Full House Resorts CEO Dan Lee emphasized his company’s immediate future and dwelt very little on its second-quarter results in an earnings call Tuesday with Wall Street analysts.
The second quarter of 2022 was a comedown from April-June 2021, which Lee attributed to an abundance of stimulus checks at that time last year. Less discretionary income for consumers meant less revenue for Full House, which grossed $44.4 million against 2Q21’s $47.4 million. Costs rose slightly and the company reported a net loss of $4 million or 13 cents per share. The results “were decent, but not compared to last year,” Lee reported.
The call began with an extended show-and-tell, as Lee walked investors through a gallery of photographs of American Place in Waukegan, Illinois, and Chamonix in Cripple Creek, Colorado. The former is expected to open its temporary casino early in the fourth quarter and the latter a year from now. Lee and CFO Lewis Fanger anticipate generating at least as much revenue from the two new casinos alone as Full House currently makes from its five existing properties.
In addition, Full House received a $5 million access fee from Circa Sports to operate at American Place and will take a percentage of sports-betting revenue.
“I keep hearing these rumors that we’re somehow going to need to raise money and we don’t need to,” bristled Lee, who pointed out that Full House had $300 million cash on hand (plus a $40 million line of credit, which he later referred to as “surplus cash”).
Asked if he would sell assets, Lee replied, “Frankly, the small assets we have are in northern Nevada and they’re a nice cash cow, and we don’t need the money [from selling them].” He elaborated that, from a managerial standpoint, they were very low-maintenance, requiring maybe an hour a month of oversight. He contrasted that with his days at far-flung (as far as Argentina) Pinnacle Entertainment where, he said with a bit of hyperbole, one didn’t know which casino one was dealing with from day to day.
Regarding Waukegan, Lee took supply and labor issues in stride. “We may not get enough dealers to keep all 50 table games open,” he said, adding that manufacturers were having difficulty providing slot machines; the temporary venue might open with 800 instead of the promised 1,000 “and that’s just fine. It’s not the slot machines [that gamble], it’s the people.” Also, American Place will be spared having to construct high-roller suites for its permanent first phase, citing the fact that “We’re kind of surrounded by hotels.”
Not that Lee is banking on travelers. He reiterated that Lake County, home to Waukegan, is the second wealthiest county in Illinois. While not dismissive of competitors, he pointed out their shortcomings. Rivers Casino Des Plaines “is on two levels. It’s pretty squeezed. We’re on one big slot floor.” (“Which is what customers prefer,” interjected Fanger.) Hard Rock Rockford is considered a non-factor due to distance and the venerable riverboat casinos are multi-level properties with low ceilings.
On top of it all, American Place will be visible from a freeway. “That freeway location is quite key,” Fanger said. He added that he thinks northern suburbanites will gravitate to Waukegan, rather than brave traffic into downtown Chicago.
Lee brushed off the idea of serious competition from a Menominee Tribe/Hard Rock International casino project in Kenosha. “Most of our customers come from the south and there’s a lot of farmland between us and Kenosha,” he said, not to mention the complex state and federal land-into-trust processes that have not even begun to be put into motion. Plus there is the not-inconsiderable opposition of the Potawatomi Band, which has what Lee calls “a pretty serious casino” in Milwaukee. “You’re going to have a bit of tribal warfare,” he predicted.
Pressed on delayed launch dates for the two new casinos, Lee said, “We’re going as quickly as we can, but problems arise.”
For instance, a union whose members crush rock (for conversion into concrete and asphalt) went on strike, leaving Chamonix without concrete and asphalt until a week ago.
“It seems like every day there’s some phone call about something else,” as supply chain issues “make building anything a challenge. It’s a little bit of whack-a-mole.”
Another example: Consolidated Edison thought it had no condensers to sell to American Place, leaving Lee to contemplate powering it off of rented generators mounted on flatbed trucks. Fortunately for Full House, Con Ed turned out to have the requisite power units in inventory. Crisis averted.
At Chamonix, steelworkers had to be sent home because light-gauge steel hadn’t arrived from the steelworks, which hadn’t received the architectural plans on time. Lee admits he “blew a few fuses,” as when the Chamonix loading dock wasn’t installed despite its obvious necessity. “What idiot architect didn’t put a dock in the loading zone? That’s why I walk the projects.
“It’ll open when it’s open,” stated Lee, emphasizing the Full House would complete its projects without running up any overtime payments. “I think we’re OK on budget and we’re a little bit over on timing.”
As for recessionary concerns, Lee was sanguine. “The regional casinos generally hold up better in a recession. We’re a cheap trick. It’s easy to drive to us.”
Appended Fanger, “We’re pretty pleased where July will lead us.”
