Executives of Full House Resorts were very upbeat during their second-quarter-earnings call, disclosing a $5.5 million profit and $14.9 million in cash flow. Although the company reported a 227 percent increase in revenue (to $47.4 million), it was an apples-to-oranges comparison, according to CEO Dan Lee, since the casino industry was closed for roughly half of the second quarter of 2020 due to the pandemic.
“This was another strong quarter,” reported Chief Financial Officer Lewis Fanger, “our fourth straight quarter of strong results.”
Only the company’s Nevada segment was described as slow, but management believed it was making a second-quarter comeback. Online, Full House has deployed five sports-betting skins and hopes to be “on the home stretch” on two more. The company has $283 million in cash on hand, much of which is pledged to the Chamonix project in Cripple Creek, Colorado.
The latter is a spinoff from Full House’s Bronco Billy Casino-Hotel and its cost seesaws between $180 million and $200 million. “It’s a topsy-turvy world to build in,” said Lee, noting a rise, then plunge, in the cost of lumber, plus the impact of tariffs on China-made goods. In addition, “the bids have come in a little higher than we thought.”
Even so, Full House has a 234-foot-tall crane in place and is already thinking of augmenting the Chamonix hotel inventory. Reasoned Lee, “The easiest way to add the extra wing is to do it right now.” That will, however, require the prior approval of the local historical-preservation commission and the city council, although Lee expressed confidence. “We will have the best casino in the state. We can’t go tall because we’re in a historical area, so we’re going to sprawl.” He likened the coming Chamonix hotel to the St. Regis in Aspen, in terms of character and quality. “The market seems to be there for it and we have the money,” he concluded.
Full House is also enlarging its Silver Slipper casino in Bay St. Louis, Mississippi, by adding a second hotel tower. Since the Silver Slipper is built on a small footprint of land, Lee plans to solve the problem by constructing the hotel tower on a pier out over the Gulf of Mexico. This involves leasing seabed from the state for $100,000 a year for a 60-year period. “The state obviously likes this,” Lee said, because it means more visitors, revenue, and jobs. The main hiccup would be getting environmental approval to convert some adjoining marshland into a parking lot.
Lee expressed vexation with the amount of media focus on the controversial proposal to move Diamond Jacks casino from Shreveport to nearby Slidell, Louisiana. He noted with some asperity that the swing vote in the Louisiana Legislature was cast by a lawmaker whose wife is a lobbyist for the casino. Full House-commissioned polling, he said, showed Diamond Jacks losing “by a very wide margin.” He said the Slidell area is very conservative and heavily Republican, filled with people who had fled New Orleans “to get away from things like casinos.”
The closest casino to Slidell is actually Churchill Downs’ Fair Grounds racino, Lee said, adding “We compete with Fair Grounds, we compete with New Orleans,” particularly Harrah’s New Orleans, which the CEO described as “the 800-pound gorilla” of the region. Slidell, by comparison, is “not a very big negative to us.”
Turning to Illinois, Lee said the Waukegan casino-selection process is a half-year behind schedule, though it will hopefully close in the fourth quarter. “We were deemed by the city’s consultant to have the best proposal” (two others are in contention). If chosen, Full House would have to reach a development agreement with the city. Lee says he has private-equity financing lined up, “but it might be better to [fund] it directly.”
Next door in Indiana, Full House showed some interest in the Terre Haute market several years ago and, with two would-be operators having been deemed unqualified, Lee’s looking at it again, stressing its placement between Indianapolis and Illinois’ Champaign-Urbana area. “We’re looking very carefully at” the request for proposals in what Lee deems “a pretty good market.”
Overall, Fanger said, “We continue to be pretty pleased” with revenue trends, although Lee cautioned that gains in the third quarter will not be as big as those in the second. One component of the revenue growth, both agreed, was the installment of a Konami slot-management system that has enlarged Full House’s database and efficiency. Being shut down by the pandemic was something of a blessing in disguise, Lee explained. “You’ve got to open every single slot machine and put a circuit board inside. It’s a pretty big process.”
As for cashless gaming, Lee showed some skepticism, saying customer adoption was crucial; he likened it to the coin-free slot machines that MGM Grand installed when it opened “and it failed.” But he added, “How wonderful would it be if we could get rid of chips?” He envisioned a future in which table-game chips are supplanted by ticket-in/ticket-out scrip that can be inserted into slot machines as well. “We’ll adopt [cashlessness] pretty quickly once it’s a proven technology. We’re not quite there.
“The bigger thing that’s out there,” he elaborated, “is you have online gaming,” which he expects soon in Illinois, Indiana, and Colorado, three of Full House’s markets. As for potential acquisitions, “We look at a lot of stuff. Unfortunately, a lot of the time it’s got hair on it. If we just execute on what we have, this stock will be a home run. First and foremost, we don’t want to screw it up.”
