Good day, ladies and gentlemen and welcome to the Full House Resorts Fourth Quarter Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Lewis Fanger, Chief Financial Officer of Full House Resorts. You may begin.

Thank you, and good afternoon, everyone. Welcome to our fourth quarter earnings call. As always, before we begin, we remind you that today's conference call may contain forward-looking statements that we are 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 adjusted EBITDA, for a reconciliation of these measures, please see our website as well as the various press releases that we issue. And lastly, we're broadcasting this conference call at fullhouseresorts.com, where you can find today's earnings release as well as all of our SEC filings. With all of that said, it was a strong fourth quarter, we did pre-announce our results. So I don't think earnings will be a surprise to anyone. Our actual results were within the range that we gave about a month and a half ago. I'll walk through those results in just a second and then Dan will walk through our broader strategy with his thoughts on Chamonix and Waukegan, including by the way our plans for a temporary casino that will open in Waukegan this year, this upcoming summer. Let's start first with the fourth quarter. It was a great fourth quarter with revenues up 13.1% from the fourth quarter of 2020. Adjusted EBITDA isn't a clean comparison between quarters. The fourth quarter of 2021 had $1.7 million of additional expenses related to corporate initiatives that weren't present in 2020. And that we don't expect to occur in 2022, and so adjusted EBITDA could have been even higher for…

Yes, let me address kind of five year strategy for the company, as we see it these days. As Lewis mentioned, EBDIT of our existing business is about $50 million, before $10 million of debt and all of our debt at this point is the one big bond issue. That's at 8%. So it's about $33 million a year of interest expense. Our maintenance CapEx at our existing properties is pretty small, about $5 million a year. We have NOLs that we'll still continue to shelter taxes for a while. And then, we're going to have accelerated depreciation on the new stuff we're building. So in a five-year timeframe, we don't expect to be paying any income taxes. Now, as Lewis mentioned, $340 million in cash only takes about $10 million to run existing operations. So and then we have a $40 million undrawn revolver. It takes about $215 million from this point to complete Chamonix. We've spent a fair amount already and recognize, like, as we're talking, there is a foundry somewhere pouring steel beams to our specifications. We don't have to pay for them until they arrive at the property. So, more than -- more has been committed than would appear for a $250 million project, but there's $215 million to go to complete it. The Temporary -- let me stick to Chamonix for a moment. This is a four star hotel, four star casino, the first of its kind in Cripple Creek. Colorado, as a whole, is an underserved market. I mean, Denver is 4 million people; Colorado Springs is 1 million people. That's most of the population of Colorado, and the gambling per capita is significantly below that of other markets on the US average and significantly below any place that has casinos. Part of the…

No. You're good, Dan. Want to take some questions?

Yeah. That'd be great.

[Operator Instructions] We’ll take our first question from Ryan Sigdahl with Craig-Hallum Capital Group. Please go ahead.

Good afternoon, Dan, Lewis. Congrats on all of the recent success and awards and licenses and everything else and appreciate the comments as well.

Great.

Thanks. Yeah.

Maybe switching back to the base business, because you answered most of my questions on The Temporary and Chamonix and everything else. But can you comment on the core business, the casinos you have today, performance in December versus January, versus February and the impact Omicron potentially had there?

Our businesses stayed strong. I mean, Omicron, we had issues like a lot of businesses with a lot of employees getting Omicron and we had to scrambled to fill in, but I think that's mostly past us. Our businesses stayed pretty steady. The biggest operating struggle we have is really in Colorado, where we've got no surface parking. And we've managed to kind of continue to make some money despite that, but it's pretty torn up and of course, it's kind of weird to be sitting here talking about putting slot machines in Waukegan and stuff when there's a war going on in Europe. Obviously, the war has no direct impact on us. Price of gasoline going up and it was a distraction and so on. But, at least historically when the price of gas went up, it was good for regional gaming. When you get on an airplane and fly to Las Vegas, you're actually burning more oil sitting in that airplane than you are getting in your car and driving to a regional casino. So the price of gas goes up, the relative cost of coming to us versus other vacations is cheaper. We don't want to go up this much. So not that I want the price of gas to go up, but when it does, I don't think it affects us very much. In fact might even be ironic, positive. I guess, I'd rather the price of gas not go up. Because I buy gas too and all the things in the economy and the reasons it's going up, but business wise, I don't think it's a negative for us. And Omicron, I think is kind of behind us and hopefully, the pandemic is somewhat behind us. I mean, people aren't wearing masks anymore. I view it as anybody who hasn't gotten vaccinated. It's now at this point almost like somebody was a heavy smoker. They are taking a personal health risk. And similar to, I don't want to be on an airplane where people are smoking. Well, it's not allowed to smoke because of secondhand smoke and so on. But so it's kind of similar. It's going to become part of just our normal lives. And we'll just deal with it. And I think things are pretty normal and pretty normal as pretty much same results as last year.

Good, Dan. You mentioned the surface parking issue in Colorado construction route. Have you noticed an improvement since you added the valet parking and the shuttle services there or is it just kind of this is the run rate given all the construction around?

We put that in, just as we were closing off our surface parking for the construction. So, it was kind of an offset. And I think if we hadn't done it, we'd be really struggling. And it does cost us some money to do that. But we've held their own, but I'll tell you what the differences is, when you look at Colorado as a whole, since last time its went away, markets up like 40% and Black Hawks the biggest piece of that, but even Cripple Creek is up pretty strongly. We're not and so, we had one competitor at 100 room hotel, and we understand they're doing very well with that. It's kind of a Fairfield inn type hotel. It's pretty simple hotel, but the market was starving for rooms, so they added 100 acceptable rooms and I think they're doing well with that. And even those when we back out what we think they're doing and look at us. It's, like, we think everybody in Cripple Creek is up except us. And the only reason we're not up is really in parking. And otherwise we'd be up nicely. So but that's just something we'll do work for another year, and when Chamonix is opened. I recognize Bronco Billy's, we're talking about Bronco Billy's, but even Bronco Billy's has no parking. It's got construction all over it. And part of its casino was closed because it's related to the construction and its hanging in there. So I joke with the general manager, it's almost like the guy at Money Pai, Simon, when they cut his arm off and he's bleeding and he says, hey, I'm still here. Cut his other arm off, he's still there. That's Bronco Billy's is today. They're making money despite all the stuff around them.

Good stuff, Dan. One last one from me, then I'll turn it over to the others. Just I think you mentioned it a bit, but can you talk through the timeline on Waukegan of temporary up the summer, but it sounds like you're going to run that for three years with the permanent out to 2025. I guess, when are you planning to really break ground on the permanent and then accelerate? Does the bond being callable in February 2024 have to do with that, or is it just kind of nature of a timeline?

No, it doesn't. The call date of the bonds are irrelevant except that that was when we were trying to figure out how to finance that made a logical way to finance the cost of the temporary was to do an add-on to the bond deal, which is really two-year money because it's callable in two years. The -- we're moving as quickly as we can. We don't control everything. So for example, we have to get certain permits from the city and there are certain meetings set up in the next few weeks to allow that to happen. Certain things have to be approved by the Gaming Commission and they've been working very well with us so far. And we need their permission and just about everything we do and assuming that everything continues to go smoothly. We can be open the summer. We actually have a timeline that has us open for 4th of July. But everything has to happen just perfectly for that. And that never happens. So don't expect the 4th of July, I think, if we're opened by Labor Day, it's a hell of a successfully quick. Remember we were just chosen in December. But that's what we're doing. We're moving as quickly as possible. In fact, it's kind of exciting. I remember, somebody asked me what color did they want the slot chairs and I said whatever is in stock, just whatever is in stock. And we've rented offices now. We've got -- we bought an extra piece of land that was pretty important and that has enclosed it, but we have it under contract, so it will close. We're moving so fast. And it's actually kind of fun. You don't have tie -- like, the more permanent casinos you really stop and think…

Thanks, Dan.

Even though -- even though it's going to be a temporary we are working on some things that give it a little more splash. I won't ruin the surprise yet, but it will still be a very, very special temporary too.

We'll take our next question from Chad Beynon with Macquarie. Please go ahead.

Hi, good afternoon. Thanks for taking my question. Dan, Lewis, you laid out the vision for the next five years and I think a lot of the questions that we're going to get from investor's going forward will be around Waukegan and Chamonix. Wondering kind of how you're thinking about the current portfolio? There's certainly bids out there for assets you have a few that have put up some good results. Is there a scenario where you would look to potentially divest at the right price to help, maybe some of these future funding needs given that a lot of the future and your stock price is going to be determined by the returns at Waukegan and Chamonix? Thanks.

Well, as we're public company, I guess, anything's always for sale. But we don't have a need for the money. I kind of outlined how we expect to do it. Our existing bonds are eight in a quarter and we issued them at 102. So it's about 8% money in our – we can borrow money under a credit facility at 4%. So, to sell a property in order to get cash, you're comparing that against borrowing costs of 4% floating and 8% fixed. So it has to be a pretty good multiple to make that attractive. And frankly, I'd like to gathering diversity, I mean, today, half of our income comes from the one property, the Silver Slipper in Mississippi, which is a great property. But we're going to be far more diverse in a couple of years. I guess Waukegan will still be the giant, but it's kind of nice to have some diversity. In Northern Nevada, we have the two small properties, but the same management team runs both of which allows us to afford a better management team than either one could probably afford on its own. And so even there, it's like if – and we get offers all the time for Stockman's, because I think a lot of individuals are like, hey, that's something I can afforded by myself. But you know, it makes a million a year and by sharing the administrative costs with the casino at the high end, Tao it works. If you've sold one of those two, you'd have a management team that's kind of expensive to be carried by the other. So Bronco Billy's! is a partner Chamonix, so I guess, Rising Sun, if you were offered a big price, but frankly property is doing really well now and pretty big property and we're pretty happy with it so.

Great.

I guess, the answer is, look, I'm never going to say no, if somebody offers us $100 million for Rising Sun, I will beat him to the bank. That'd be great. But I think at the prices we're likely to get for any of our assets. We're better off holding them.

Okay. And then I wanted to ask, I believe you talked about this during the process of seeking the license in Waukegan. It's -- is it still your view that one of the casino, the Chicago casino licenses, I believe there's three who are bidding for that now, that if and when that's finally constructed and operating, that that'll have very little impact? I think, you've noted that, you primarily compete against Rivers and then maybe some of the properties over the state line and closer to Milwaukee. But is that still your view that there’re new competitions, so to speak, in the state won't really affect you in Downtown Chicago?

Well, we've always assumed that there would be a casino in Downtown Chicago, because that was talked about -- for years it’s been talked about. So if you're building a $500 million place with a long-term view, you naturally assume that's going to happen. We'd also assume that there'd be slots at Arlington Park, that was in our original projections and now the Chicago Bears are moving there and there's not going to be slots in Arlington Park, so sometimes you get a pleasant surprise. If you look at the geography, anybody go into those Downtown casinos would have to drive past Rivers to get to us. And so, I think, because of that, you’ve -- we're quite a bit further from Downtown Chicago than Rivers is. So I don't think it has much impact on us. And it'll be a little different experience too. It may be -- if you look at the quality of the competition, the other thing that kind of drew us to the market was, other than Rivers, all the other casinos in Illinois near Chicago are old riverboats. They're 25 years old. They got low ceilings, the smoke kind of hangs in them. They’re multiple deck boats, they don't have to sail anymore, but they had to be on a river. Well, the rivers aren't near freeways. And so you have to get off a freeway and drive on often kind of circuitous two lane roads to get to almost all of the casinos in the state. The only exception is Rivers. Now you can go -- that's part of why you go to Indiana. Now Indiana has the Hard Rock Casino, which is right off a freeway and the giant Caesars place in Hammond is pretty close to the freeway. But those are on the far side of Chicago from us. But if you look at Elgin, Joliet, Aurora, they're all old riverboats. And so downtown Chicago, I'm sure will be a nice place, because they're all talking about big expenditures. Ours is going to be nice place and between the two of us, we’ll have the nicest casinos in the Midwest, a lot of people there.

That drive -- yes, and that drive from downtown to us is a little bit of a hike with traffic and everything else. So the nice thing about our location is we're kind of tucked up in that northern suburb, really, all by ourselves. I won't go over everything that Dan just said, but when you get bored, look at that map and look at the nearby casinos, you'll realize pretty quickly where the closest casino to 1.2 million people, that is -- that in itself is a tremendous benefit.

Yes. And we will be the closest casino to 1.2 million people, both before and after the Chicago casino opens, doesn't affect that math at all.

Okay. Thanks. And then, just one last housekeeping. What's the -- I guess, what percentage of the Chamonix construction bill has been finalized at this point?

It's better than 70%, I believe, has been subcontracted to the subcontractors. Might be higher than that, but I haven't checked with the construction guy lately.

Okay.

But it's -- and that means it's either work we've already done or it's already been subcontracted to, so.

Great. Thanks. I appreciate it guys.

Yes.

Yes. Thanks, Chad.

We’ll take our next question from Edward Engel with ROTH Capital. Please go ahead.

Hi. Thank you for taking the question and congrats again on Waukegan and appreciate all the color on this call. Just kind of getting back to that CapEx budget, looks like you lifted it a couple dozen million on Chamonix versus the last time you kind of checked in. Was that all just things like cost inflation and supply chain issues, or is there anything incremental that you're kind of doing there?

No, it was -- sadly it was, what you said supply chain issues and frankly unemployment being so low in Colorado, getting people to work on the backside of Pikes Peak at 10,000 feet. We had to pay up, or our subcontractors had to pay up. I mean, our original budget of 180 was based on the design we had and the experience of our contractor who largest contractor in the state. There are the people have built Ameristar and Black Hawk and we were all kind of shocked when we put things out to bid how much higher it was. And then I think it's a lot of things that feed into that, like some of these tariffs that were put on by the former president on steel from China and places like that. They haven't gone away. And as you know, for whatever reason, the following administration kept the tariffs in place, which allows the US steel companies to charge more than they ever had and on and on and on. So we were -- we've been fighting for that for quite a while. And in fact, when we made that change in the budget for Cripple Creek, I had Alex or development guy go back to our contractor and say, let's rethink, what is this thing really going to cost us at Waukegan, because we had presented the whole building and everything? And the state came back and said, are you willing to pay us more in taxes upfront? And our answer was, you know what, we have figured out that this building this beautiful sexy building we showed you with all these restaurants and everything isn't going to cost $400 million, it's going to cost $500 million. And that's our increased bid. We will build what we promised you, but it's $500 million, not $400 million. And that increase in that budget was dictated by what we learned in Cripple Creek. Hopefully, we have that sort of issue taken care of in this expanded budget in Waukegan. Time will tell, but we went to the fat side of what we thought we could build it for.

Perfect. Thanks for the color. And then just kind of on the quarter and I guess the last couple weeks. Have you seen any change in behavior since the mass mandates were lifted in Colorado or Nevada? And would it be fair to say hopefully, things have kind of picked up above where they were probably the first quarter and then some that the fourth quarter as well?

No, it's been stable. I haven't seen an increase because of it. I see people smiling. But maybe they were smiling behind their masks. I don't know. But I think everybody's kind of happy to have the mask gone. But I don't -- I haven't seen a lift in our business because of it. I think frankly, some of our markets, we were required where they were required to wear masks. They were barely wearing the masks. And so it was -- they were wearing masks, but half the time they were down around their chin.

Terrific. Thanks for the color.

Yeah. No worries. Let me add, no complaints for what it's worth. No complaints about where our business sits today if that helps you.

Actually -- for whatever reason that maybe it was a pleasant surprise. But historically I found, Olympics were bad for our business. People stayed home and watch television. And so I, kind of, expected we'd have a soft period during the Winter Olympics. And we didn't. I don't know whether that meant that, not as many people were watching or maybe it was like hey, I don't have to wear a mask. I'm going to go out I don't want to watch the Olympics, I don't know. Our business has been fine, nothing unusually up or unusually down.

We'll take our next question from David Levine with MidOcean. Please go ahead.

Hey, David.

Hey. Thanks. Hey, how are you guys? Thanks for taking my questions. First question just around the current operating environment with respect to gas and food prices I thought your color was interesting. Can you guys talk about some of the moving pieces around keeping the guidance or the base business the same, do you think perhaps like older customers who haven't gambled, because of COVID maybe have more income will come and that'll offset some of the potentially weakness from the higher gas and food, or do you just not expect there to be really much of a drop off? And then, can you speak also to the margin side, you think you'll be able to keep up the robust margins to like a jumbled question there, but just a little bit more color around just the inflationary environment would be helpful? Thanks.

Yeah. Actually in there you had a lot of questions. But I found the older segment back, when before there were vaccines and stuff. We saw a definite fall off of gambling by older people that fortunately was offset by younger people. We've been able to maintain the younger people and the old people came back. That happened really a couple of quarters ago. And at this point, we're back to a normal age spread. We're doing the same revenues with a lot less marketing dollars, which is part of why our margins have improved and that's a function of putting the Konami system in at the right time. And frankly, paying -- being smarter about our business when we went to the pandemic closures, we kind of went to zero based budgeting and examine everything. And as we reopened, we and frankly I think a number of the other casino companies looked at it and said, what $5 blackjack tables don't make money, let's stop offering it. We don't have to have a two-for-one buffet special midweek et cetera, et cetera and that's helped our margins. Cost of food is, obviously, going to affect our cost of food as well. And we will seek to pass that through. So it'll, again cost more. Now a lot of our customers are comped anyway, but they'll end up burning through their points faster when they get comped. They probably don't perceive that as much, so. But -- and then on the cost of gas, I mean, I just stop and think about our customers come almost predominantly by car, very few -- we get a few people fly in for town, but it's almost everybody's driving. And when you have two or three people in a car typically and you're driving 50 miles, that's 50 miles, there’s two gallons of gas and you're dividing it amongst three people. And so whether the gas is$3 a gallon or $5 a gallon or $8 a gallon, doesn't really change the cost of that trip very much because you're really not using that much gas. And -- now if you're -- if you're living in Cleveland and you're in Cincinnati and you're thinking of going to Las Vegas, yes, it takes a lot of gas even in a 737 for you to physically move from Cincinnati to Las Vegas. And that's why I think in the past when the price of gas went up or down. It doesn't seem to affect us very much because we're kind of the easy alternative.

Interesting. Okay, that's helpful. And then on the skin points. My sense was that before kind of this announcement the way to think about the skin revenue, which is almost 100% passed that was kind of in the $7 million to $9 million range and correct me if I'm wrong around that maybe $8 million to $10 million Do these additional skins -- how do you kind of frame how much more revenue that that might add to the business?

Well, the -- we had a couple of things. One is they paid a market access fee upfront. And so Churchill, which was one of our partners in both Indiana and Colorado, announced they're exiting the business, which is disappointing and when we did the deal with Churchill they had the opportunity to be the DraftKings of this. The online betting had been legal for Pure Mutual's for years. And they had a website for years and they even had an office in Mountain View, California. And then they kind of dropped the ball. They didn't step up the way some of these other guys did. They ended up with a minuscule market share and they were losing money out so they're exiting the business, which is and so there are other people who are still embracing the business who will step in. Now, the market access fee they paid which was from Churchill over $3 million, Alex

No, no, $2 million total down, $1 million each.

$2 million total, right? We've only amortize because you had to amortize that over the life of the contract. So, we've only taken a small piece of that income. And so we will -- it's not refundable. We'll get back in income. And we'll find replacement players and there are other players who want to be into it. And there'll be another market access fee and there'll be a commitment with somebody else. But then the Illinois license for sports betting which is new is significantly more valuable than any of the others. And so we were at guaranteed minimum. Lewis was $7 million a year from the--

$7 million without the market access fee and $7.6 million if you include the annual--

Amortization

Yes, that's right.

The amortization, with Churchill leaving you know that shrink some we've there's confidentiality clauses and each of those contracts so we can't tell you exactly which one each is. But if you said well, you just lost two out of six because Churchill's pulling out that's true, but we hope to replace them. And so, there could be a gap because the replacement entity will have to get licensed and so on. So, the $7 million a year could shrink a little bit as we find a replacement and get them licensed. But then when you add on Illinois, I'd be surprised if we're not north of $10 million in that segment.

Illinois. Okay. So Illinois plus the replacement, which gets you north of 10.

Yes. There is no guarantee that the replacement will be on the same terms as Churchill. It might be better, it might be worst. But there are companies out there. And you say, if you go from 7 as of March 15, they are guaranteed minimum be something less than 7. If you've said a-third less than 7, you'd probably be in the right ballpark. I'd be happy to tell you the number, but I can't, because confidentiality clause, but Churchill was insisted on. But if it was a-third, you'd go from 7 to what 4.7, then you find replacements. You're back to something close to 7 and then you add Chicago and you're probably north of 10.

And then my last question, just when I think about The Temporary this year, if you talk about August, opening something around there, for EBITDA there for the year, obviously you're kind of exiting the high season, so you wouldn't exactly do like a-third of 50, but would it be something like -- I'm just thinking for EBITDA for The Temporary for this - for just this year. Would it be like a quarter times 50? Is that a fair estimate or am I not thinking about --

But even with our board, we said, assume that our existing business does X. And it's so uncertain when we can open and we said, assume that the first month were open we earned zero, because the first full month. So let's say you opened July 15. When you first open any casino, it's a temporary or the permanent, you have much higher costs. You end up hiring additional employees, because employees don't really know their jobs yet. And some are going to quit and they find out that, serving cocktails in a casino isn't what they really want to do in life and save a lot of turnover, a lot of training costs. So you really don't make a lot of money. Even Bellagio did not make a lot of money in its first month or two. And then, you start getting it under control. So if you open, July 15, assume you wouldn't make any money in July, probably not much in August, maybe nothing. And then September you start making money and by the time you get to October, maybe you're making $4 million a month, something like that. So how much ends up in this year will depend very much and exactly when we can get open. It's not completely in our control.

Okay. Thanks a lot, Dan.

You are not wrong, David and that you can get some harsher winter weather over there in Chicago. But knock on wood, hopefully, the sheer volume of people that we have right around us will help offset much of that seasonality.

And also you get lookie-loos. You get people who want to see the new place, where the first new casino to open in Chicago land in 10 years probably. And how long -- I forget how long Rivers have been open; it's pretty close to 10 years now.

Yes. And they're making $0.5 billion a year in revenue, by the way. Yes.

All right. Well, good. Best of luck.

Yes. So, I mean, in terms of having an earnest mile trying to put a number on this year and job I used to do as well, is, I guess, pick an opening date. Your guess is, within that third quarter, is about as good as mine. So if you say assuming it opens August 1, then they wouldn't make much money in August. They make some money in September, and then $4 million a month thereafter and use that number. But we're moving as quickly as we can to get this open. And exactly when is -- a lot of things are not in our control. So --

With that, Dan, we've run out of time, so feel free to close it out.

No, that's it. I mean, we're working hard. It's pretty exciting. I think we got a great future, and we had a great team of people and everybody's best in chops on this. And everything -- Waukegan is a game changer for us, and it came at the right time. It's the right size. It fits in perfectly. And you can see once you put that together with Chamonix, the five-year strategy is as good as it gets. And now we just need to execute that. So thank you, everybody. Take care.

Thank you, everyone.

Ladies and gentlemen, this concludes today's conference. We appreciate your participation. You may now disconnect.