New product dominates Full House earnings call

August 8, 2023 9:53 PM
Photo: Full House Resorts (courtesy)
  • David McKee, CDC Gaming Reports
August 8, 2023 9:53 PM
  • David McKee, CDC Gaming Reports

Quarterly numbers took a back seat to architecture as Full House Resorts CEO Dan Lee devoted a considerable amount of the second-quarter earnings call to show-and-tell.

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Scrolling through dozens of pages of renderings of the Chamonix resort in Cripple Creek, Colorado, Lee went into detail about its finishings and amenities, including an outdoor fire pit to keep valet-parking patrons warm during cold Colorado winters.

Although Chamonix will be 10 percent the size of the Las Vegas Strip casinos Lee helped mastermind while he was at Mirage Resorts, it stands to be the biggest property in Cripple Creek and huge by that measure, Lee related. Although the casino will debut in the shadow of Christmas (December 26, to be exact), Lee hoped, “We’re the something else” that people look for when seeking yuletide entertainment.

“People win money and then they have to bring home involuntary jewelry,” Lee said, by way of explaining why Full House is building a jewelry boutique onto the façade of Chamonix. It will also cover what would otherwise be a blank stretch of frontage.

The exterior of the casino will have windows, but not the interior. And the high-end property will connect to mass-market Bronco Billy’s. “It’s a lot like going from Tomorrowland to Fantasyland at Disney,” said Lee, illustrating his point.

Citing the early days of Full House’s Silver Slipper casino in Mississippi, CFO Lewis Fanger said that before it had a hotel, “We had a casino that died out at 8 p.m.” Bronco Billy’s relies for rooms on a nearby bed and breakfast. Chamonix’s hotel rooms, Fanger said, will lead to “much better utilization of the slots and all that other jazz.”

“It’s kind of a complicated quarter,” Lee remarked of the April-June period. Revenues that were up 34 percent, mainly from The Temporary at American Place, helped offset a loss of $5.6 million. In its first full quarter of operation, the Waukegan, Illinois, casino placed third in the state for table-game revenue, even though the steakhouse is “disappointingly late.” The latter is awaiting shipment from Florida, in seven trucks. “But the trends are pretty good and it’s profitable.”

Wall Street analysts were particularly concerned with margins at The Temporary. This eventually prompted Lee to say, “You’d be hard-pressed to find a casino whose margins reached their highest point during its first full quarter of operation.” He also cited the slow ramp-ups of Bellagio and Louisiana’s L’Auberge du Lac, both of which he was involved in, as cautionary examples. Lee pointed to the age of most Illinois casinos, saying, “To be sixth overall is pretty remarkable, given that they’ve got a 20-year head start on us.”

Another subtlety that Lee elucidated was the rapid depreciation of The Temporary, meant to have only a three-year lifespan. Even though the parking lot and two Airstream trailers that serve as food trucks will become part of American Place, everything in The Temporary is being written down in accelerated fashion.

At present, The Temporary has enough dealers to operate 30 table games at once, Lee reported. Full House runs its own training school at a cost of $30,000 to $50,000 a month. (“It’s not huge.”) Lee and Fanger said that The Temporary had drawn experienced dealers from casinos like Rivers Des Plaines and Potawatomi in Milwaukee and was now falling back on training dealers from scratch and luring others from farther away with relocation subsidies. The table-game pit is, Lee said, a month from staff all 50 tables simultaneously.

As for gamblers, they’re said to be taking the place of “lookie-loos” (Lee’s phrase) and tourists who filled the casino early on. As admissions rise, so too do slot coin-in and table game wagering. Rated players already make up “in the high sixties” of Waukegan’s player mix, according to Fanger.

Although Lee admitted Full House is still feeling out the area in terms of marketing, it has a 40,000-member player database. “This allows us to eventually be more efficient in our marketing costs.”

Queried about financing for construction of the permanent American Place, Lee said the existing bonds need to be refinanced next February, when they’ll be more affordable, with the bond market described as being presently neither great nor horrible. “There’s no deadline on when we have to be open,” he added, especially since the inception of construction is being delayed while a recently reinstated Potawatomi Band lawsuit plays out in the courts.

Full House, he said, has a “standby facility” with an unnamed private-equity firm that could buy out the company (“Our stock’s pretty cheap,” Lee remarked), while a REIT-financing option is also on the table, as well as funding construction out of free cash flow from Chamonix. “There’s no issuance of equity being contemplated,” Lee insisted, adding, “the longer it takes us, the easier the financing is.”

Compared to other issues Full House is juggling, “That almost seems less important,” Lee said of consumer sentiment. The Silver Slipper, he and Fanger related, was suffering from elevated costs and a new, more restrictive, admission policy, not from competition. “In Indiana, the revenues are a little soft,” said Lee, pointing to new casino competition from Turfway Park in Kentucky. “Is that a recession? I don’t see anything I can point to.”

Concluded Fanger, “Maybe some of that unrated [casino] play is going away, but it seems like the rated player is still hanging in.”