Good day, and welcome to the Full House Resorts’ Second Quarter 2017 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Lewis Fanger, Chief Financial Officer of Full House Resorts. You may begin.

Thank you. Good afternoon, everyone. Welcome to our second quarter earnings call. Before we begin, as always, we’ll 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 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 EBITDA for a reconciliation of those measures, please see our website as well as the various press releases including the one today that we issued. 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 then lastly, really quickly we’ve been working on and completing by the way several growth projects at our properties, we know it’s not easy for you to go and visit all of our places and to help you more easily stay on track of those projects as well as keep up with the company in general, we did create a Facebook page. You can find it directly at facebook.com/FHResorts our goal isn’t to overload you with info. So you can expect to post maybe once a week or so. With that all said, you’re ready, Dan.

Yeah and I tell you, I think if you go to the [Indiscernible] and frankly I tested it this morning, it wasn’t working. So we had somebody running around to make sure it works right. So if you have any troubles, give it a couple of hours more to have it working, but I think if you like the site, you just click on like, and then anytime something is added to the site, you’ll get a notification through Facebook, but there’s also a way you can get a notification through email if you want. And so we did this partially because as we travel, and I look at the steps, sometimes frankly I’ll take a picture of my own phone, something that’s coming together and we’ve decided be kind of fun to actually share that with people in a casual way, so we don’t want to have to file an 8-K every time we have a picture of a palm tree going in or something, but we definitely find a way to share with people and we decided to use Facebook for that, so that’s that. Looking at the quarter, it’s a good quarter, real good quarter actually, but it’s still very much a transitional quarter. We’ve got stuff going on in every property, different improvements and big made all funded by cash gross and the small write off we did last fall. And those improvements have really just starting to be completed and are going to continue to come in online over the next 12 to 18 months. And then meanwhile we are working on things that will extend our growth beyond the next 12 to 18 months. So, in the quarter the weak spot was also ironically a strong spot, and that was the Grand Lodge Casino…

Yes. You did, yes. Let’s take some Q&A

Thank you. [Operator Instructions] And we’ll take our first question from Chad Beynon with Macquarie.

Hi, good afternoon. Thanks for taking my questions. How are you?

Good. But where everybody is Macquarie, but I’m sure you all know that.

Thanks. I wanted to start with operational questions. Is Silver Slipper, the second quarter where we’ve seen really nice revenue growth, you kind of touched on some of things and I guess more importantly touched on some of things that are going to provide for higher growth going forward? So what do you seeing right now at that property? Is it really your players are staying longer because there are just enjoying the property or you growing the database. There was some competition that opened up a little while ago. And in Biloxi it doesn't seem like you guys were faced given your location. But just trying to get a better sense of exactly what’s really driving that growth and how sustainable that is? Thanks.

Well, you know Biloxi in our east of us and their customers principally come from the East and frankly the other casinos in Biloxi were not much faced by that new competition. And the market didn't grow and that -- and I think the return on that new place is pretty suboptimal. And I went and saw that little while ago and they did okay just building it, but I think their concept was that people would stop at their place before driving the last mile took over [Indiscernible] and yet to get to their place, you get off the freeway. Go under the freeway, there are about three stop signals and then park behind their swimming pool next of their miniature golf course, quite I’d say, I don't think that really saves you any time. It could be a -- from the same time because that you can go from Tallahassee Florida to Beau Rivage, I don’t think there is one traffic signal between your home and that parking garage. I was part of the team and help build that and it was $670 million in 1998, if I remember correct is when we're building it. So, 20 years of inflation, the replacement cost even if inflation is lower the replacement cost of Beau Rivage, today is probably 1.3 billion or 1.5 billion and you build a $300 million place I don't care if you are 15 seconds faster to get to, its probably not going to work. And then the hard rock has evolved over the years into a pretty competitive property right next to Beau Rivage, and then Boyd has Imperial Palace, which is a pretty big property. And so, I actually think one of the strengths of the market from our perspective because if there is…

Yes. I think the only other thing to add to that, Chad, it’s a property a year ago where we were really ramping the hotel and trying to figure who area best guest were, who to comp the rooms, who is actually going to spent more money in our casino if they were staying over night. That’s sort of analysis is going on behind this scenes and fast forward today we have property that’s really firing on all cylinders and now it’s even more impressive. I don’t want to understate who awesome this new swimming pool that’s surrounded by this glorious palm grove. It’s night and day different than what you would have seen six months ago is. We’re excited for what the next year is going to bring.

So the whole sense of arrival is way better, but I also mention, John Sheldon just passed me note here that we have a tiered players club that we implemented just about a year ago, so that’s starting to take hold. The used to have a players club and that’s pretty State of the art that you should have one. Our food offerings; we have dungeon crabs back in the buffet. That’s popular, but I have to laugh actually one of our competitors has put dungeon crabs on their buffet and they always signs up, that says, their ad campaign is whose got the best legs in town. We do – we have done in this crab. That’s like idiots you don’t eat the legs, it’s a claw, you eat the claw and anybody who lives down they knows that you’re eating the claw, not the legs. So maybe you get the best legs, you get the best claws, but anyway, though that’s fine. And then, we are getting better at it leveraging the hotel rooms and improving the wind per occupied room.

So, will say that much more than that because they are on our call right now to…. But guys over Pan, just you know, dungeon crabs, you do no eat the legs.

Lewis, could you provide CapEx for the quarter and just maybe how we should think about the cadence of this as we get through the rest of 2017?

Sure. In the Q we literally just put out, but lease for the six months is about $6.3 million of CapEx, if that helps you there?

Okay. And then any guidance or help for the year. I know your -- there’s some projects that are finishing and some of those that are its kind of underway. Should think about 10 or so million from a project standpoint as of all the announcements that you’ve given us so far?

Yes. I think for the balance of the year, its going to be somewhere in the ballpark of 1.5 maybe 2 million bucks. Some of the spent that left you’re going to see lot of that trickle on that 2018, so there’s ferry boat is an example. We spend about $260,000 on that already, the platform that we’re building, we get the greenlight for and that’s about $500 -- $550,000 or so, but lot of the road, right, that will start work on that later this year and the actual cash out the door will trickle into 2018. If you think about something like Stockman were million one into that through the six-month period, so there’s some spend left. The landscaping as Dan mentioned, literally they’re putting their touches -- final touches on it as we speak, in the porte-cochere we’re trying to wrap up same of that – some of the labor issues there. So you’ll see that that’s been hopefully be done before year-end. And then we’ve got a office building that we want to build as a part of that that probably spend wise trickles into 2018 even though the construction will start before year-end.

I mentioned that hotel room renovations visit there, that forecast and we talked about in that rights offering there is also $3 million a year of maintenance CapEx and like the room refurbishment of Rising Sun was never part of the 10 million, that’s part of maintenance CapEx.

That’s right. That’s right.

And the Crippled Cow was part of a 10 ten million. I think we spent 60,000 on it maybe?

Little above that.

Little about that, and then – and the Oyster Bar was not part of it because frankly we didn’t think about the Oyster Bar until March of this year. And then I came up with the idea and went down there either one of the oyster bars in last Vegas. And I had to stand on line for two hours to get a seat. At one O’clock in the afternoon on weekend, and I thought that seems pretty popular and [Indiscernible] he jumped on it and thought it would work it. So we move just quickly as possible on that and it was -- tell me a number; 200,000?

Yes.

Yes. And it was not part of the 10 million. So, there is some money we’re spending outside of the 10 million. The 10 million really pertain to earning gross for us.

Yes. Six or seven, its right.

So the details in that aspect is and as a group those – they were late I think as a group they were in much on budget and the quality was really good, but that doesn’t stop us from brushing out and hanging a fabulous cow over a bar, if we think its make sense, it doesn’t cost to money.

So, you’ve got a good couple of million of bucks, the stuff that all --its not a huge number, but its not a small number either and we feel fine with all that realizing we’ve got $22 million of cash sitting on the balance sheet and only about $12 million needed in normal day to day operating. Do you got it?

Yeah. That’s perfect. Dan you mentioned growth opportunities and every regional gaming operator, this quarter is probably talked about those, the difference with you guys is you’re looking assets that are probably generating under 15 million and are passing on those resumes and they’re also putting their assets that are generating under that for sale. So how should we think about -- you talked about you’re seeing a lot of opportunities, how should we think about the returns that you’re looking for, the markets that you’re looking for. What you would need to see, I wonder these properties to move forward on that instead of some internal CapEx like you talked about Bronco Billy’s or anything else. Just kind of framing that would be helpful?

Just to be clear we don’t have to acquire anything to have the stock feed work out well, I mean, all we do is execute the stuff we’re doing, I think we have a shot at getting us up to like 25 million EBITDA to a year. No promises but I think we’re shot at that, the next few years just with what we got. And if we can get to that then the companies that worth eight times cash flow like I have previously recently sold for by then our debt are probably be done at $70 or $80 million and the stock doubles or triples. So I mean that, that’s why I don’t screw that up. Okay. I’m the biggest shareholder here and I don't want to screw that up. So then you start looking at deals people bring to you and you start off with the basis of we do not want to screw up what we have, but sometimes you find some like Cripple Creek where I think was a great acquisition and its not only earning what we believed it would when we acquired but we’ve now figured out that its actually got a big growth opportunity side of it that was even bigger than I think we thought it was when we bought it. And so, some times you buy with. I will tell you there is another one and you’re right, there’s a lot of kind of small deals that would move the needle for us, but they don't move needle for others so it's kind of nice as we don’t have the competition. But there was a small casino stable business that we looked at that we could've bought for about six times cash flow, may little bit north of 1 million…

Yes. We are extremely diligent, Chad, when it comes to taking the tired and Dan is right, we’ve gone out of our way to make sure that we are not overpaying for anything. I can think of two things in recent memory where we were politely excuse from the project for refusing the budge on our price and that’s quite all right, I’ll tell you that. If you think about the percentage of the company that this management team and this Board of Director owned it’s in the mid-teen and Dan is right, we go in to work every single day with the mantra of don’t mess it up and let’s just drive this stock price higher. So that’s goal number one.

Great. Thanks. Thank you both for the color. Appreciate it.

Thanks Chad.

Yes. I’ll answer that, I will say, there is something I think our team has – is pretty good at is finding the opportunities to improve properties. When I came in I thought we were closing Rising Sun. The cash flow of it is just plummeted over the years, we got down to almost zero and over two years we turn it around and now especially with this variables and some of the other things we’re doing is actually a pretty good growth vehicle for us. And so some of these other ones, these big companies are trying to sell some small assets, we go into it, look at it and say what can we do with this. And its actually little surprising to me how often, maybe it’s a function of casino business, how often the big companies kind of ignore the small things because I think it's not worth chasing. And whereas in the hotel business which I also use follow as an analyst, a company like Marriott, they create teams of people so that somebody finds an opportunity to build the Fairfield in some way they jump on it and they don’t think of it as being too small. They know if they built 500 Fairfield inns it moves the needle for and the casino business never develop that sophistication and I think that's actually good for us.

We’ll take our next question from Jim [Indiscernible]. Your line is open.

Hi, good afternoon guys. I had a couple of questions. As Cripple Creek just for clarification the [Indiscernible] family at Monarch, the hotel casino, how were they building theirs, I think almost the 250 million?

No. I’m sorry.

It’s okay. But…

I’m confusing what I think they might be earning.

All right, right, yes. That’s about correct. And the Ameristar doing about 70 million EBITDA. So, but if you look at Cripple Creek, right, copying it kind of Monarch, one of the slides in the Monarch deck is by far Black Hawk as a comp to cripple Creek. I think they do approximately the same adjusted gross gaming revenue as Reno does, Reno’s got like almost 30,000 hotel rooms and Black Hawk only has a think at this point about 1100 hotel rooms. So if you divide that by the room key they're coming up with like almost $660,000 per available hotel room key. So my question is, how many hotels are in Cripple Creek right now, how many rooms and what’s the adjusted gross revenue, the total spent say in Cripple Creek as a comp?

I don’t have my paper front of me, but my recollection is that there is more like five or 600 rooms in Cripple Creek. And frankly both of those that are in one place and I visited those rooms and they’re really small and pretty beat up. Most of the others are in small places, and like we have 14 rooms that are literally on the roof of our casino, and they are okay and there are some of the nicer rooms in town, but if you went to AAA and I did not sure you I know you would get four diamond and I’m sure you get three. And then we have 10 other rooms and a building a block away which counts in the guestroom account and I look those rooms, there so small, it's a historical building. I'm convinced it was a bordello earlier in its life and almost embarrassed of putting anybody there. And the former high school was converted into a bed-and-breakfast which is but he says is like the best hotel in town I stayed there. It’s okay. It’s little bit like staying in your elementary school classrooms, little weird, right. It’s literally its awkward. And I guess that’s my point is like if I lived in Colorado Springs there is not a hotel in Cripple Creek where I would take my wife for her birthday.

Anecdotally the people from Cripple Creek would love to come and gamble there, but they can’t stay overnight. So to your point, I mean, clearly you’re barking up the right tree, my question is I think you were stating the plan for 100 rooms, is that because you are saturated at that amount? Is it zoning or if you wanted to – do you have enough property even though more than 100 rooms if you wanted to?

We have enough property to build more than 100 rooms and what kind of dealing with the issues of maybe it should have meeting room space which wasn't part of the original plan, maybe we should have more parking which wasn't part of the original plan. And part of the reason I was at the Black Hawk was looking at the same numbers you’re talking about. I kept looking at and saying, Wow, there’s a black [ph] is just on paper, you look at the size of Denver and the size of Colorado Springs and you look at what's going on in the Black Hawk. I mean Monarch, if we’re right that 35 million is not the EBITDA, I think the total EBITDA of Black Hawk is 20% all the casinos combined and we’re five of the 20.

Okay.

Sorry, not even 20, right.

So Cripple Creek got some room to grow if you can add room capacity, right, I mean, you’re talking about [Indiscernible]?

We’re the guys with enough land to do it. With that deal we have quite a bit of land, that was we’ve kind of detailed what we own and we already own quite a bit of land. We don't have to acquire more land. We lease with the right to buy. So we have the room to do it. What is the trick here though is Cripple Creek and rightly so is very sensitive about its historical status. It has much more of a historic downtown than does Black Hawk and its careful, you can't -- like if we went in and proposal of 30 story tall tower like the Ameristar and the middle of Cripple Creek I think we get turned down, and it would be right to be turned down because it would change the whole character of the town.

So you need to build an amenity that kind of maintain the historic integrity of the town.

We want to design something that -- is provides all modern services that feels like a four star hotel that maybe has really good restaurants and it ties into our existing casino really well, but isn’t jarring the town. We don’t to, we want to compliment the historic nature of the town, not try to make it Las Vegas on the mountain top. And so that takes a lot of thought and frankly a lot of renderings and in fact just the other day our architect suddenly rendering of our hotel that was black. And I said there is no chance we are building a black hotel in the middle of this town. I said it’s just why don’t we change the color, and they argued a little bit and I said, listen; I won’t build a black hotel in this town because we won’t approval to build a black hotel in this town. It looks like Darth Vador's hotel. I want a hotel that runs into the town and matches the color of the town which is predominantly brick. And so we want something that like – you come to Las Vegas and you see Bellagio. And yes, it’s a little stunning because it has all these fountains and lakes in front of it in the middle of the desert. But it was kind of a pleasant surprise. You look and say that’s a pleasant building, its looks nice here and this is kind of a cool thing. And I want the same thing I want you to find a building in Cripple Creek that blends in, it feels right in the place, but you look at it and say, that’s where I want to stay. That looks really nice. And so that’s what we are getting to and good design isn’t done quickly. It -- you know God, we must have had 10 meetings there and you’ll have a meeting and people go in they think about it, and think about it when you come back together and you discover different things and you say what if we did this, what if we did that and so, you know we’re still pretty early in the process of that and then of course I have to get you know lots of government approvals and then I have to get financing, so this little weighs off. But I do think there is a good opportunity there and we will get around to it at the right time when we have the design done.

Okay. And then I just had two more quick questions. As far as the debt is concerned, you’ve got two patches of that debt? Mr. Fanger, right? One is very high yield and then the one is moderately priced? Can you instead of having to dig it out, can the higher patch debt what’s the implied interest rate on that?

So we are at 13.5% on our second lien and then our first lien is that a LIBOR plus 425. And its 55 million on the second lien and then it’s about -- 43 left.

So I mean you guys are under kind of that lending cap or at or above that 5X level that would value to the capital markets on a refi. You know it’s wouldn’t be the biggest band offering by any stretch. Do you guys have any sense or any feel if you talk to any wonders about kind of what a more amendable rate might look like?

There is probably not a whole lot I can tell you now Jim, but what I can tell you is looking at – right now if you look at the trailing leverage; we are tad above that five times. Kind of looking at I will tell you we are extremely pleased with the results we’ve seen out of our properties in July in the first half of August. You know if you could just step back a second, all those properties were under construction for the several months. At Grand Lodge, we only had a third of the casino open for us. And so, it’s nice to now be free of cranes and jack hammers and all that stuff and really have fresh properties, impressive new additions and all of that moving forward. So I’ll tell you looking from our seats here, we feel better about this company than we ever had. Quite frankly, its I don’t mind where we are sitting right now it’s probably the best thing to tell you.

So I mean just kind of thinking forward, I mean are you guys better off as far as the rate kind of stacking and racking EBITDA as the quarter strip forward. There is no gun to your head, right? The more you hound under 5 times, could that be – obviously [Indiscernible] that would be advantageous to you as far as hitting the debt markets.

These are discussions we have with vendors virtually every day that the second lien debt has four years to go to maturity.

Six years from 2016, so 22 technically, although....

But it accelerates to be six months after the first lien debt and the first lien debt is May of 19.

2019 that’s right.

Right. And so if we can move back the maturity on the first lien debt, the second lien debt automatically moves back, that’s right. And so you know one discussion in terms of maturities I think was fine, you know obviously with an improving credit I think our existing banks will probably move that maturity back pretty readily. But you do start looking and saying, well are we better off waiting or not? I will share one of my frustrations is when you look at our ratios, and then you go and look at the borrowing cost of other companies with the same ratios or worse ratios, they borrow money a lot cheaper than we do. And we keep getting told that your promise yourself small. And it’s actually not a diversity issue, we are more diverse than most of those guys. A lot of those guys, but the fact that it would be a 100 million in size instead of 200 or 300 million in size. And then, I’ve heard bankers say, you need to go acquire something so you can borrow money cheaper. But then they show me some crappy acquisition and say, well, I'm not going to do a bad acquisition just to save a point on the interest expense. So, but that’s and it’s so frustrating because it seems to me that the price of debt should be laid to the risk the lender is taking which relates to the ratio and the diversity of the business.

I mean what is going on in gaming is more of a financial alchemy type of situation, you know creative you know creative cost cutting and synergies with much larger debt deals obviously. So, you guys are kind of.....

Yes, I think some guy out there managing money and he’s got you know $1 billion to invest and he want to spend his time analyzing companies where he can make bigger investments because it’s more efficient use of his time. And I'm looking at it and thinking, it's almost like when Mike Duncan [ph] wrote this thesis, it was that businesses go where he has had a well business like portfolio of junk bonds would get a higher return than investment grade bonds. It seems like a well diversified portfolio of small, obligations of small debts would get you a much better return than investing in bigger names. But I think the number of people willing to do the smaller deals are still pretty small.

And then the last question obviously pertains to the Northern Nevada assets. I mean the news coming out of Reno these days is just gangbusters, and I think El Dorado just reported they announced that July was the best that they've had in 10 years and you name a Silicon Valley company they all seem to be moving into that area in the Washoe County. As far as Fallon and Lake Tahoe go, I mean the economy in Northern Nevada is growing like a wee. I mean, how do you – I mean you guys are kind of outside of kind of the core Reno and trick the tower Reno industrial center. And then I think also in Fallon there is some movement around closing airspace and making that base larger as far as the U.S. Defense Department is concerned. Can you talk about kind of the Northern Nevada as the population grows, I mean some of the Metropolitan population growth numbers looking out five and ten years for Reno are amongst the highest growth rates in the country, should that hit you guys?

Well and it’s really two very different properties, but at Reno, we benefit directly from the success of Silicon Valley because a lot of those people have come up in vacation at the Hyatt where they buy multimillion dollar homes in inclined [ph] village and so when they do well in the Silicon Valley generally it’s good for us, but then we do have an important secondary market of people they know who drives up to the lake, because it’s a pretty place for them to go. And so we do get some of that spill over. So, yes, and that property is pretty sound, yes. That everything that’s happening in Northern Nevada is good for us. In Fallon, a little less there because we are about an hour from Reno and the Tesla plant is half an hour from Reno in our direction and a lot of those other projects you are talking about are in that same industrial park. So we and I think that is good for Fallon, but so far we’ve seen kind of the competitive impact in terms of trying to get construction done has been a bit of a challenge, I think eventually you are going to find people choosing to live in Fallon or Fernley rather than Reno because it’s an easier to commute to work at the Tesla plant and so on. That hasn’t really happened yet, but I think it will eventually. Fallon is an agricultural community, which does quite well. They go [Indiscernible] and there is stuff there. It's also a retirement community, guys from the Navy go back to retire there because they like the weather of the high desert. And then the Navy base is pretty big business. And yeah, Navy never tells you exactly what their plan…

Now I really know who’s Dan.

...what you dad did for a living out there. But it’s a super secret air force space that government would not admit existed until the last couple of years. So I think we are pretty safe than that base closing and in fact if anything I think it’s getting bigger and I think that’s positive, but I don’t have a way of proving that.

Hey Jim, we’ve got to shut it down. We are over our allotted time. So apologies there, but apologies to everyone for going a little long, but that’s truly our enthusiasm for everything that on around here. Do you have any closing words, Dan?

No just want to thank everybody for their support and we are excited a bit. Sorry, I kept telling stories a little bit, but I hopefully answered everyone’s questions.

Thank you guys. See you next quarter.

That concludes today’s call. Thank you for your participation. You may now disconnect.