Good day and welcome to the Full House Resorts second quarter earnings call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Lewis Fanger, Chief Financial Officer of Full House Resorts. You may now begin.

Thank you and good afternoon, everyone. Welcome to our second quarter earnings call. Before we begin, a couple of things. One, we have some slides up on our website, so if you go to investors.fullhouseresorts.com and click on News and Events and then Presentations on the side, you’ll see those slides pop up. As always, before we begin, we also remind you that today’s conference call may contain forward-looking statements that we’re making under the safe harbor provision of federal securities 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 adjusted EBITDA. For a reconciliation of those measures, please see our website as well as the various press releases that we issue. And lastly, we’re also broadcasting this conference call at fullhouseresorts.com, where you can find the slides I mentioned, today’s earnings release as well as all of our SEC filings. And with that said, we’re ready to go.

All right, good afternoon, everyone. This is Dan Lee with a bad cold, so if I sound a little under the weather, it’s just a cold. I actually feel fine, but... We put these slides up because a picture’s worth a thousand words, and it helps keep me a little bit on schedule. And Lewis already covered the safe harbor language, so I’d start with Slide 3. And the story of the quarter and really for the company in recent times has been the Silver Slipper doing well. This is near Bay St. Louis, Mississippi, the closest casino in Mississippi to Louisiana, and it’s about an hour from New Orleans, about an hour and a half from Baton Rouge, but it’s also the closest casino to the 400,000 people who live on the north shore of Lake Ponchartrain. We’ve added quite a bit to this property in the last four years. The hotel opened in late 2016. We added the swimming pool and improvements to the central arrival in mid-2017, the oyster bar in mid-2017. The sports book opened in August 2018, which is a joint venture with William Hill. Of course, William Hill. And then we just recently renovated the casino and the buffet, the first renovation it’s had in the 12 years since the property opened. So Slide 4 shows the look of the property today. All those palm trees are Zahidi palm trees, which we spent over $100,000 on, but it vastly improves the arrival at the property. And the pool right on the beach and the oyster bar, which we added. Slide 6 shows the new sports book, which adjoins the oyster bar and is doing quite well. And then Slide 7 shows the new carpeting in the casino. We also changed the wallpaper, changed all…

Thank you. [Operator Instructions] We take our first question from Chad Beynon from Macquarie. Please go ahead.

Hi, afternoon Dan, thanks for taking my question. I wanted to revisit your comments on sports betting because this is certainly one of the more meaningful things for the industry, and it sounds like it could be a very meaningful thing for you. You noted some of the details, and I think you said you would prefer to participate in a rev share model with you as the market access licensee holder, and then you would bring in a partner who could provide the technology and the brand. So a couple of questions on this. Firstly, how big do you think this could really be, how meaningful for the company? Secondly, is it your intention to bring in a partner that would be exclusive to the skin you’re providing? And then lastly, why not just sell the license, bring in the cash right now, let them run it, and why do you think the rev share model is best? Thanks.

Well, I don’t think we really have the option of selling the license. We’d have to sell the casino because the license has to be tied to the brick and mortar. And – but there is a couple of aspects. Obviously, when there’s an onsite sports book like the one we have in Mississippi, we split the revenue, and we pay for the employee who’s actually there. So William Hill kind of sets the odds. It’s their technology; it’s their everything. And they paid for it; they built it out, and we get half the revenue, and then we have to pay for the employee who’s there, or sometimes two employees. And nevertheless, we still made $400,000 in six months, and I think we’re pretty close to $800,000 over the past year it’s been open, roughly. And so that’s just the onsite one. Now we will have an onsite one in Rising Sun that is actually a bigger sports book than the one we have at Silver Slipper, but we don’t have as many people coming through the casino every day. So I’m not sure it’s going to do more. It might do similar. But we made, even if we made $500,000 a year on a sports book at Rising Sun, it’s pretty significant for a place that’s doing EBDIT of $2 million or $3 million a year. Then I guess it’s almost anyone’s guess as to what the online component would be, but we will get a piece of the revenues of if somebody sits in their office in Indianapolis, signs up for an account and starts making sports bets. The deals we’re considering would give us a piece of the revenues with really none of the expenses, and that could be pretty material. And we know some of…

Okay, great. Thanks for that. And then turning to Colorado, so Phase 1 parking garage, you mentioned that that’s under construction and you kind of give an opening date. What’s the total expected CapEx for the project? Where will leverage – or what’s your expected peak leverage before the property opens? And then do you have any type of ROI analysis on what you can get on just Phase 1? Thank you.

Well, we’ve got $24 million of cash we’re sitting on. About $10 million of that is used in operations. So the $14 million will build that garage. It’s – obviously, we’ve spent some money already on the design piece and everything, but $14 million should get it completed. I think the all-in cost is around $15 million to $16 million. It’s not just garage. There’s a back-of-the-house building that goes in between because the garage will block the access to the back of our casino, which is where goods and supplies come in and our garbage goes out. So we had to create a back-of-house corridor in there. It’s a couple of million bucks. And they’re relocating the utilities, as you saw in that slide. That’s not a cheap thing, either. That’s being done. And so there’s quite a bit of stuff that’s being done that is a precursor for Phase 2. It allows us to get ready to roll into Phase 2. But if we never built Phase 2, I think the garage probably adds $1 million to $2 million a year of EBDIT to the property, just a guess. I know we looked at what some of our competition, there was periods where they added a garage. We looked at how much their revenues went up when they added it. And we worked backwards and said, "Yes, we’d probably get a pretty decent return on it." Now we’ve designed our garage to be easily the best garage in town. All the floors are flat. All the other garages are kind of slanted floors except for Wildwood, which is buried underground, which is inherently not – if you have an underground garage, you get all sorts of weird smells and exhaust fumes and so on. And while theirs is…

Okay. And then lastly, Dan, on Mississippi property’s doing exceptionally well, as you noted. That’s kind of been the bright spot for several quarters and actually a couple of years here. I believe that the Mississippi Gaming Commission just approved another casino proposal down in the region in Hancock County. If memory serves, this is not the first time that this has happened. So others have gotten to this stage and you haven’t seen competition as some would have expected. Can you talk about the real likelihood of a competitor opening up, the timing of that, just what your team on the ground believes is and could happen in that market? Thanks.

Well, I think there has been a discussion at the Gaming Commission of putting a moratorium on new licenses or new permitted spots, and that’s made a bunch of landowners nervous, so people have rushed in to try to get approval of their sites, thinking that if they want to beat a moratorium, if a moratorium happens. The particular site you’re talking about is actually owned by our landlord. The land underneath the Silver Slipper is leased and we have an option to buy it out for $15.5 million, but it’s leased for 37 years. And at the moment, it’s kind of a wash whether we buy it out or not. The rent is like $1.5 million or $1.6 million a year, and the buyout price is $15.5 million. But under our lease, we have the right of first refusal to buy that other piece of land if he was going to sell it to somebody else. The land is basically a swamp. You could clear that it’s a lot of wetlands, but just a little sliver of dry land along the road. I don’t think it’s really practical to put a casino there. And if you did, I don’t think the numbers would work. There’s another casino-zoned piece of land right off the freeway over in Diamond Head, and it’s a far superior piece of land, and it’s hard to make the numbers work there. If you take the Silver Slipper, the original cost that I think was $80 million, then we spent $20 million on the hotel. And if you adjust all that to inflation, it’s probably $150 million if you were to build it today, and it’s making $13 million of EBDIT a year. So if it got wiped out by a hurricane and we got $150…

Thank you very much.

Hey, Chad, I’m going to add in a couple of comments, too. Dan there is at the end of a long, long table because he’s out sick today. The thing to keep in mind for leverage is we’re at a point right now where leverage is on the decline. We don’t need to borrow any more to build this parking garage, and so we won’t borrow any more. And when you look at EBITDA, EBITDA’s certainly going up. Between sports betting, you should expect, or I should say you have seen market access payments for recent deals. They’re – you should expect that we are trying to get the same. But EBITDA itself is inherently going up, and if you were to look at middle of next year, just on a total debt-to-EBITDA basis, I’d be disappointed if we were meaningfully off of five times. So some food for thought there for you. If you look at July as an example, we had a hurricane down at Silver Slipper, which affected business there. But everywhere else, we had a pretty solid month, and so even despite the hurricane, we showed some pretty decent growth in the month of July. Now one month doesn’t make a whole quarter, so we’ll see if all that continues. But that’s right. And Dan mentioned as well that even despite the hurricane, Silver Slipper still is going to pull out a pretty decent July. So a little color there for you.

Okay, thanks appreciate it.

Thank you. [Operator Instructions] This concludes today’s question-and-answer session. At this time I would like to turn the conference back to our host for any additional or closing remarks.

I guess Chad asked all the questions everybody else was thinking about. So anyway, thank you, everybody, and I don’t feel as bad as I sound. It’s the later stages of this cold. But thanks for bearing with me and I look forward to talking to you next quarter. Bye.

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.