Good day, and welcome to the Full House Resorts' Third Quarter 2016 Earnings Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Lewis Fanger, Chief Financial Officer of Full House Resorts. You may begin.

Thank you. Good morning everyone. Welcome to our third quarter 2016 earnings call. Before we begin, I need to remind you that today's conference call may contain forward-looking statements that we're making under the Safe Harbor provision of federal security laws. I would also like to caution you that the company's actual results could different 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 EBITDA and for a reconciliation of those measures please see our Web site and the various press releases that we issue. We're also broadcasting this conference call on our Web site at fullhouseresorts.com where you can find today's earnings release as well. With that all said, I'll turn it over to Dan?

Hi, good morning. We're talking to you all from Rising Sun, so I apologize to people on the West coast that we're so early -- morning there, but we've got a meeting with [indiscernible] engineers later today in Louisville to [technical difficulty] here. And so, a few things, we opened the Christmas Casino yesterday at Rising Sun, which is bigger and better than last year, and of course it was pretty successful for us last year, so we have high hopes for that. The reindeer out there, we added a skating rink, and a venue to visit with Santa Clause, and on the more decorations, so the place looks great. And a little bit early, but if we're going to spend all this money on decoration and putting it up and everything you did want to do it just for a few weeks, so we always start early in November. But looking at the quarter, it's kind of a transitional quarter. We had -- it was our first full quarter with Cripple Creek, and of course we're doing the rights offering, which closes today. And so we -- it was busy quarter, and we started a lot of the construction of the rights offering as designed to fund. At the Silver Slipper revenues were about flat with last year, up slightly. We had part of the hotel open last year, and the entire hotel was open for the entire quarter this year. So it's a little disappointing that we're only up $100,000 in revenue. But it's understandable, all that flooding you saw in Louisiana, where literally houses has water up to their roofs, that's where our customers live. That's the area on the north shore [ph] of Lake Pontchartrain and east of Baton Rouge, and that's our most important customer…

No, you're good Dan. Just really quick, we did throw a new [indiscernible] in the liquidity section on the press release for you. You know we are a pretty strong cash flow generator. And since we haven't filed the Q yet, that'll happen on Tuesday of next week. We did put in there steps that you can see the cash flow provided by operating activities. It was $6.2 million for the first nine months of the year; CapEx was only $1.7 million. I know a lot of you will get free cash flow yields. So there are some statistics there for you as well. But other than that…

What's our free cash flow per share?

Well, we had 19 million shares before the offering.

Okay. And we had net income of zero, but we have a pretty significant depreciation charge for the size of the company, and amortization of debt issuance costs, and so on. So we actually generate pretty good free cash flow while having no net income. And at the end of the day it's free cash flow that creates value in the stock. So on that, any questions?

Actually we're ready for some questions.

Thank you. [Operator Instructions] And we'll take our first question from Chad Beynon with Macquarie. Please go ahead.

Great. Hi, Dan, hi Lewis, how are you?

Thanks, we're good.

Good, quite good.

Great. Congrats on everything with the rights offerings. This is a pretty exciting time for your company here, and nice to see that everything is on track. So maybe if we can just kind of start with that on a high level standpoint, when you underwrote these projects and you looked at all the properties, you set your capital budget at each property, and you're sticking to those numbers, and those are obviously based on some internal return metrics. Could you just talk about what you've seen in the market in the last three or six months, if your expectations on the returns for this $10 million infusion, if those return profiles have changed? Thanks.

Yes, the returns, each of these obviously we had returns which we shared with our Board, and we'd share them with you too, but our lawyers would have a heart attack, and we like our lawyers, so we don't want to do that. But I think the worst of them was about a 20% per year return cash-on-cash, and the best of them were probably higher than that and some potentially higher, but a lot of it is guesswork. Like the ferry boat, for example, I think has a very high return. But we're going to put a little ferry boat in to carry 10 cars, it goes across the Ohio River to a bunch of people that today takes them almost an hour to drive here, and with the ferry boat takes three minutes. And so it's pretty clearly a plus, but trying to figure out how big a plus you can get numbers all over the place. I mean, that thing could pay for itself in a year, or three years, or five years. And so -- but I think your bigger question is kind of what's the temperature in the regional markets. And I guess in some ways we have more inward looking things that are more important, like [indiscernible], more people come and see our live reindeer than the last year. But in a general sense, I would characterize the Mississippi market, which is our most important property; it's been a challenged market. And it wasn't a great quarter for us largely because of that. And if you sort out all the different stuff going on, but it rained like you wouldn't believe down there in August. It just rained, and rained, and rained. And with such flat land the water had no place to go,…

Yes, that's great.

I'll tack on a little more there too, Chad. I will say, we do have a competitor in Cripple Creek that's building or they're taking an existing space and turning into a bigger hotel. That's good at the end of the day. Cripple Creek only has about 500 rooms total for the 700,000 people that live in Colorado Springs, in that whole metro area. And so we want to do a hotel for the same reason, that that town is very under-roomed, we feel. If you go back to last quarter, Chad, we talked about hitting a $25 million EBITDA figure in the next couple of years, and we haven't really wavered from that thinking. We want to hit four times total leverage. And if you think about net leverage, we're a turn less than that. We'd be at somewhere in the ballpark of three times net leverage if we hit $25 million of EBITDA. And we feel very good about our chances of hitting $25 million.

Yes, I should mention that now with the rights offering done we're looking at amplifying the discussions with the banks to redo the bank deal, which only has two-and-a-half years to go one, and extend it. And then they like to basically do a new bank deal, five-year bank deal. And we'd also look at refinancing all of our debt, because of the second lien debt. The first lien debt has a shortish maturity, and so we definitely want to fix the maturity. And second lien debt is expensive. And I think as our results improve, and our equity builds we have an opportunity to [indiscernible] more reasonably. And we're frankly a much more diverse company than we were when Lewis and I got here two years ago. And things are trending pretty well. So we're probably paying 200 or 300 basis points higher on a $100 million of debt than other companies with similar leverage as us. And we're pretty intent on trying to fix that. And obviously it makes a pretty big difference to the free cash flow per share and the equity value, if we can do that. And we should be able to do it.

Yes, that sounds great. One other, just looking forward on the cost side of things, we're seeing wage growth pick up a little bit around the country. And you or the general manager at these properties have run them for some time and good stable base of employees. What can you do to maybe offset some of the inflationary pressure that we'll see in 2017? Are you not really seeing that outside of just putting through the revenues and getting the natural flow through that you would see excluding the gaming tax and the marketing in the business model?

It's funny [indiscernible] one of our competitors in Cripple Creek tried to hire one our key guys, so were in overdrive this week in persuading him to stay, and I'm happy he has stayed, and he's very important, and frankly he was underpaid, and we adjusted him accordingly. So you do run into those situations. So I think that was a particular case, a very talented young man, and they viewed an opportunity to get a talented person and hurt a key competitor, and found out that we could be pretty competitive in keeping our people as well. So when you talk about inflationary pressure, obviously you have to pay people what they're worth or they're won't work for you anymore. But there's more than just money involved. And then the people want to work at a place where they can have fun, where things are going positively, where there's career opportunities, where they're treated fairly. And we've worked very hard to be that sort of employer, and it takes time. Quite honestly, I think the attitude was a little oppressive before we got here, and I think we've made it a place where people want to work. And we actually have very little turnover. Now, you still have to pay people appropriately, and we do, but it's not just salary. Our biggest challenge on payroll has been healthcare. And with presidential election next week, it's a topic. I mean, our health plan is significantly more expensive than it was before Obamacare, and significantly worse. I mean, the deductibles are higher, the coverage is worse, and yet the cost to the company is significantly higher. And I think you could hear that from any CEO in the country. And that's our biggest challenge in terms of people. The other inflationary…

Yes, I'll tack on a little bit to that, Chad. If you think about a year-and-a-half ago, when we got here, we really had employee retention problems. Our Fallon casino, what do we have, Dan, 85% turnover two years in a row. And it's kind of on the opposite way now. The quality of the resumes that we get on a daily basis from people that we've been fortunate enough to know in our past, it kind of blows me away on a daily basis, that a company this small gets such unbelievable attention these days from people looking for new jobs.

Well, we don't intend to be small very long. And if we can grow, mostly internally, and continue to grow -- I joked with Jim [indiscernible] not long ago that I intend to double or triple the size of my company, what the hell is he going to do for shareholders. And that's a joke of course, Jim does a great job, but from an employee perspective, growth rate is opportunity. It's also the value of the stock options, but it's clear opportunity, and a small company intrinsically has more career opportunity.

There you go, Chad.

Thank you guys, appreciate it.

You got it.

Any other calls, or have we scared everybody from asking now because we've talked for a half-an-hour on that one.

[Operator Instructions]

Well, Chad, thank you for asking questions that [indiscernible].

All right. And it appears that there are no further questions. I would like to turn the call back over to Mr. Fanger for any additional or closing remarks.

You got anything, Dan?

No I think we covered it. And I thank everybody for your support. Thank you most of you who participated in the rights offering. I apologize that there wasn't more over-allotment shares available, but I guess that's a good thing because people exercise their direct rights. And frankly, that $5 million is disproportionately important. It allows us to do a lot of things to the different properties without stretching the balance sheet too hard. And frankly, our banks see it as a very strong important line of support. Our discussions with the banks are dramatically better now with only $5 million of equity. I mean, it's just the fact that shareholders and the Board, and me have shown our confidence in the company. And so I think that'll be instrumental in getting our debt refinanced on better terms. That's it. Thank you very much.

Thank you everyone.

And that concludes today's presentation. We thank you all for your participation. And you may now disconnect.