Full House Resorts, Inc. (FLL) on Q3 2022 Results - Earnings Call Transcript
Operator: Good day and welcome to the Full House Resorts Third Quarter Earnings Call. Today's call is being recorded. At this time, I would now like to turn the conference over to Lewis Fanger, Chief Financial Officer of Full House Resorts. You may begin.
Lewis Fanger: Thank you and good afternoon, everyone. Welcome to our third 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 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 broadcasting this conference call at fullhouseresorts.com, where you can find today's earnings release, as well as all of our SEC filings. And with that, I'll, sort of, make one big point before I turn it over to Dan. this is a very, very big call for us, because it is the last time you'll hear from us without Waukegan open. The next time we talk to you, Waukegan should be open, and Dan will give you some more color on that timeline and everything else. But I'm going to reinforce that point right from the start. With that, I'll turn it over to you, Dan.
Daniel Lee: Recognize Waukegan has probably, but certainly the permanent one will be bigger than our whole company and the temporary one might be bigger than our whole company. So it's pretty significant. The recent results show that the Rivers Casino, which is about a half an hour to our South is doing about $600 million in revenue. The Potawatomi Casino in Milwaukee, which is just over half an hour to our North does about $400 million and the Grand Vic, which is to our Southwest, is doing about $120 million. So the existing casinos in our neck of the woods are doing a $1.2 billion, if we just take a small piece of that business and then we'll actually grow the market, there's 700,000 people in Lake County, itâs one of the wealthier counties in the country. We're the only casino in Lake County, we're kind of in the middle of it. So I think we'll grow the gambling by people who live there, because it'll be much more convenient. We might nip a little bit away from our competitors and then we probably take a bite out of the video lottery terminals, which are doing about $109 million a year in Lake County. And -- but I think the biggest piece of it is we'll grow the market. Hey, Dan. So anyway, let me go ahead.
Lewis Fanger: Let's just speak up only, because people, I think --
Daniel Lee: Okay. I'm speaking . Okay, well, it's come along very quickly. You can see it on the website, which is AmericanPlace.com. The parking lots are paved, lit, striped, the kitchens are in place, you can kind of see it on the right side of the building they're in nine shipping containers at the kitchens. On the webcam, you don't see behind it, but behind it, we have basically office complex that's a bunch of construction trailers, kind of, a modular office complex and that's where the employee locker rooms and everything are. The decor is going up on the inside. This week, we'll be rolling out carpet and putting in slot basis and starting to install the slot machines. We should have all the machines in by the end of the month be about 1,000 slot machines, 50 table games, two restaurants. We have a third restaurant that will open probably in February little behind everything else. And then we're hiring people, probably the biggest challenge is that 50 table games takes a lot of employees. My guess is we will open with less than 50 and open more tables as we hire dealers. And so it's going to be hard to find enough dealers and get them all licensed and trained and everything to open everything at once. But generally, once you are open, it's easier to get people to accept job offers, and especially since if we open with less the maximum number of tables, the tip rates will probably be quite high. So but recognizes a very big checklist that we have to go through a lot of different checklist. So you got to remember each of these slot machines is basically a computer, and imagine if you had 1,000 computers from different manufacturers and different games and they all have to be hardwired back to a server that's not done with Wi-Fi, so there are miles and miles of low voltage cabling that runs in the floor of this place to hook all those up to a server and make sure all of them work properly. And it's got to be proven to us and proven to the Gaming Commission, and then there's also 100s of cameras all hooked up to surveillance DVRs and all our speed function properly. And so if everything went perfectly, we could be open in late December. We'd be the first casino in the history of the Midwest where everything went perfectly. So I think more than likely it's going to slip into January, but itâs somewhere in that timeframe we think. We're not going to open until we're confident that we're ready. You certainly don't want a flood opening like it has happened at some casinos. And when we're confident we're ready and the Gaming Commission is confident we're ready then we'll open. But it's coming, itâs not very far off at this point and we're excited about it. We are hiring people and having job fairs and so on. In Colorado, we're also making good progress. We're closing up parts of the building now and starting to get cold up there 10,000 feet in the mountains, and you can see that on the webcam for ChamonixCO.com, Chamonix Colorado dot com. The -- and very good progress there, wrapping it up so we can heat the inside so that we can continue the inside work through the winter. The drywall is going up in some areas. The glass is up on a lot of the building. The brick is up in the lower parts of the building. We have had some challenges. There are three different hotel towers there, for example. They are erected with medium gauge steel. We had difficulty finding enough the idea we would have had three teams of workers working on the three towers. We only had enough workers up there in the small town the mountains to have two teams. And so the third tower really didn't start until towers wanted to have tapped off. And so it's a little behind. It's now going up whereas towers went into it being enclosed. So most everything else is doing pretty well. We're aiming for mid-2023, but some attributes notably that third tower might be a little bit behind. So less certain on the opening date there than we are in Illinois, because after Illinois, and I wish we're installing slot machines, so itâs -- but it's looking pretty good. We're making good progress there as well. We've also been refurbishing Bronco Billyâs, which is next to Chamonix. And in this past quarter, about half of it was closed, including the steakhouse. So it's currently operating with much less gaming capacity than it has had in the past. It's got no on-site parking, no on-site hotel rooms, itâs kind of amazing that it's make any money at all and it wasn't making much lost a little bit in the quarter if I may, it was about zero. And so that gaming space, which is really the center chunk of Bronco Billy's will reopen by the end of December. Now we're going into the slow season, but it'll be nice to have that gaming space back. It matters really especially on weekends. And then the restaurant, which was a steakhouse where we opened as an Italian Restaurant in the first quarter, and we did that in part, because the Chamonix has a high end restaurant in it, which would be the highest end restaurant in the complex. And so we took what was the high-end restaurant in the complex and are rebranding it as kind of a more modestly priced Italian restaurant. So in the quarter, there was a lot of pre-opening costs, about $2.5 million, which of course affects net income, even though we back it out for EBITDA, that's a lot of payroll. We're hiring people and so on. There's some rent that goes in there, a lot of professional fees, but that all gets expensed as incurred these days, historically it was capitalized sometimes, but today it's all expensed as incurred. And obviously, it's a big drain on current net income, but it's really not really a current expense. It's an investment for future net income. Some other noise that was in the quarter, there's a progressive gaming tax rate in Indiana and we're one of the smaller places, so we have a low tax rate and Indiana law allows us to not be taxed on a certain amount of free play, but it also allows us to sell that untaxed free play to other casino companies. And so there are other casino companies in a much higher tax bracket. And so every year, for several years now, we have sold our free play where we'll go ahead and pay the tax on our free play, sell the ability to not be taxed on the free play to a different casino company and we kind of split the benefit of that with the other party on that casino companies spend different parties, different years. This year, and last year, both years, we got $2.1 million for selling the free play, this year, we did it in the second quarter, last year we did in the third quarter. So that confuses the results on both quarters. The counterparty wanted to do it in the second quarter, we didn't really care. It may be a little better if you do it in the second quarter, because in the back of few years ago when we had to shut down for the pandemic, we had sold the free play and the counterparty kind of didn't get as much benefit as they might have thought, because they were actually closed for a period of time. And -- but other than that, we're pretty indifferent, except that sooner might be a little better. And so selling it in the second quarter, instead of the third quarter is what happened and that confuses things. There were also stimulus checks last year, I don't know, what everyone else has been saying, but pretty much across our markets, we've been swimming a little upstream, because the stimulus checks went out in the later part of the second quarter last year. And no, middle of the second quarter actually. And so that helped the later part of the second quarter and the first part of the third quarter, because some of those stimulus checks ended up in slot machines. And so we had that going. Our insurance costs are up quite a bit, because we have a big casino on the Pacific Gulf Coast that tends to get hurricanes. We haven't had a hurricane there in a while, but it is definitely in a hurricane zone. It's a big part of the company, so we've always maintained our insurance at a very high cost. We've maintained very good insurance, because if it did get hit by a hurricane, it would be pretty monumental for the company. That will pretty significantly in the year ahead or at least relative to income, both because we'll be more diverse and probably negotiate a better deal with the insurance companies, but also we might be willing to accept a little higher deductible and things like that on the Mississippi property, because it won't be half of the company anymore. It'll be much less than half the company. And just to put that in perspective, the increase in insurance under the current contract is running about $0.5 million a quarter and the insurance contract comes up for renewal on May 1st if Iâm correctly, a bit confused.
Lewis Fanger: Yes, May 1st.
Daniel Lee: And so we have another few months of that and then I think we'll have much better comparisons on the insurance thereafter. We do have some new competition out there, not huge, but in two different markets, there's new competition in -- at our Mississippi property, there is now online sports betting in Louisiana. We did have the closest sports book to Louisiana, so we would get some people coming over and gambling at our sports book. Now that they can do it on their iPhone from home, we're seeing that business being up quite a bit and that was not a big part of the property was like 5% of gaming win, but it's down quite a bit. So we have one small piece of our gaming win is down a lot. And that'll just be what it is. There is talk about Mississippi eventually having online sports betting as well and I suspect that does happen and we would participate in that and maybe get some lift. But at the moment Mississippi doesn't have online sports betting and Louisiana does. And then a competitor put these historic racing machines, which are really slot machines into a racetrack in Boone County, they actually tour down a pretty decrepit doubling there if they had torn it down probably would have fallen down. And put up a building, which not the most beautiful building in the world, but it's there. And it's got a bunch of historical racing machines in it. And so as typically happens customers go and check out the new place. And I think when they realize that the new place is, kind of, a dark airplane hanger that sells hot dogs off the cart in the back, they'll come back to us, but that was a little bit of an impact on us since September. We're not the closest casino to that competitor, if somebody opens a new casino that really is nice, it tends to -- has a chance of growing the market. As I think we will in Waukegan. In this case, they're not growing the market. They're just taking a little bit of market share. And the revenues that they get are mostly from downtown Cincinnati and Lawrenceburg, but a little bit from us and actually the closest casino to them is Belterra Park, which is in the Southeast side of Cincinnati. So there is a new competitor in that market. Like talking about going into the selection, the cost of food is up and that's affected us some too. And then on the positive side, we did not have a wildfire at Lake Tahoe on Labor Day weekend this year, and so that helped us out. So -- but really this is one of those quarters where and it was considering everything that's going on, it was an okay quarter, it wasn't a great quarter, it wasn't an awful quarter, operationally. But frankly, we're spending so much time getting these two new places open, because they really are the future of the company. And we're very excited about that. So I think in future quarters, itâs almost like not even worth talking about some of the smaller properties. So anyway, on that, I'm happy to take questions.
Lewis Fanger: But before we take a question, I'm going to ask, a footnote everything that Dan said there. But to put it all in perspective, if you go back to pre-COVID, the properties on a year-to-date basis back in 2019, property margins were about 13.5%, compared to today year-to-date margin -- property margins are about 25.5%. So we've gotten a good 12 percentage points of property level improvement and that's with Colorado essentially at a breakeven margin, that's with the additional insurance costs that Dan mentioned in Mississippi. Fast forward to a year from now, two years from now with both Waukegan and then Chamonix opening, I strongly, strongly suspect you're going to see those margins continue their way back up for what it's worth. And I'm just going to end it down with, this is our last call before Waukegan opens. Next time we talk to you guys, that thing will be open.
Daniel Lee: And I actually, I failed to mention on the online sports books, we have three licenses in Colorado, three in Indiana and one in Illinois. Last year, all six of those in Colorado and Indiana were earning their minimum guarantees that we have. Churchill pulled out of the business, so we have one available in Colorado, one available in Indiana. We're looking at whether we contract them out again or maybe just to keep the opportunity. In the meantime, we've signed one in Illinois and Illinois is by far the most valuable, because the population of Illinois is bigger than Colorado and Indiana combined and there's only one license permitted for each casino. And so there's fewer licenses and a lot more people. And so that license is $5 million a year, which exceeds the minimum guarantees on the other four. The reason if somebody comes along and offers us a great deal of money for those licenses, we'd probably contract them out again, but we have been looking at the possibility of doing it ourselves not to compete with DraftKings and FanDuel who are in these big marketing wars that we wouldn't want to spend the money to try to be in. But we could offer online sports betting, you can buy or at least the software, you can even buy and lease the people who set the odds and all that stuff. And just do it really for our own customers, and that allows us to do, because we have mailing lists of each of these casinos and tens of thousands of people. And then we can tie it in that says if you -- when you bet on the final four games and so on, we will give you credit towards around the Gulf or towards a weekend stay at our hotel and it's a lot easier for us to do that than it is for DraftKings or FanDuel, because they don't actually own the hotels, they're a little more complicated. And so we think we could probably do it and make a little bit of money. But maybe more importantly, the bigger opportunity in that area is online gambling where you can actually play a slot machine on your iPad, that's not yet legal in any of the states we're in. But in the States where that's happened, that's been a much bigger market than online sports betting. And that is a field we could do on our own. We think it will be legal in the States we operate in and the not too distant future. And so one of the appeals of trying our own online sports betting is we'd have to hire a handful of people and learn how to market it, learn how to run it and so on. And we would be developing the expertise to get into online gaming when it comes along. So, anyway that's where the online. But in the quarter, you were comparing four licenses versus six last year, because Illinois will not be up and running until after we get our casino open, so probably in the spring. And so we have a temporary down comparison on contract sports wagering, but contractually it's going to be up once we open in Illinois and then when we figure out what to do with the other two licenses potentially up even more, so --
Lewis Fanger: Yes. All right. With that, let's take some questions.
Operator: Thank you. Our first question comes from David Bain with B. Riley. Your line is open.
David Bain: Awesome. Thank you. First to Lewis, I appreciate your strong comments that you're going to be open with Waukegan by the next call. But at this point, what are the major items that determine a Waukegan opening next month versus January or February. Is it the Gaming Control Board reviewing everything? Or are there more structural items that you need to tackle?
Daniel Lee: Well, let me be clear. Our interest in the Gaming Control Board are perfectly aligned, we want to have a smooth opening. So when our customers come in, everything goes smoothly. And remember, I'm old enough to remember the opening of the Taj Mahal in Atlantic City, where things didn't work properly and they opened and four hours later, they had to close. And they had Michael Jackson appearing in their showroom that night of his complete fiasco. And kind of the image of the place never really recovered from it. So I mean, we want everything to be working properly. And in particular, I mean the slot machines, we don't need to have every one of the 50 table games open, but we want the slot machines to be working and we want to have the systems all working properly and the surveillance all working properly. And then at some point when we are -- as we start zeroing in on the day, like roughly by Thanksgiving, we have to make a decision on when people actually start getting paid and because there's a large number of people who then say, okay, you're on the payroll on this date, and then a number of them are already going through licensing. That's a long process. But then they show up and we have to train them and make sure they understand all the normal stuff you do when you take a new job, right? And so then you're training them in a new facility, then there's a point where you say, okay, we're going to have play nights, where you take two or three nights where you're playing with artificial money and you get the restaurants going with invited friends and family just so the cooks learn how to cook and the waiters learn how to serve. And if all that goes smoothly, then you can open thereafter. But there are times where you go through the play nights and then all of a sudden you find out the cage didn't balance and it's off. And then you're all scratching your head saying, okay, what happened? Why did the cage got balance? And you have to go back through it again. So when we're confident that everything's working properly, and then includes having the right staffing of the right people who are licensed. When the Gaming Commission is confident, we'll look at each other and say, okay, let's open. And I know everybody wants to have a date certain. It would be nice to have a date certain, but that's not actually helpful, because if you're not ready, you shouldn't open. And so we're zeroing in on where it is, and I think it's somewhere in that six weeks and a little complicated by Christmas falling in the middle of it. But I think it's more than likely January. But frankly, if the servers donât work right or if things donât coordinate right, it could be early February. But I think it's -- we're zooming in on it pretty quickly now. And -- but I can't give you a precise date and -- or let me put this -- I'm not going to give you a precise date.
Lewis Fanger: We have one in our heads just, so you know David, weâre going to --
Daniel Lee: But David, if I tell you it's January 15, we're actually ready to open on January 5, don't you want to open on January 5. And if I tell you it's January 5 and we're not really ready to open, then we'll have a screwed up opening. So when we're confident we can open, we will open.
Lewis Fanger: I'm going to give you a little bit more color and maybe a different perspective on it, Dave. So part of it is keep in mind, usually when you're opening a normal casino, you're building it for two or three years. And you've got -- we're condensed. If you look back in May of this year, we had a site that was green. There was no strong structure on it, there was no digging, there was no pavement, there was nothing. And so where -- what does that six months removed from that and on the verge of opening. Now I'll tell you the good news is when the slot machines are on-site, that's how you know you're very close and those do start up -- those get installed starting this week. Those -- I don't want to trivialize it, but a lot of what we're really looking at from the slot install point of view is really going through the checklist, making things just making things -- sure things are communicating right. When we did the slot install up in Northern Nevada as an example, we had issues with economy server where we had to spend an extra couple of days just working through some of the kings. That sort of stuff does happen. And what just complicates it a little more than usual is if you get delayed by a couple of days, you've got a whole slew of holidays right around this time of year as well. So a couple of days might throw you off by a week or two, that's really the reason for some of our hedging. But we feel very, very good about where that process is right now, how it's going. It's actually looking pretty darn spectacular. I think on the inside, I think people are going to walk in the doors and be very, very pleasantly surprised at what we've done on the inside. I know you saw it with no walls. Now we've got walls, David, and we've got cameras and we've got decor hanging from the ceiling and very, very soon slot machines. It's looking pretty cool now.
Daniel Lee: The other thing I will add is in early December we will start the advertising campaign with, kind, of a banner or a voiceover that says opening soon. And then as we start to zeroing like when we're starting the play nights and then you change the opening soon to opening on X, so --
David Bain: Right on, okay, perfect. And is there anything you guys are seeing from a macro perspective or as you continue to visit both Cripple Creek and Waukegan during construction that would change your return calculus either direction. And Lewis, I mean you mentioned I did visit Waukegan, I got a deeper appreciation for the surrounding hotels and potentially drivers with that and the ingress. I mean, either direction? Are there some things that you can identify one or two that would make you more excited with either project? And then just the macro anything that you're seeing there that changes your calculus?
Lewis Fanger: I mean, I don't want to speak for Dan, but I kind of feel better than ever for what it's worth. You know, part -- if you look at Waukegan first, part of the optimism comes from the fact that rivers open their expansion back in April and since that expansion they've been making pretty consistently $48 million, $49 million of gaming revenue per month, $600 million a year on a run rate basis. And when you look at what we -- the numbers that we're striving for, we don't need to make $50 million a month to make our math work and get $50 million a year in EBITDA, we need $0 million, $11 million, $12 million a month. And so I will tell you, I am more optimistic as we watch their success in realizing that they're continuing to ramp up their own property by ramping up their own table games. Over at Chamonix, I think it's pretty true as well. Even versus a year or two years ago, the population that we have to go after right in that Colorado Springs market has continued to grow. That whole state population has grown, but especially Colorado Springs and even South of Denver going down towards cities like Castle Rock have really grown. And so at this point, I think we have a bigger potential customer database than I would have envisioned three, four years ago. We've watched Monarch open up to great success, I think most people two years ago would have said, wow, I don't know how Monarch is going to get the numbers that they're going to get. We were on the other side saying, well, absolutely they're going to do well, because the gaming spend per capita is so low and fast forward to today there I think doing much better than people gave them credit. But I don't -- none of that cost the others. Without hurting the others, and none of which caught us off guard, because it was always we thought pretty apparent in just that gaming spent per capita figure. So they've kind of proved the concept all over again and that's ultimately good for us. So we're feeling very, very good, despite all that you see on the news. I mean, by the way, Dave, even if we are off by a little bit, cycles come and go, but you can haircut our numbers all you want. But any way you haircut them, you're still going to get pretty meaningful growth off the numbers that we have today.
Daniel Lee: And then actually this is showing the old analyst in me if you dig up the Churchill 10-K. They own and I think it's 62% of rivers, but they carry it as a unconsolidated entity, because the decision making is still shared with Neil Bluhmâs company. They only have two material unconsolidated entities, they admit that themselves in their 10-K. The other one is Miami Valley, which they own 50-50 with Delaware North and similarly share control. In 2021, before they built their expansion, the EBDIT from unconsolidated entities was $306 million. If you go back and look at Miami Valley, which has been an unconsolidated subsidiary for several years, it does about $100 million a year of EBDIT. So that says that rivers is doing about $200 million a year of EBDIT.
Lewis Fanger: Pretty expansion.
Daniel Lee: Pretty expansion and $400 million or $500 million of gaming revenue. Now you got to be careful like, if you're just looking at EBDIT and a gaming revenue in the regional markets, the margins are very then the margins are more like 25%, 30% when you have the non ones around us are doing. I don't think those are and a recession is two quarters of recession. Now the Federal Reserve is trying very hard to bring down inflation and threatens to cause a recession in order to do so. What's an ideal world for us, if there's no recession and inflation goes back to a modest number and maybe they get rid of the tariffs. So when we built the permanent, we can buy steel and glass from China, that's an ideal world. But we're doing okay. We're starting the design process for the permanent casino in Waukegan. Now the temporary is just about done. So we need to do that, we -- obviously, we've designed it. We had a whole presentation with the renderings and everything. But we need to get into the details, the working drawings and precisely what are the restaurants and all that stuff. And that's a lot of design work we've been interviewing different architectural firms to help us with that. And we'll spend the next year doing the design, the engineering, the interior designs and all that stuff. And then it'll take about two years to build. And we're allowed to operate the temporary for two years and then the Gaming Commission can give us permission to go a third year if it's necessary to build something of the quality we're building. And so I think it probably will be necessary.There's no certainty they'll give it to us, but I think it's highly likely they will. So because we promised a hell of a nice permanent casino and we intend to do that and I know that, that's what they want as well and you can't do these things overnight. So -- but as a prior to the matter, we have -- we didn't harp on this, but we should because it's kind of pretty crappy equity markets, pretty crappy bond markets and we don't need any money, which is a really good thing. All of our debt is fixed rate debt and we're sitting at two hundred and something million dollars is in the press release. And we're confident that that's more than enough to complete the temporary and complete Chamonix and then and we have about two years before we have to figure out how to finance the permanent one in Illinois. We still have a standby financing commitment from a large private equity firm that is always, kind of, a backstop if we need it. It's kind of expensive. We hope not to need it. Bond markets open and close. We have a lot of REITs calling us all the time on whether they'd like to do Waukegan as a REIT-owned entity or we do a sale leaseback component for other places. So we have a lot of different ways we can finance the permanent. The real answer is we've got two years to figure that out, no reason to do it now or even frankly, you don't want to rush into it now, because the negative carry would be high and our bonds are not callable until February of 2024. So we have a long time to figure this out. But currently, we're in great shape. We don't need money.
Lewis Fanger: I know we said a lot Dave, but Waukegan opens soon.
Daniel Lee: I'll take another question. I'll take a half an hour to answer that one.
David Bain: No, we're looking forward to a lot of good stuff very near-term from you guys. Thanks Dan and Lewis.
Lewis Fanger: Dave, thank you, Dave.
David Bain: Thank you.
Operator: Our next question comes from Chad Beynon with Macquarie. Please go ahead.
Chad Beynon: Hi, good afternoon. Lewis, Dan, thanks for taking my question. Appreciate it.
Lewis Fanger: Hi, Chad.
Chad Beynon: Just kind of following on some of the numbers there, can you kind of help us with CapEx in the quarter? And then what's left to spend as a temporary including the license? And then at Chamonix? Thanks.
Lewis Fanger: Yes. So at Chamonix, we spent about $34 million, $35 million in the quarter. The balance that's sitting in that construction, that restricted cash account is basically what we need to finish it. So that's a $156 million left to spend. Here in real time, we're spending roughly $12 million, $13 million a month in the near-term. So you might get a $30 million spend for the fourth quarter and the balance in next year. Over at Waukegan, it's pretty hefty spend at opening and just after opening for what it's worth in part, because that build is so fast. But we spent about $15 million in the third quarter. You could have like a $30 million, $40 million spent here in the fourth quarter. The big chunk is really going to be in 1Q, because that gaming license fee is $32 million in change that gets paid. We expect shortly after opening not before and then you get a bunch of construction payables that lag as well. So hopefully that helped you there.
Chad Beynon: That's perfect. Thank you.
Daniel Lee: And actually that $30 million might be delayed too, because if we don't open all the table games, we don't pay all the tax right away, because once we hire dealers, the tax becomes due. And so that may -- there may be a large payment made in January and then smaller payments in February and March as we're able to hire dealers. So --
Lewis Fanger: A very good point, Dan.
Chad Beynon: Okay, great. And then next just kind of on the current business. Firstly, I know it's probably hard to dissect this, but any trends you can talk about, kind of, within your databases? I know we're all expecting that lower end of the database and maybe some of that retail end to slip a little bit? And then secondly, if you can help with anything that you were seeing in October?
Lewis Fanger: Well, you're --
Daniel Lee: So far has been pretty good October is first.
Chad Beynon: What I've seen. But anyway, depends on the property.
Lewis Fanger: Yes, you're not wrong there, Chad, that lower end of the database has seen a little bit of that play go away. I think part of that has been by design for what it's worth where we're kind of actively trying to incent people in the upper tiers versus the lower tiers. If you look at, kind of, using Silver Slipper as the example, gaming admissions have been down. Part of that is sports book, but part of it is just slower end play not coming by customers and sales are the ones that are coming in the door are spending relatively similar amounts for what it's worth. That cost line is what's really hitting us over that Sliver Slipper right now for what it's worth.
Daniel Lee: Which is property insurance and food costs.
Lewis Fanger: Yes.
Daniel Lee: But I'm not going to digest on the cost of crab.
Lewis Fanger: Thanks, again.
Chad Beynon: Thanks, guys. We'll be looking at our mailbox for the invitation.
Lewis Fanger: We'll make sure you get there. Yes, please be well -- we'll email you a week before.
Daniel Lee: By the way, to be clear similar to Monarch and some other casinos, I mean, the actual grand opening party will be at some later date.
Lewis Fanger: Yes, that's what I was sending it yet, Chad. So we'll probably find out a good week before. What the opening days and then maybe a monthly will have the grand opening for guys like you.
Chad Beynon: Thanks guys. Appreciate it.
Operator: Our next question comes from Edward Engel with ROTH Capital. Please go ahead.
Edward Engel: Hi, thanks for taking my question and looking forward to the grand opening. You talked about Chamonix, the hotel potentially not being open by mid-2023 at least part of the hotel. Can you just talk about some of the puts and takes for that property to open in? Would you consider a phased opening at Chamonix or is it just much better to open everything at once?
Daniel Lee: No, we would consider a phased opening, that's one of the things we're trying to figure out is what's kind of essential and what isn't essential. Like I know when we opened L'Auberge in Lake Charles, the swimming pool area and the spa we're not done yet. And it was no big deal, I mean, we just told people come back when the spot -- when the pool is done. Even though we opened going into the summer. It opened a month or two after the hotel opened. And in terms of guestrooms, when you stay in a hotel, you don't really know how many rooms are in the hotel. So if we ended up opening with 200 rooms instead of 300 rooms, the guest experience would not be different. But obviously, you want the casino open, you want the restaurants off the casino open, the parking garage open, you want a lot of things open. And yes, we end up looking at and saying, well, you don't really want to spend over time to try to speed up tower three. And when you say it's not done yet, it'll be enclosed. I mean, from the outside, it'll look finished, it just there might be guys inside still installing carpet. So we're still several months away. So it's not certain that we can't catch up. But I think it's pretty good likelihood that we end up opening most of it and then some other features catching up later, which is similar to what happened with Monarch. And these are small -- these are very big projects in these very small towns. So finding the construction workforce isn't the easiest thing in the world.
Edward Engel: Great. Thank you. And then I guess relative to the topic of part you had in September, just any comments you have on maybe connectivity or your guest has gives -- like you said it's a smaller town. Is it a town that you could take and can handle some larger events that you're hoping to host? Or is there still some connectivity that you need to be approved?
Daniel Lee: Yes. I mean, we're 45 minutes from the West Edge of Colorado Springs and about an 1.15 from the East Edge of Colorado Springs. So we're an hour away from Colorado Springs. Teller County, which we're in, has like 25,000. It includes Cripple Creek and Victor, which is nearby, but it also Woodland Park, which is pretty good size town, Fluorescent, which is pretty good size town. I mean 25,000 isn't huge, but that's where a lot of our employees come from. To put it in perspective, Black Hawk as a casino industry is probably 5 times what Cripple Creek is today in terms of number of employees and so on. And it's in Gilpin County and the population of Gilpin County is about 6,000. And so their employees all come out from golden and evergreen, which are 45 minutes away. So finding employees is a challenge in Cripple Creek, but it's actually an even bigger challenge in Black Hawk, because we do have significant talent, not that far away from us. Now the customers principally come from the Colorado Springs area in the whole Colorado Springs MSA, which is Colorado Springs and Pueblo and Canyon City. Now Pueblo is closer to two hours away, but we're the closest casinos to it. Canyon City is a little less than one hour away. And then we have a strong secondary market and that's Denver itself. Now Denver is one hour from Black Hawk and two hours from us. But if you live on the South side of Denver, which is like Castle Rock down in there and you take into consideration the traffic issues that Denver has these days, you're probably closer to us. And then there will also be regular -- there will be regular gamblers from Denver, who will go to Black Hawk say once a month. But maybe once or twice a year, they make the extra drive down to our place just to experience something different. That's not unusual. And but given the Denver's 4 million people, if we get a small slice of Denver, it's nevertheless pretty material for us. And recognize, I mean, I always have to remind myself like what we're building is really big for Cripple Creek and really big for Full House Resorts, itâs three hundred grounds, itâs 10% the size of Treasure Island. I mean, when you say we're going to have meetings and conventions, I'm not talking about Comdex. I think we already have booked the annual convention of Colorado Morticians for example, which I know in Las Vegas is a pretty good gambling group of people. They have to be very, what's the word subdued in their hometown, but when they come to Las Vegas, they party pretty hard. Well, so we have some groups like that, that we're booking, but they're not 1,000 rooms, they're 100 rooms, right? And so -- but we are putting things on the books now for medians and conventions. And I think we'll do a pretty good business of that as does Ameristar. Ameristar and Blackhawk has a nice meeting room area and they keep it very busy and it helps fill that hotel midweek. Monarch has very limited meeting area. Just the confines of their site, they didn't have a place. We actually have more meeting room space than they do, even though they have a lot more hotel rooms than we do, so --
Edward Engel: Great. Thank you. Appreciate the color.
Daniel Lee: Yes.
Operator: Our next question comes from Ryan Sigdahl with Craig-Hallum Capital Group. Go ahead.
Ryan Sigdahl: Good afternoon, Dan, Lewis. Just maybe one from us, you've covered most of it here, but can you talk through the margin cadence throughout the quarter, kind of, month-to-month and then in October, mainly trying to think through you mentioned a lot of different costs within each of the properties? And curious if kind of Q3 margin is the right run rate going forward or if they sort of impact you more in the back half of the quarter? Thanks.
Daniel Lee: I mean Q4 is seasonally slower than Q3, so you would normally in a normal year have some margin compression going in to Q4. Looking at Q3 itself, like the food costs was up pretty steadily through the quarter. Obviously, insurance costs were up pretty steadily through the quarter. They're very steady. I mean, it's all annual cost. It's amortized, right? And then the Turfway Park their new facility opened in September. So that affected Rising Sun in September, and I think it will over time have less than effect on everyone else in the market, because there's a natural tendency to everybody go see the new place and then, okay, we saw it and then you go back to your favorite. Some people stick with new places. Some market share you lose forever, but most of it you get back. And then the Sports Book issue in Mississippi that's been happening ever since January 1, when it went live with online gaming and this is in Louisiana. So we will lap that at the end of the fourth quarter. It's like that little segment of our business is off like 50%, but it's actually a little segment of our business, even little relative to the Silver Slippers. So you hate to see a piece of business up 50%, but at least it's not a big piece of business. I guess, I'm not -- I mean, at this point, there's different things that happen like I know -- I haven't heard the final outcome, but I know we had one of those great events that happened this weekend, because we had a Golf Tournament in Mississippi, we invited all these high rollers in and they all came in on Friday night. And then late Friday, I heard that it was supposed to rain and be very windy on Saturday, so they weren't going to be able to play Golf. And so I haven't seen the numbers yet, but usually that leads to a very good weekend. So you have things like that happening that on a month-to-month basis. I mean, the fourth quarter, we don't get that gaming capacity back in Colorado until probably mid December. And so the Bronco Billy's will still be limping here in the fourth quarter. I think the Silver Slipper is much easier comparisons compared to the fourth quarter of last year. That was doing okay in Northern Nevada going into the fourth quarter. So I don't know. Yes, frankly, what's really going to matter is what are we doing revenue in our first month in Waukegan, and because we're all guessing a little bit. And even if it's at the low-end of the range, it's going to be a very important property for us.
Ryan Sigdahl: Yes. No, I was more so thinking sequentially. It felt like a lot of the costs from Louisiana competitive pressures, et cetera. Louisiana and the reset on insurance, et cetera, would have impacted Q2 as well. And there was just some sequential stuff.
Daniel Lee: Yes. I mean, I don't want to harp on it too much, but if the Silver Slipper literally half of our food cost is crab. So we give away a lot of crab in our buffet. And when you look at the cost of food sold, it goes up and down with the cost of crap, so -- Itâs not material does that same as jokingly, because a couple of conference calls ago, I got a little carried away with it and talked for 10 minutes about the cost of crab and at the end of the day it's never material. Yes.
Lewis Fanger: But those insurance costs was property insurance costs are pretty meaningful and Dan's rate. That resets I think on May 15 of every year. So you really didn't get a full quarter of that for what it's worth in the second quarter that we just had. So there's stuff.
Daniel Lee: Yes, right about now is when you wonder whether we had to make a tough decision last spring of -- do we maintain, kind of, platinum insurance on the property, because insurance rates went up so much. And we opted to do so just because it's so important to us relative to the company today. But we're right at the end of hurricane season, we didn't get whacked. So maybe we could have gambled a little bit. We would have been fine, but it's easy to say with hindsight. So --
Ryan Sigdahl: Good. Thanks guys. No follow-up questions on the crowd. Good luck.
Lewis Fanger: Thanks Ryan.
Ryan Sigdahl: Waukegan open soon by the way.
Lewis Fanger: Yes, I think we have time for one last question, yes.
Operator: And our next question comes from David Levine with MidOcean. Please go ahead.
Daniel Lee: Hi, David.
David Levine: Hey, guys. How are you? Thanks for taking my questions. First question, I just wanted to firm up the unrestricted cash point and just an expectation for the next couple of quarters? So the next two rather it seems like if my math is right, unrestricted cash is around $85 million. And you guys said that at Waukegan, which is where more unrestricted or rather the CapEx would come from that's within earnings and unrestricted cash that would be around. Lewis, I think you said like in the low $70 million range over the next two quarters, and then you have the interest payment, the bond interest payment of, like, 15%-ish. So that's, like, into the mid-80s for call it, like, fixed costs? So if you have kind of, like, 85% of liquidity away from, kind of, Chamonix and then that gets me to, like, 85% of between CapEx and interest. That leaves, like, obviously, like, your EBITDA to provide just, like, the rest of liquidity there. Is that kind of the right way to think about it? Obviously, weâre modeling.
Daniel Lee: No, we have a $49 million credit facility.
David Levine: And the revolver, which I was going to get to and say like -- and say you probably feel pretty comfortable about necessarily not needing to draw that just, because I just kind of laid out the CapEx and interest and you have EBITDA to take care of the rest, right?
Daniel Lee: Yes, we will probably draw some of the revolver, because you don't really want unrestricted cash going to near zero. And so the revolver is not very expensive, so we will probably draw some just not close to the line.
Lewis Fanger: Yes. And I think -- but you are thinking of it the right way, David. There's obviously a bit more liquidity from that revolver, not a bit a lot more liquidity from the revolver. And then the other thing I would just tap on is I kind of put numbers out there that are assuming all these builds come in a timely manner and based off of our experience what you tend to see especially with those construction payables is those last payments actually lag on a bit longer than what I'm modeling most likely. So there's that piece too.
Daniel Lee: And if you model our existing properties are paying the interest expense on our debt, so when you start having free cash flow from the temporary, it could repay whatever you draw on that revolver in the next couple of months. You're going to repay in the couple of months after, I mean and so very quickly. But you're doing the math right, when we say we're confident that we have enough money to do all this, that's including a $40 million credit facility that's undrawn. But if we didn't have that, we think we'd be okay, but it'd be a lot tighter. That's the math you're doing.
David Levine: Yes. Yes. Okay. And then I just had a couple that I don't want to squeeze in. Any word on the â sorry.
Daniel Lee: We recognized $40 million, I mean, at this point, the numbers of what we have yet to spend are pretty certain. So I mean, it's not like we're going to have a $40 million cost overrun with that will not happen, right?
David Levine: Ye, yes. S any word on anything on the hard rock menominee process? I mean, I'm sure the election tomorrow night might be somewhat important, although I'm not entirely clear now. But any kind of perspective on that since the last time we spoke?
Lewis Fanger: I'll make two quick points and maybe Dan will add something there. I do think you're right. It's important to watch the election and depending on the day, it keeps swapping back and forth with who's going to win. So but I think maybe the more important point is if you pull up a satellite photo of that area and look at what is relatively -- the space between us and going up towards Kenosha and Milwaukee, a lot of that land is largely farmland for what it's worth. The dense areas are going to the South of us, down towards rivers, going to the West. And so when you think about closeness of our casino to our feeder market, even with the potential casino opening up that way. I think we're still going to be the closest casino, not to $1.1 million anymore, but still a very, very, very high number. We haven't put it out there. The impact is relatively marginal because of the lack of population density as you go north. The other thing I would keep in mind is we'll have -- should have speed on our side. So we'll open relatively closely. We'll have proximity on our side. And then with the permanent, we're going to have quality on our side as well. And when you have one of those, it's always good. When you have all three, I think you should do quite okay.
Daniel Lee: And pay 1.5% of gaming revenue in a contribution to the city and you get into the city's municipal budget and back into it and they're doing revenues about $400 million a year, gaming revenue and have for a long time. And so this is a very successful travel casino and a tribe with significant resources. Kenosha would have a much bigger impact on them than it would on us, because it would draw from Milwaukee, which is their core. And we're not assuming we get much from Milwaukee, we might get some. But and so I think there will be, let's just say, the two tribes may have a little bit to fight over here.
David Levine: you think tomorrow night is and you think the election is relatively important though for that?
Daniel Lee: Well, I don't know because it's not clear whether either candidate would necessarily be in favor of this.
Lewis Fanger: Yes, I would agree with Dan on that. Itâs -- I can assume one scenario versus another, but it's kind of going off of assumptions for what it's worth, yes.
Daniel Lee: My guess is both of them have been kind of as often happens in something like this, they are non-committal so that they can raise money from both tribes, because they need it for the election. And then after the election, you find out where they really stand.
David Levine: Fair enough. Thanks a lot guys.
Daniel Lee: I hate to be a cynic, but how it often works.
Lewis Fanger: Yes, but we think we should be okay anyway, David.
Daniel Lee: Okay. Thank you, everybody. And we'll --
Lewis Fanger: Weâll talk next quarter, Dan, when American Places opened, yes.
Daniel Lee: They wonât do this from American Place. All right. Thank you, everybody.
Lewis Fanger: Thank you, guys.
Operator: This concludes today's call. Thank you for your participation and you may now disconnect.
