar a mailing. So $176,000, again offering a free midweek stay. We only got 0.8% took us up on the offer. So it cost us over $100 to get a person to come to our casino. Customer acquisition cost, frankly, of those, only half gambled. So the customer acquisition cost was like $200. Those that gambled, only lost $48, which barely pays for cleaning the room. So that particular mailing list was a bust and accounted for a few hundred thousand dollars. It was 1,382 room nights, which is over several weeks. It wasn't all in one month. In some cases, they may have displaced more profitable customers. So that particular promotion was a bust. Going forward, we will continue to do some mailing lists, but we're going to be a lot more careful about how we do it. We're also resuming an advertising program. Lewis mentioned there's an ad starting today. We did not want to compete with the high ad rates of the political season, so we started today. We also had a very successful grand opening weekend this past weekend for our VIP players with Jay Leno and all sorts of things going on. It went very well. You can see the ad. We also have a link to a drone video. This is something we did in American Place where you hire somebody to fly a drone through the property. It's too long a video to put on television, but you can put it on the website and it's interesting to watch, and it goes viral. It's not expensive to make, and yet we can get views. We had tens of thousands of views at American Place, so hopefully we get something here. We also just hired a new VP of advertising for the entire company, somebody who's got over 20 years of experience in the industry, and she starts next week. She will help us ensure we're targeting the advertising correctly and not wasting dollars. We're also seeking to hire more casino hosts and more sales and marketing people. A casino host is almost like a stockbroker. They bring with them customers, and they know how to expand that list. Sales and marketing people reach out to book meetings and conventions, which is very important to filling midweek periods profitably. We have had some conventions, like the Veterans Foreign Wars from Colorado. We had the Funeral Home Directors Convention, which, believe it or not, when they're not conducting funerals, they like to gamble. We have also had a couple of dart championships, which have done okay. We will have much more of that time. We have great meeting room space. Honestly, it's hard to get people to book meetings and conventions before you're open because nobody's quite sure if you're really going to be as nice as you say you will be. Over time, we will book those, and that's part of building the business. On the stuff Lewis posts, we're adding about 5,000 people a month to our mailing list. That's important over the long term. Like most casino companies, we group our casinos into regions. It makes it a little more complicated for our competition to figure out what we're doing. This quarter, however, for transparency, I want to provide some additional numbers so that you all understand. We don't intend to do this every quarter, but I'll do it this quarter. In Colorado, for example, our EBITDA for the quarter was a loss of $0.7 million versus a profit of $0.1 million last year, which reflects everything I've just explained. Now in that segment, we also have the Grand Lodge Casino within the Hyatt and Incline Village at Lake Tahoe. Larry Ellison purchased that hotel a couple of years ago, and it is still run by Hyatt with us leasing the casino and running it. Ellison has indicated he intends to refurbish the hotel extensively. The first phase is to demolish most of the property's banquet and meeting room space, which is in a separate building from where we are down along the beach. So as a result, the hotel canceled and put off many of its meeting and group business this summer and did a lot less than it normally did. Ironically, the owners pushed off their construction plans. They either redesigned them or didn’t get the permits, but it was too late to recoup that segment of the business. The hotel itself had weaker occupancy than normal over the summer, and some of those groups are people who tend to gamble. Principally due to that, our EBITDA was $1.8 million versus $2.2 million in the third quarter at that property. It's now having a very nice October, but that was what went on in the quarter. The other major segment we have is the Silver Slipper, Rising Star, and American Place. The Silver Slipper did not have a great quarter largely due to an active hurricane season. This time of year, I feel like you watch those storms come across the Gulf of Mexico, and they always seem to curve and it feels like God's bowling and I'm the tenpin every time. Fortunately, we weren't actually hit by a hurricane, but several storms went to each side of us. When that happens, it affects our customers' ability and willingness to come to us. So the EBITDA in the quarter was $2.6 million versus $3.6 million. We were off $1 million there. This property has been capably run for many years since it opened by John Farucci, who's an industry veteran. He's retiring. Just this week, we relocated Angelika Truebner-Webb if I say it right, she’s from East Germany originally, but we transferred her from Rising Star to Silver Slipper. She started her career with us at the Silver Slipper in the finance area. We promoted her several years ago when we realized how smart she was to become the Finance Director of Rising Star. Then she became the GM at Rising Star. Frankly, she did a very good job at that geographically challenging property. She brings a fresh set of eyes to the Silver Slipper. We do a lot of things right there, both on revenues and expenses. I'm confident that a fresh set of eyes will find ways to improve some things. Now replacing her at Rising Star, we hired Jeff Mitchy from a major tribal casino in Arizona. Jeff had worked with Lewis and me many years ago when he was the Assistant General Manager at Belterra, which is 10 miles away from Rising Star. In fact, before he worked at Belterra, he worked at Rising Star. For several years, he was the Finance Director and Senior Operations person at the large Hard Rock Casino in downtown Cincinnati. He knows the area very well. He's actually been commuting for a few years from Cincinnati where his family stayed to Tucson. We were happy to get him back with us and bring him back to the Tri-State area. He's operated a number of casinos in this area, and he's operated casinos much bigger than Rising Star, and he knows how to open a new casino, which could be important if we get the approval to move Rising Star to Fort Wayne. Let me digress for a moment. Rising Star was the first casino in the Tri-State area when it opened about 30 years ago, and it was very successful. Over the interim, however, newer casinos have opened in every direction from it, often closer to where the customers live. Today, it is the oldest and most geographically challenged casino in Indiana. It makes money, but not a lot, about $4 million or $5 million a year. In the recent past, the Indiana legislature has allowed two other first-generation casinos to relocate from where they originally had riverboats to better locations. One became the Hard Rock casino on Interstate 84 in Gary, and it's now the number one casino in the state. It went from being one of the lowest revenue ones to the largest. The other is the Churchill Downs casino that opened a few months ago in Terre Haute, and it's also been very successful. So the state has benefited significantly in terms of tax revenues and employment from the relocation of those casinos. We have recently proposed and it's been in the press to relocate our casino in Rising Sun to a suburb of Fort Wayne, Indiana, called New Haven. Fort Wayne has about 650,000 people. It's the second largest city in the state and currently has no nearby casino. We intend to do this in a way that is generous to Rising Sun and employees and the employees in Rising Sun. For example, we will make Rising Sun hold more than the taxes we pay to them. We are the largest taxpayer in the community. A casino in Fort Wayne would do enough better that we can continue to pay tax revenues to Rising Sun and be a big source of tax revenues in New Haven. We recently opened a website on the proposal called newewhaven.com. Recognize that this takes legislative approval and state legislatures can be notoriously unpredictable. There's absolutely no certainty we get this. It may take more than one legislative session to get it, sometimes two or three if it ever does get approved. But if you don't try, you don't get. We just had the grand opening in Chamonix. We began working on that project in 2017. It took us seven years. It's taken us a similar period with American Place. These things take a long time to get approved, get designed, and get them built. It's important to be realistic about it. Otherwise, you guys are going to think we’re crazy. We're working to get Chamonix profitable; it just opened. We’re trying to figure out how to finance and build the permanent American Place. Oh my God, you have another casino. The other casino, if it happens, is going to follow the opening of the permanent American Place. So it's a long way down the road. From a bondholder perspective, this strategy probably results in a series of refinancings. For example, the existing bonds mature in 2028. We would be looking to figure out how to refinance those in the not-too-distant future anyway. To finance the permanent American Place, we hope to call and replace that bond issue perhaps in mid-2025 when we hope to have demonstrated the success of Chamonix. We realized we have to prove that success before we can really go to the bond market. If we get permission to relocate Rising Star, it probably results in calling that subsequent bond issue, maybe in 2028 or 2029 to arrange financing for the new casino in Fort Wayne because bondholders are pretty smart. They usually have confidence in it which forces you to pay them a call premium every few years. That’s just part of that business, and that’s fine. Hopefully, we are on the path to being an improving credit throughout the period with each bond refinancing done on better terms. That’s exactly what I did with Mirage Resorts in the 1990s and what we did with Pinnacle Entertainment in the first 10 years of this century. Let me segue to American Place, which is the bright spot in the quarter. If you're going to have one place up and the rest of them not so strong, it's good to have it be the most important casino we have. Despite being in a temporary structure, it made $7.7 million of EBIT, which is a 13.3% increase over the third quarter of last year. It had a 17.6% increase in revenues. It's done that pretty steadily all year. Q3 was its best quarter to date. It continues to build a mailing list and improve margins month after month. There was another very positive development regarding American Place that has nothing to do with us, actually. We get asked all the time how we can be confident that the permanent American Place will do much better than the temporary one. Aren't we investing in the ballpark of $300 million to address the same people? We answered, look, the permanent will be significantly nicer, have better curb appeal, and those same people will gamble more, or more people will come. There's a very analogous situation in Rockford, Illinois, where the Seminal Indian Tribe about three years ago opened a temporary casino pretty much like ours. It was a little smaller than ours, but it was in some ways better; its restaurants are probably better. Our casino floor is probably better. They just opened their permanent casino at the end of August, and in September, their revenues more than doubled. I understand they've continued to be strong in October. Most of that seems to be growth in that market. They did penalize Grand Victoria a little bit; I think they were up $7 million and Grand Victoria was down like $2 million. Grand Victoria would be the closest casino to Rockford. It had no impact on us. We're a couple of hours away. It had no impact that we could tell on Rivers. Grand Vic is a very old riverboat, and there are some people who live in between Elgin, Illinois, and Rockford. Those people came out of their driveways, and some of them turned right instead of left. The permanent casino significantly grew the revenues for the Hard Rock, and Rockford, by comparison, is a metropolitan area with about 450,000 people. It is kind of its own Midwestern place, two-thirds the size of Fort Wayne, just to put it in perspective, and they are doing $10 million or $11 million a month in revenues at this point in a facility that is comparable to what we intend to build as our permanent, both in terms of cost and quality. They did a good job, and we’re rooting for them because we think they’re a good template for us. I will also note that we are actually doing pretty well in October and November with some swings in win percentage and there's some seasonality. I'm hoping to have a fourth quarter that at least looks better than the third quarter. I think we're set up to have a pretty good 2025. I'd also note there were some other noises in the quarter. We sold Fallon in a two-stage transaction. We're now between the stages. We sold the real estate for $7 million. When they get licensed, we'll sell them the operating company for $2 million. Fallon is very small; it didn't fit in the portfolio. We hardly ever got there. We got a good price for it, and there was a couple of million dollar gain in the quarter. The prior year's results included the accelerated recognition of deferred revenue from market access fees. Back when sports gaming was new and a lot of people were trying to get into it before it concentrated down to a few major players, everybody was trying to get in. We didn't go and try to develop it ourselves, which would have been very expensive and difficult. So we licensed other people to operate under our licenses, but they had to pay a market access fee upfront. When Wynn decided to pull the plug on that business and exit, it accelerated the recognition of that deferred revenue. It's a noncash item at that point because we got the cash earlier, but that was a factor of almost $6 million in last year's number. The way GAAP works, we can't say that was extraordinary.

Dan, did I miss anything? I went through a lot of stuff. Good, Dan. Let me give you a quick peek into October for what it’s worth. So Dan hinted at American Place. We actually did have a pretty decent month at American Place. Slot volumes were up about 13% versus last year’s October. Table game volumes were up 46%. That's the really good news there. Unfortunately, hold was off pretty meaningfully. Slot hold was up about 50 basis points, table hold of 450 basis points from the prior year and 230 basis points from what we would have normally expected. So when you put—

But we very seldom show you a monthly number. By the time you get to the end of the quarter—

No, it's true.

They're usually standardized.

They do. My way point and all that, Dan, was going to be we're still going to be up pretty decently over the prior year with gaming revenue despite all that. So if you—it's a month when you see these monthly revenue numbers come out in a week or so, just know that, that number, while higher than the prior year, should have been up even more.

Rising Star revenues and EBITDA are both up pretty meaningfully versus last year. As Dan mentioned, we have a new General Manager that will start there. I forgot to mention, we have a new general manager. There's another thing that happened in September, I forgot to mention. When the news came out that we were going to try to move to Fort Wayne, it unnerved both our employees and our customers. We had to go to our employees and say, hey, come down. This is not at all certain. Even if it happens, it's 5 years away. So don't quit on us here. By the way, if we do get to move and we end up closing Rising Star and moving, those employees get first crack at the new place. If they don't go, we will have stay bonuses for them and kind of a severance thing for staying with us until the end. They will benefit when they see the size of those stay bonuses; a lot of those employees are going to be rooting for us to move.

But on the customer side, we got phone calls from people saying, hey, I have a reservation this weekend. Should I be worried? Are you closing? We're like, no, we're not closing. If I gamble there, what am I going to do with my points? So we've had to go back and calm people down. But September took an immediate hit when that hit the newspaper and it's kind of come back. I'm sorry. No, no, no, that's perfect, Dan. So a nice rebound there in October versus the prior year and certainly versus the September that just ended and the new GM that will start there in a week. Silver Slipper admissions are up about 2% or 3%, spend per guest is down a little bit. As Dan mentioned, we also have a brand-new GM, Angie, that's moving down there from Rising Star. Over at Grand Lodge, both slots and tables are up pretty meaningfully over the prior year period. So October is actually shaking out to be pretty decent. The only other thing I had there, Dan, was that Stockman sale, if you assume an EBITDA figure there of about $800,000, that's 11.5 times EBITDA multiple, and we're quite pleased with that sale.

The guys buying it are—

Smart guys, good guys.

They are smart guys who operate small casinos like that. It's in their wheelhouse, and it's not in our wheelhouse. It's a logical transaction.

So moving on to questions.

Sure.

Let's open up for Q&A.

The first question we have comes from David Bain of B. Riley Securities. Please go ahead.

Thank you. Thanks, Dan and Lewis for all the info. It seems like we're at trough margins for Chamonix and revenue grows basically on a relatively fixed cost base from here through the initiatives you spoke to. You seem to infer, I think, Dan, in the beginning that 2025 is really when we see more of a meaningful margin ramp. I'm just wondering if you guys could kind of big picture, how you feel comfortable with that progression? Is it like low single digits in 1Q or single digits to double in 2Q? Just any thoughts around how you would envision that and to help us sort of think about things as we enter the new year?

Okay, well, first off, I think we've built the nicest casino in the state. Now I will tell you, Monarch is also very nice. Both Denver and Colorado Springs are still gambling a lot less per capita than places like the state of Washington, where the casinos are also some distance away on Indian reservations up in the mountains or even California, where it's travel gaming. So I think there's a lot more growth in the market. I often cite Monarch as our competition, which it really is at the high end. But I think we will both do well going forward. If you look at their numbers, they have 500 rooms, and they didn't get there overnight. It took them a while. They don't break out Reno, but guys like you back into it and give me an estimate, and I can get a pretty good estimate. They seem to be earning upwards of at least $100 million, maybe $100 million of EBIT, $120 million of EBITDA on about $300 million of revenue, which is about the margin you'd expect in a regional market. They're about a 30% market share in Black Hawk. I believe Ameristar is pretty close to those numbers. They're probably number two now, but they're not far behind that. They also have about 500 hotel rooms. We only have 300 hotel rooms. We don't expect to get to those numbers. But can we get to half those numbers? We should be able to over time. Recognize the people who live on the south side of Denver, like Castle Rock and Centennial and Parker, they're about equal distance from us to Black Hawk. About 20% of our new sign-ups are from the Denver area. Colorado Springs is closer to us than Black Hawk. That will always be our number one market. Pueblo, which is a city of 200,000 people, is a pretty important market for us. When you look at the revenue numbers I gave you, we're nowhere close to what we think we can be. We have to grow it. How fast can we grow it? I don't know, but we're about to run this advertising campaign. We just had a grand opening. I'm trying to hire more hosts. I would like to get there tomorrow, but that won't happen. It might take us two or three years. You can kind of play with a graph. There's some seasonality that you have to deal with. Absent seasonality, we should be able to show steady revenue growth for the next two or three years that exceeds our expense growth, resulting in higher margins so that at maturity, maybe we're making $50 million a year on $150 million of revenue, in other words, being half of what Monarch is. To be clear, I think there’s enough—this is enough of an underserved market that while we're aiming for Monarch, I don't actually think we affect them negatively. They made a comment on their call that they think they're in the fifth or sixth inning of figuring out who the big casino customers are in Denver because a lot of them go to Las Vegas, for example. If they're in the fifth or sixth inning, we're in the first inning. We're actually in the top half of the first.

We're also warming up. I'll tell you this too, Dave. Although traditionally, winter is seasonally slower for that market, historically, there haven’t been any rooms in that town either. If you look at what happened in Black Hawk with room product, a lot of that seasonality starts to go away. We have half of the room product now in town. I think that will actually help offset a lot of the seasonality that you usually see. On top of that, there's a lot going on there over this coming winter. There's something called Ice Castles that brings thousands of people on their own to town every year. It did it for the first time last winter as we were getting ready to open. It's back for its second year this year. We've got some marketing plans behind the scenes for events that we're going to try to drive as well. Icefest is one of the biggest weeks in that market every year where they bring tens of thousands of people.

There are several natural marketing events in the city beyond what we're doing that will help bring people over to see us for the first time. I think there are a lot of reasons to still be quite excited. That ramp, as Dan kind of alluded to in his comments, is always difficult to get. It's easy to figure out the long-term run rate; it's always a little more difficult to figure out that ramp to it. I went into a lot of detail on those direct mail programs because I wanted you to appreciate the sort of trial and error that happens in any new properties. There are things we tried at American Place when it first opened that it was like, oh, that didn't work, don't try that again. You gradually figure out what does work, and you go back; like the one mailing list that did work, we'll probably go back and mail to those people again. Now we know if we're going to buy a large mailing list and it’s not clear, somebody said, well, these have a propensity to gamble, and they are not willing to tell us what it is, let's try it out with 1,000 people, not 175,000 people, and find out if it works. Even with the advertising, part of the reason we're hiring this new VP of Advertising is it's important; it's a pretty complex algorithm. Do you want to be on streaming television? Do you want to be on Facebook? Do you want to be on network television in Colorado Springs, Denver, Pueblo? What program, what time of day, and so on. This is something that she's been doing for 20 years; she's very good at it, and we're happy to have her. She'll bring a lot of benefits to us in Colorado, but she'll also help us in all the other markets.

Right. No, that's helpful. And back on the marketing thing, Dan, if we could just follow-up on that. It seems like it's about showing folks the amenities because I assume like in Colorado Springs through press and other outlets, they must know the properties there. But it may be helpful to give a sense of repeat business from new carded players and maybe if there's been any change in frequency from legacy carded ones, if you have that off hand?

It all depends on how you—if you look at that big list of—on the slides that Lewis posted, it shows about 140,000 people in the mailing list. But that's a mailing list that has been accumulated since Bronco Billy's opened, and some of those people are dead. We cut it down into people we've seen in the last 36 months, people we've seen in the last year, and how often we're seeing them. Now that we have a hotel, of course, we're seeing people more. They tend to stay overnight; they tend to gamble more. To get to where we need to be, we need to find more new people and get the new people to come. Even the grand opening weekend was part of that. To some extent, we held the party for really good players in Bronco Billy's, but a lot of the people were new who didn’t know us before. We want them to go home and tell their neighbors; usually, a gambler hangs with gamblers and go back and say, hey, we went up there; they had a surprise entertainer. Guess what? It was Jay Leno who was terrific. He was expensive, but comedians are a lot cheaper than a big band, and he’s one of the best. He’s that sort of name that people will talk about. We have a venue where we can seat 600 people for a show like that and escalate away from the casino. Monarch doesn't, and Ameristar, they have a ballroom, but I don’t think they could do it as well as we do. It's a little bit of a competitive edge. We purposely did that. Nobody in Cripple Creek could do anything close to that. We were able to entertain 600 people this weekend with entertainment and great meals. We had horse drawn carriages around Cripple Creek. We had tours of the District Museum, tours of the Bordello Museum. You could visit a goat farm and milk a goat. That was so popular we had to get an extra bus for it. We had sound bowls in the spa and all this stuff. People asked me, how did it go? I said, there were a lot of things that could go wrong operationally and none of them did. We pulled that off. We actually had, if not the strongest weekend, it was very close. It was probably the strongest weekend since New Year’s Eve when we opened. We may have topped that. I haven't gone back and looked. Considering the cost of Jay Leno and the cost of all that other stuff, did we make money? Probably not. You don’t usually on a grand opening weekend, but you do it to get everyone's attention and get them to come back next weekend and the weekend after when you don’t have to pay for Jay Leno and so on.

If you were to look at the early reviews versus what you would see today, it's a massive improvement. The appreciation for the product that we built is absolutely there. The repeat visitation is absolutely there. If you look at the customers coming in the door today versus a year ago, all the right things are happening behind the scenes. When we sit around the room and think about where that property can be in years two, three, four, nothing's changed. The excitement we have for that building is as strong as it ever was, largely because of the way customers have reacted to it.

The only thing that's changed: the population of Denver and Colorado Springs keeps growing.

That's very true.

This wasn’t a grand opening like you might have with a big casino in Las Vegas with fireworks and all this. We didn’t publicize this. It was only for 300 invited guests and their spouses. We’re not a very big place. We only have 300 hotel rooms. It was really just for the top echelon players. That’s intentional; you could not buy a ticket to see Jay Leno. If you’re a customer of, say, the Golden Nugget, you’re like, if we sold tickets, Golden Nugget would buy tickets and give it to their customers. We’re not doing that. You want to see Jay Leno, you have to be our customer. We will continue to do stuff like that.

Clearly, your confidence in Chamonix remains unchanged. I just wanted to lastly congratulate you on the stocks sale. It seems that the valuation is great for shareholders and good for the buyer as well. Thank you.

You mean on the sale of stocks?

I was just congratulating you on a good transaction.

Just so you know, I had a bunch of options I got when I took the job, just under a million options, and they were going to expire November 28th. Therefore, I had to exercise them. That incurs a whole big tax bill, and the exercise prices, if that's what you're talking about.

You said, stockman.

I'll let somebody else.

My intent is to hold the shares. I had a 10b5 program. It sold some shares to pay my taxes, and the remaining shares I intend to hold. I didn't actually take any money out of the company. I just paid my taxes. It ends up being the filing shows me selling shares.

But we do thank you on that stock.

We have not lost confidence in the company. I just had to pay a big tax bill.

Good afternoon, everyone. Just one for me. When we think about the legacy portfolio, I guess outside of Illinois and Colorado, without getting into guidance, can you just give us a sense or the general outlook of what growth looks like next year? How should we think about your expense growth into 2025 as well? Thank you.

The Silver Slipper, in my opinion, should be earning in the high-teens, if not 20. It's not there now; it's somewhere $13 million, $14 million a year, maybe $15 million. I'm hoping that Angie will get us back there. She's very good at coming up with marketing programs and controlling costs; she did that, and I think she doubled the results in Rising Sun after she became GM. I have high hopes on that. If you look at normal margins in a regional casino, that's what it should be doing. We did have some storms this year, but I also think a fresh set of eyes is going to help us. At Tahoe, we've always made about $3 million to $4 million a year. One year we got a little above 4. If Ellison, and it’s always been kind of a short-term lease that gets renewed. Now we just redid it as a 10-year lease they can cancel on short notice. It's still a short term lease, but we've been running it now for at least 10 years. The Pritzkers and Larry Ellison don’t want to go get a gaming license. We have good relationships with them. We pay them pretty significant rent; it's a way for them to have a casino in their place and benefit from the economics without needing a casino license. Hopefully we’re there for a long time, but there's no certainty we will be. At Rising Star, frankly, we struggle to keep it profitable. I think we can keep doing that. Jeff is also a very good manager, and with him, we can at least tread water. It's hard to get upside when you have better casinos every direction. You have to do quirky things. Each year we put up all these Christmas decorations, give the keys to Santa Claus and call it the Christmas casino for two months. We actually make money in the fourth quarter when historically we used to lose money. The big upside there is Fort Wayne. If we can move it to Fort Wayne, you could have a casino that makes $30 million or $40 million a year, or even better, instead of $5 million. That's a long. We’re looking at selling it. That could be the next big growth opportunity for the company down the road. If you were to get into a situation where you did get the permit to go, but you couldn't arrange the financing, you could always sell the subsidiary and still generate shareholder value. I think the timing would be such that we could probably finance it pretty easily after American Place opens. Once we like, even today, we've done all the construction. There is only $7 million in the restricted cash account for Chamonix, and we expect $5 million of that to finish all the construction spending, and then we’re done. Now it's time to harvest some cash flow. We want to build up cash flow in the next few quarters and then go into the financing for the permanent America Place. The permanent American Place has been on hold waiting for a lawsuit from the Potawatomi Tribe against the Gaming Commission. Because of that lawsuit, we were able to get an extension of the time we can operate the temporary. If that lawsuit drags out, we could probably get another extension. We kind of watch our liquidity pretty carefully. This is the tight spot. We've just finished all the construction, but our liquidity is good. We’re sitting okay. We got an interest payment in February. I think we have the money today for it. We’re going to generate cash flow between now and February and next interest payment in August should be easy as Chamonix comes online.

How did I go down this rabbit hole? Other properties, no, no. American Place, EBITDA will continue to gain in 2025. The stretch would be to have EBITDA start with a four. I think if we're in the mid to upper 30s, we'll be pretty pleased. I'm trying to think of what one we didn't have in there.

Legacy Properties. Basically, we're a three-legged stool. We got Silver Slipper, Colorado, and American Place. Rising Sun is a growth opportunity outside that. Tahoe, our return on investment there is very good. We'll continue to run it as long as they allow us to run it, and we’ll run it as best we can. It's essentially a three-legged stool with a couple little extras.

In Colorado, if we're doing something between $1 million and $2 million a month in the earlier part of the year. I think we'd be pretty happy.

I pay a lot of attention to Monarch because they’re a successful company and a competitor of ours. They only have two places, and they focus on the two places; they do a really good job. If we could do a really good job at our three, I'd be very happy. We don’t have to diversify on your behalf; you can diversify on your own. Our focus is on doing a really good job on the three schools we have and going from there.

I appreciate it. Thank you very much.

Thank you.

Thank you. The next question we have comes from Ryan Sigdahl of Craig-Hallum Capital Group. Please go ahead.

Hey, good afternoon. Dan Lewis. Not to nitpick too much because American Place is performing really strongly here, but margins appear to be down year-over-year. Revenue grew faster than EBITDA. Is there anything to call out there? How should we think about the cost structure within that property specifically going forward?

I hadn't actually focused on the margins, but my guess is it would be because we opened the steakhouse, which is actually a big revenue driver but, of course, has employees and food beverage revenue, which is less profitable.

Our cable business has been growing pretty robustly.

We do pay attention to margins to some extent, but if you run the company based on margins, like I could improve the margins of Rising Sun if I just closed the hotel and golf course and the ferry boat, and we'd have higher margins and less income. You try to maximize income. The main thing that changed at American Place over the past year is opening the high-end restaurant, which we did back in February.

We also had a, if you're looking at, if you're comparing it to the third quarter of last year, we had a $600,000 true-up that benefited us in last year's third quarter. So year-over-year, we did not have that in this year's third quarter. True-up was a reversal of something; we won't go into it, but yes, it was a true-up.

Good. The one quick follow up on Chamonix, still varying degrees of success on the mailing list and marketing strategy there. Why not lean more into the convention business and really try to drive people in to see the property through that?

The convention business should be pretty important, and we were a little slower on this than we should be. Normally you would hire a pretty big sales and marketing force before you even open. We had one person. We've recently added two more. We should have five. The Broadmoor has 900 rooms. They have about 18 people in sales and marketing. The Broadmoor is the biggest five-star hotel outside of Las Vegas. They run about 85% occupancy, and about 75% of that occupancy is group meeting and convention business. We look at that and say, okay, we're just getting going. Broadmoor, by the way, has been around for 100 years, so they've had time to build that book. We're just starting to build up that sales force. We've added, as I mentioned, two other people in the last few months, and frankly, I’d like to hire two more, but it takes time. That’s the bread and butter in Las Vegas. Not the bread and butter, as Las Vegas could fill every weekend with people driving over from Los Angeles and then they fill the midweek with meetings and conventions. It’s the same formula as the Strip.

Hi, Chad. Good afternoon, Daniel, Lewis. Thanks for taking my question. First, I just wanted to go back to Silver Slipper on one of your competitors' earnings calls, they talked about the extraordinary growth at Treasure Chest. I believe historically, there were some markets between Silver Slipper and Treasure Chest that were battleground ZIP codes. Have you seen any impact since that property went from barge to land-based? Is that something we should expect in the next couple of quarters? Thanks.

Yes. I looked at that. Treasure Chest is at the foot of the causeway that goes to Jefferson Parish from the North Shore Lake Pontchartrain. It’s a pretty long drive. Our customers tend to be a little more from the eastern part of the North Shore of Lake Pontchartrain. They are doing much better in the land-based than they did in the boat; the boat was a 30-year-old dump. The reason they were incentivized to do that is a little hidden. You have to dig a little to find it—because it's overseen by the Racing Commission rather than the Gaming Commission. Churchill was able to put slot machines in off-track betting parlors and many of those are in Jefferson Parish near where Treasure Chest is. About a year and a half ago, Boomtown and the West Bank, which was part of Pinnacle that was not used to run, both showed big revenue declines. If you looked at the numbers out of the Gaming Commission, you couldn't figure out what was going on. Why are they down? So much so that I asked one of our people to go down there and sniff around to find out what it was. He called back and said Churchill snuck. I forget how many 50 slot machines into each of 10 off-track betting probably the historical racing machines, which are a Trojan horse for slot machines. They were doing very well. Churchill, I think, disguises it because they don't want people to understand what they're doing competitively. They keep trying to figure out a way to do similar in Slidell, and the courts have turned them down. So, they are doing much better in the land-based than they did in the boat; the boat was a 30-year-old dump. I think they have a nicer land-based casino where you would want to go instead of an OTB parlor. But it’s far enough away from us that it doesn’t seem to have any impact on us. I will tell you, the Hollywood casino near us has a new GM who used to work for us, a good guy, and he keeps coming out with aggressive promotions. I think that's had a bigger impact on us; I don't know if they've been successful.

Thank you very much, Dan. Lewis, quick last one. As we think about the free cash flow build in the next couple of years, 2025, will there be much higher maintenance CapEx or any project CapEx for the permanent in Waukegan? Or will that all be '26 and '27 based on where things currently stand with the lawsuit?

Maintenance CapEx is traditionally closer to $3 million, $4 million a year. It’s not a giant number. With the new properties, maybe that number edges up a little, but it's still going to be a single-digit number, not $10 million or $15 million. They are brand new. Most of what you're spending would be more on slot machines versus anything else. For the permanent casino, ask me again in a quarter. We’ve got that.

It depends on the timing. If everything came together and you had the financing in June, you'd start spending money in July. If it’s September, you’d start spending money in October. How much money we spend in calendar 2025 will depend on when we've been able to get Chamonix up and the bond market is right and everything comes together to get the funding for the permanent. We watch this all the time. We have big investments in this company. It's like managing liquidity, looking at spending, and looking at cash flow. Sometimes the answer doesn’t fit calendar years. We won't start spending significant money on the permanent until we have the funding to complete it. And we'll get that funding when the markets are right and we can show good numbers to address the market. We have a lot of flexibility on when we start, and the same is true of Fort Wayne.

The other piece of that is maybe cash taxes. With these two new properties open, we're not expecting to pay cash taxes in 2024. In fact, our NOL balance actually climbed with our 2023 financials being filed. We went from about $13 million or $14 million to $27.5 million in NOLs. We'll continue to benefit from that with these two large new assets and some pretty big D&A taxes.

A lot of people get focused on GAAP and forget that for tax purposes, when you build a new building, you get accelerated depreciation on much of the investment. We generate some pretty nice tax losses on these new properties because a lot of the depreciation gets front-loaded.

Perfect. Thank you both. Appreciate it.

Thank you, everybody. I apologize for the quarter; we will do better.

Thank you. Ladies and gentlemen, we have reached the end of our question-and-answer session. I will now hand the call back to Daniel Lee for closing remarks.

I think you said it, yes.

Thank you, everybody.

Thank you. Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.