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Presentation

Operator: Good afternoon, ladies and gentlemen. And welcome to the Full House Resorts first Quarter 2025 Earnings Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call, you require immediate assistance, please press 0 for the operator. This call is being recorded on Thursday, February. I would now like to turn the conference over to Adam Campbell. Please go ahead.

Adam Campbell: Thank you. Good afternoon. Welcome to our first 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 those measures, please see our website as well as the various press releases we issue.

Lastly, we are broadcasting this conference call at fullhouseresorts.com, where you can find today’s earnings release as well as all other SEC filings. And with that said, we’re ready to go. Good afternoon, everyone. We’ll be quick with the comments today, and we’ll go into Q&A relatively quickly. But we do have a lot of positive things to talk about this afternoon regarding the quarter, especially at our three biggest properties. At Silver Slipper, we have Angie Trimmer Webb as our new general manager there. If you recall, she came to us from Rising Star where she did a great job in taking that property from essentially breakeven and earning a pretty meaningful income out of that property for the last few years. We also have several new department heads that she’s brought in over there as well.

That team has found ways to grow our bottom line, adjusted property EBITDA grew by 21% versus last year’s first quarter. That’s despite a small decline in property revenue. We think the bulk of those changes are occurring, and we believe that so far, we have more than $2 million of annualized cost savings there.

Lewis Fanger: To put it in perspective, last year, we did about $12 million of adjusted EBITDA at Silver Slipper, and we think this year, we’ve got a very good shot of hitting the mid-teens. At Chamonix and Bronco Billy’s, we also have a new general manager. Brandon Lent Lenton is our new GM there. He previously ran some casinos for Bally’s and Blackhawk. He’s got his start as a gaming regulator for what it’s worth up in Canada, so he knows that side too. And then he had several senior roles at marketing companies that specifically targeted the gaming industry. Brandon came to us late in the first quarter, so the first quarter results do not include much of his efforts yet. Revenue grew 34% in the first quarter. Expenses grew at a similar pace, and so our EBITDA was still at a little bit of a loss.

But, sequentially, we did improve versus the first versus the fourth quarter of 2024. Now we’re in a phase where we can focus on continuing the growth to grow the business while also improving the bottom line. The revenue growth piece is simple to state, but as you guys know, it always takes time. We built a beautiful building with unparalleled amenities in our market. And we intend to use that to bring a customer to town that has historically never visited. If you ever wanted proof that we’re in a very undersaturated market, all you need to do is look at the market’s gaming revenue. We have more than doubled our gaming market share without any meaningful impact at all to the other gaming operators. On the cost side, we’ve already found several million dollars of cost to take out of the system on an annualized basis.

They include over $1.5 million of annual savings in the food and beverage department, a new overtime approval process that has eliminated more than 90% of our overtime cost, that adds up to more than $800,000 per year. And about $350,000 of annual savings by using our own team to replenish the minibars in the rooms. On the slot side, we’ve found another $3,000 of savings as well simply by switching from revenue share to flat daily fee economics for some of the lease gains that we don’t own in the building. On the marketing side, we’ve also improved, especially on the targeting of our marketing and especially on our various social channels. That should let us be more efficient, but also allow us to continue to grow the top line. A new VP of advertising started here a few months ago, and, literally, we have a brand new CMO that we signed yesterday.

He’ll be starting next week to help further improve our marketing starting first with Shamini. That new CMO came to us via Alf Capri. He was the VP of marketing there for a while. Left the industry for a brief moment of time and then most recently was head of marketing for a very large Indian casino in Southern California. At American Place, we’ve consistently had year-over-year growth. That continued here in the first quarter where we had an all-time record gaming revenue month in March. We crossed $10 million for the first time almost reached $11 million. Most of you probably saw April’s gaming revenues yesterday. We did well, just having a low hold for the month of April. We crossed 100,000 guests in our database for the first time at American Place.

The pace of new names going into the database has not really slowed down in recent months. That’s a good sign because it strongly suggests that we aren’t done growing in our temporary casino quite yet. Two other quick notes. We completed the sale of Stockman’s on April 1. So we no longer have any relation to that property. And then on the balance sheet side, we did extend the maturity date of our revolver from March of 2026 to January of 2027. We also started voluntarily paying down some of that revolver balance with our excess cash. Having recently taken the balance down to $25 million. I’m sure I forgot something. Dan, you wanna clean up in there?

Dan Lee: I just mentioned that we are gonna open a poker room here in the next couple of months. In Illinois. We didn’t have one. We’re adding one. When you say the temporary is not done growing, that’s part of it. And you’ve mentioned marketing. You know, in the casino world, marketing has changed pretty dramatically in the last several years. You still have casino hosts dealing with the highest-end people, and you still have sales and marketing people trying to book groups and conventions and so on. But a lot of it is database marketing, dealing with the database and trying to figure out how to market them with free play offers and all this sort of thing. And we were probably behind the curve on that versus some other casino companies.

And so we’ve reached out and hired a chief marketing officer for the company, somebody who we think knows that stuff and can help us be more savvy. And that’s gonna be particularly important in Colorado, where we have a great property and our revenues are not where they should be. I guess that’s the main thing. I mean, there’s a lot of management changes, and I think that’s one of the things that really say we’ve significantly upgraded the operating management of this company in the last year compared to where it was. I mean, not that it was bad, but I think we’re much better now.

Operator: That’s it. Happy to take questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press 1 on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press 2. If you’re using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Jordan Bender of Citizens. Your line is already open.

Jordan Bender: Hey, everyone. Good afternoon. It seems like you’re making good progress across multiple properties in the portfolio. I want to start in Colorado. You know, we’re starting to head into, I guess, the busy season, you know, on the mountain. And I guess, can we kinda get a glimpse of what you know, April and May look like there? And in terms of you lost money there in the quarter, just kind of what that looks like as well from an expense standpoint as we head into Q2? Thank you.

Dan Lee: Well, seasonally, Q2 is quite a bit better than Q1. And I think it will we’ll be making money in the second quarter. Whereas it lost a little bit of money in the first quarter. But there’s two things involved in that. One is hope to continue to grow revenues. We’ve had great revenue growth since Gemini opened, and we think that will continue as it matures. But on the expense side, we found a lot of low-hanging fruit. I mean, those of you who have known me, I don’t I’m not quick to make management changes. I tend to back the people and try to help them evolve. But in this case, it became obvious we had to make some wholesale changes, and we have. And there’s some things like they were operating a pop-up buffet facility that was really supposed to be just for the opening because we didn’t have $9.80 prime done yet.

But they ran it throughout the year, and we lost, like, a million and a half dollars on it, which is ridiculous. We have a deal with the laundry company where we pay by the pound, but there’s supposed to be a true-up done each month or quarter. I think it’s each quarter. And nobody had done the true-up, and that was several hundred thousand dollars. And Lewis mentioned a few other things. So having a fresh set of eyes, we also hired an outside consultant. We enlisted help from our GM in Chicago. We descended on the property, frankly, I fired three people in about ten minutes. And we took over. And we found all sorts of issues. We had chefs selling boxes of crab meat to other restaurants. And so on. And so we have cleaned it up and kind of ruthlessly, and we will continue to find ways to reduce costs and improve revenues.

And I think it will be profitable in the second quarter. I think it’ll be more profitable in the third quarter and show a profit for the year. And grow from there. People forget. I mean, I’m old, and I was part of the team that opened Bellagio and Treasure Island and Monte Carlo and there were some birthing pains with each of those too. And twenty-five years later, they’re all known to be solid successes, and that will be true here too. It’s a great property and a great market, and it will be an upward trend from here. Even a couple of years ago, about this time, we were talking about how difficult it was to hire people in Chicago and get them through the gaming licensing and we had our challenges there too. And then once we got it under control, it’s been up every quarter since it first opened.

So it’ll be the same here. And then we didn’t touch much on because I knew the question would come up, but I’ll go ahead and answer the question. You know, we are right now, working on the design very diligently for building the permanent American place. And we have a top architectural firm by the name of WATG. We have some other most talented people working on this. They did all the work for the Venetian and Palazzo and a number of other places in town. It’s probably the largest architectural firm that only deals with hospitality. They do hotels all over the world, but a number of casinos. And then frankly, we went to town studying Durango Station. In fact, I spent so much time in the back of the house, they started to think I worked there.

And they did a lot of smart things there. And we’ve kind of learned from that and incorporated that into the design for the permanent American place. We hope to break ground, intend to break ground in the second half of this year, maybe even late in the third quarter. And along those lines, we enlisted Richardson and Company, Bill Richardson, and I were I was at Mirage Resorts. He was one of the major owners of a company called Gold Striking. And we did the joint venture for what is today Park MGM, which may be the most successful in terms of ROI, most successful resort on the entire Las Vegas Strip. And it’s it has been very, very successful. And he was the guy who built it, and he had a construction background, and then he became when Circus Circus acquired Goldstrike, he became one of the bigger shareholders of Circus Circus and had a construction.

So he built expansion on luxury, built Mandalay Bay. And when Mandalay Bay got sold to MGM, he started a construction company that, by the way, built Durango Station. Built something go Fountain Blue, built the West addition of the convention center, built the sphere. Maybe the largest construction company in Las Vegas today. His partner in that is Yvette Landau, Many of you may know Ellis Landau. That’s his wife. She’s a very competent lawyer. And they qualify as a WBE. And we’ve enlisted them to be a project manager for us in Chicago. So it’s important that the contractor be local because they will know the trades and the subs and all that. But constrict there’s not a lot being built in Las Vegas these days. So Bill had some extra expertise that he’s going to give to us.

Obviously, we pay for it to help make sure that the project runs smoothly. And so we’re lining up the construction expertise to make it a very smooth project. And we will need to raise the money for it sometime in the next year. I mean, we can do the early stages out of cash flow. We’re watching the bond market pretty carefully because that’s where we intend to go. Everything was doing great until started talking about tariffs, and then all hell broke loose. Hopefully, we will get back to a more normal market, but we have quite a bit of time to figure that out. And multiple ways to finance it. And so that’s where we’re going with that.

Lewis Fanger: So you got more than what you bargained for there, Jordan, but I’m gonna add a little bit to Dan. If you look at the bond markets, I will say this, the bond markets today versus what you saw back in early April after the tariffs were announced, that market has really come roaring back in a big way. It’s, you know, really right now open for bigger companies, not quite us yet. But if you look at just kind of spreads in general and recent deals that are priced and go through the list of things, that’s off to a promising start. So I look. I don’t know when the market will be open for us. The reality is, as Dan said, we can go well into 2026 we need to be out in the debt market. So we don’t need to be out in those debt markets today. But I think the reality is, I think the markets are gonna open up sooner than what I would have told you three weeks ago.

Dan Lee: And I will also tell you the technically, we do not have a date by which we must open the permanent. Though the way the law is written in Illinois, there is an outside date at which we can operate the temporary. And that outside date is April of 2027. So we would like to open the permanent by August of 2027, because we have 600 employees, and we wanna transition them very smoothly over. We probably spent $5 or $10 million hiring and training those employees. And if we ended up opening let’s say, October 2027, we’d end up paying a bunch of employees for not working. And if we were a bigger delay than that, you might be faced with laying people off and trying to hire them back later, which we’d rather not do. Now I think if we had to, we could go to legislature and get the law changed.

We already did that once because of the Potawatomi lawsuit. We pay over $20 million a year of gaming taxes, and, of course, we employ a lot of people. And so nobody wants us to have a gap between the temporary and the permanent. And as long as we work diligently, we should be able to build this inside of two years. That’s about the time frame that Penn is spending to build their place in Aurora. It’s about how long it took, the Seminoles to build their place in Rockford. Our place is similar in size and scale to those. And so that’s where we’re going. But I back when the bond market fell apart when tariffs were first mentioned, I started thinking, okay. What do I do if I can’t get the money in the next, you know, eighteen months? And the answer is you go back to the legislature and get the law changed.

And you just run the company as is, and we would actually generate more cash flow and have to borrow less so that it wouldn’t be the worst thing in the world. And then in terms of, like, construction price, you know, when you when you look at the whole budget, which is $325 million, it basically breaks into thirds. About a third of that, a little less than a third of it, is soft cost, things like capitalized interests and design fees and that sort of thing. About a third of it is actual material. And that’s where, like, the price of steel comes into play. But steel’s a relatively small part of the overall price material. I mean, there’s a lot of concrete in the building, for example, and electrical wiring and stuff like that. And, you know, one of the things about tariffs is, like, well, just like Apple said, they’re importing iPhones now from India as many as they can.

Well, I’ll bet if you live in India and you buy an iPhone, you’re gonna get one from China. And so there are all sorts of ways around this. If you don’t wanna pay a 45% tariff out of China, well, those phones go to India, and then we get phones from India. Or somebody goes down to Mar A Lago, kisses the ring, and then they decide that, oh, iPhones don’t have to pay tariffs, which is what they did do. So we’re kind of watching this. But the price of steel is that’s the one thing that clearly jumped, and it jumped as soon as they put a tariff on foreign steel. That’s a relatively modest part of the project. The other third is the labor. All the electricians and carpenters and so on that it takes to actually build this. And while that it’s a union job, so the wages are somewhat set, nevertheless, you will get better efficiency.

In a recession than you would normally. You’ll and so the subcontractors would be a little hungrier if there’s less being built. And so, if all this tumult results in a recession, we may benefit from that more the cost of construction. Than it would impact us in our normal operations. Know, we operate these regional casinos. We’re a cheap vacation. And so when you hit a recession, people might be hesitant to come to Las Vegas. Certainly, Canadians are hesitant to come to Las Vegas. We don’t get any Canadians in our places. And, you know, the dollar is down, so it’s about 10% more expensive to go to Europe now than it was four months ago. And so if people stay home and do domestic vacations instead of going to Europe, that would benefit us. And so I think we’re in pretty good shape relative to the tumult that’s going out there in the world.

I mean, what I prefer that everything be stable? Of course, I would. But when you look at the choppy terrain, I think we’re in pretty good shape for. So I’m sorry. You answered a simple question. We gave you a fifteen-minute answer. So my goal, Jordan, was to leave things for people to ask questions about.

Lewis Fanger: But Dan took it all with you.

Jordan Bender: I think he answered everyone’s question in the process. So for the interest of time, I’ll leave it at that. Thanks for all the comments, guys.

Dan Lee: Thank you, Jordan.

Operator: Your next question comes from John DeCree of CVRE. Your line is already open.

Maxwell Marsh: Hey, guys. This is Max Marsh on for John. Thanks for taking the question. Obviously, you guys just finished the sale of Stockman’s three biggest properties in a better position now. Strategically, how are you thinking about the rest of the portfolio at this time?

Dan Lee: Well, you got the three big properties. I sometimes refer to us as a three-legged stool, which is Mississippi, Chicago, and Colorado. The casino in Tahoe has always been on a short string. Hyatt won’t do a long-term lease for something like that. But we’ve operated it now for almost fifteen years, so it keeps extending. We have a good relationship with them. The owner, which is Larry Ellison, is now fixing the place up. We hope to continue there. We make good money there, and we have a good relationship with Hyatt. And as they fix up the place, we think it only gets better. If you were to try to sell it, you wouldn’t get much for it because it’s a short-term lease. But it’s a nice business for us, and we’re happy to have it.

And then the only other significant asset is the rising star. Tough market. It was the first casino in the region. It made a lot of money in the early days. But since then, newer casinos have opened every direction from it. So our strategy there is to try to relocate it. There’s a progressive tax rate in Indiana. And, at the lowest revenue level, you pay the least gaming tax. Well, there used to be three casinos in that level, us and two places up in Gary that were old traditional riverboats as well. And in the last five years, the state allowed those two to relocate. And one is right off the interstate in Gary, and it’s now the number one casino in the state. And the other relocated to Terre Haute where Churchill opened about a year ago, and it’s doing very well as well.

So we went to the legislature and asked if we could relocate. And the legislature passed a bill, which is either been signed by the governor or sitting on his desk, and we expect it to be signed. That calls for the gaming commission to have a study of where what markets could you add casinos to that would be most beneficial to the state? And I will tell you right now, I’d be astounded if the study showed anything other than two largest cities in the state, which is Indianapolis, and Fort Wayne.

Lewis Fanger: The way, was signed, Dan.

Dan Lee: Okay. It was signed. Okay. So that there’s a $100,000 study by a third party that’ll be taken by year-end. And quite sure certain that study is gonna say Indianapolis with 2 million people has no casino. And Fort Wayne with 600,000 people has no casino. Now Caesars has casinos 32 casinos, each of which is 30 miles outside of Indianapolis. And then the church at one in Terre Haute is 50 miles outside of Indianapolis. And so, of course, they don’t want it to be Indianapolis. But the city of Indianapolis has some historic buildings in need of renovation. They’d be interested in having. And so that’ll be an interesting thing to play out. Caesar’s lobbied very hard to have this not happen and ended up changing it so it doesn’t say specifically relocate.

It says what’s the biggest opportunities because they’re trying to figure out how to make the opportunity theirs. They first tried to kill it, and they weren’t successful at that. At the end of the day, they’re not gonna want it in Indianapolis. And I’m hoping that they will become our ally and say, okay. Let’s go to Fort Wayne. But, frankly, if we could go to Indianapolis, that’d be very interesting. But we’ve been dealing with New Haven, which is a suburb of Fort Wayne that’s interested in this. We think it’s a great market. There the people in Fort Wayne to gamble have to drive, like, an hour. And so this is a big opportunity for Fort Wayne, and it would be us, and it would be for the state. And we think the study is gonna show that. And then there will be an argument in the next year legislative session whether this is a new license or can it be a relocation of a license.

Well, in the politics of Indiana, a relocation of a license is not an expansion of gaming, and there are two precedents for it. And so we will argue that we should be allowed to relocate. Even Rising Sun is in favor of it because we told them that we would pay them twice the taxes we’re paying them now. Would just pay it from the casino in Fort Wayne. And we told their employees if they stick with us, until the day we relocate, will pay them one year’s pay. And so even our own employees are rooting for us to relocate. And the economics of that new facility are strong enough that we’re working on that. So the economics of relocating Rising Sun far exceed what we could sell Rising Sun for. And so that’s our strategy there. So we have the three-legged stool.

We have Rising Sun. And we have Tahoe. And we’re pretty busy, so the things are offered to us all the time to acquire. We’re pretty picky because we think we have a pretty bright future just with what we have on our plate right now. So never say never if somebody wants to sell us seats with pallets at two times cash flow, we’d look at it, of course. But they’re not likely to do that.

Lewis Fanger: So

Maxwell Marsh: Great. Thank you for that. And if I could just ask a quick follow-up here. Curious about the trajectory of these sports wagering contract business. Obviously, a couple of those fell out in January. Any expectations around either replacing those or whether the outlook for the balance of those contracts might be at risk? Or how are you guys thinking about that?

Dan Lee: Well, that business has evolved to being dominated by DraftKings and FanDuel. And MGM’s a strong third party. There’s a few other parties in it. Thankfully, one of those. Circa has kind of a niche here in town. They’re one of the larger sportsbooks. It might be the largest sportsbook in town. And so they have a few states like Illinois where they’re trying to be a niche player as well. And that’s by far our most important contract. So we have unused skins in Indiana and Colorado. Unlikely that we’ll be able to do a joint venture with anybody on anywhere close to the terms of what we used to have. We obviously look for it all the time. But it’s difficult. And in fact, DraftKings and FanDuel have come out this past year in different markets and tried to get online gaming approved.

And even where it has to be done in conjunction with a brick and mortar, the brick and mortar have generally opposed it. Because it would be so dominated by a handful of firms that you don’t have a large number of firms looking for licenses. So for example, in Colorado, you know, DraftKings and FanDuel already have their partnerships. So we don’t think anybody would call us up and say, hey. We wanna get into the Colorado. We’ll give you a piece of the deal. And in terms of us doing it ourselves, well, we’re pretty busy these days. And those people who have tried to compete with DraftKings and FanDuel have found it’s a lot of headwinds on that. MGM has done okay. They’re big enough. But there’s a number of other players who have kinda folded and just sold their businesses to DraftKings and FanDuel.

So

Maxwell Marsh: Great. Thank you guys very much.

Operator: Your next question comes from Ryan Sigdahl of Craig Hallum Capital Group. Your line is already open.

Ryan Sigdahl: Hey. Good afternoon, guys. To hear, Shammadis. You expect to get to positive EBITDA in Q2 and for the year. Curious though when you think you can get to say, $20 million plus of EBITDA, which ultimately you need to get to, to cover the cost of capital to just what you built and took on from a debt standpoint. For the property?

Dan Lee: Well, I’m, you know, I’m still looking at being able to do much more than $20 million. And with the we hired Brandon, I said, I’m thinking of a five-year time frame. I’d like it to be well above $20 million by 2030. Does it get to $20 million this year? No. Next year? Maybe not, but it’ll be headed that way. Three years out, we should be at $20 million. You look at the magnitude of the property and what the facilities we have and you look at Monarch, which is about 50% bigger than us. So in other words, we’re two-thirds of their size. They’re doing $100 million a year. 50? And so if they can do $100 million a year, why can we not do? Now we’re not gonna get there overnight. But with a five-year time frame, that’s possible.

So twenty, thirty, forty, fifty. I mean, if you wanna, you know, I mean, it might go. Yeah. Ten a rough guess, you could put that up for the next five years. Okay? But, you know, I and I said, Brandon, when I hired him, said, the trajectory is more important. I mean, I want it to be trending positively and nicely positively. And that’s the same thing we have going on in Chicago, where we’re trending positively. Know, I think the temporary casino will make something in the mid-thirties this year, probably in the forties next year. Might hit 50 before we open the permanent. And the permanent’s gonna be a big jump in revenues after that. And yet there’s a number of cases now where you can look at, where a permanent casino replaced a temporary casino.

And the permanent did twice the revenues. If you have a significantly better facility and recognize our permanent is about 200,000 square feet. It’s just under 200,000 square feet. Now that’s including back of house and everything. And that’s roughly twice the size of the temporary. So just by size, we can do better revenue, but, also, it’s a higher quality. It’s a much nicer place. And, you know, I recently went down and looked at the treasure chest casino that Boyd opened in Jefferson Parish out it’s a suburb of New Orleans. And typical of Boyd, like they are so good at making the buffalo jump off a nickel. I mean, you go in and you look up at the ceiling, and they have a grid in there for acoustic tiles. And they didn’t spend $10 a tile to put the tiles in.

They just have a grid. I talked to one of their supervisors. You know, we try not to look up. But it’s doing much better than the crummy boat they operated there for twenty years. And it’s the same market. It’s the same people. It’s the same location. And doing twice the revenues. Frankly, if they’d spent a little bit more and made it a little bit nicer, they might be doing three times the revenues of what they were doing in the old one. When you pull up to it, it looks like they hired an architect from Costco. But they’re doing very well is my point. And I think if they had spent a little bit extra they’d be doing even better, but that’s not Boyd’s DNA. They’re a very successful company, and they are in part successful by what they don’t spend.

And they did that at treasure chest. But that’s you have Treasure Chest. You have the Seminole Casino in Rockford. Which is doing very, very well since they opened their permanent back in at the August. You have a couple places in, Virginia now. Where permits have replaced temporaries. If you go to our temp you know, you just look at the numbers, our temporary looks great. If you actually go and look at if you drive by during the day, it looks like we’re the Department of Motor Vehicles stores salt. It’s a big sprung structure, has zero curb appeal. At night, we have these giant projectors that try to project stuff on it to make it look interesting. But, once you go inside, it’s pretty nice. We did spend the money to make it look like a real casino on the inside.

On the outside, I go there with Uber drivers all the time, and they pull up this what the heck is this? It’s a casino. So, you know, our permanent will have curb appeal and that’ll be like, make a big difference. So

Ryan Sigdahl: Very good. Then just moving on to the lot of personnel changes, general managers. Curious, I guess, what gives you confidence because previous ones also had good resumes, good backgrounds, good experience. Etcetera, etcetera, etcetera. So I guess what gives you confidence in the new leadership team at Silver Slipper and at Chamani?

Dan Lee: Sure. John Ferrucci had run the Silver Slipper very well for many, many years. He was in his seventies. It was time to retire. And so he earned a good retirement. He’s still a consultant to us for a year. Angie he was Angie’s mentor. And she worked in the accounting department at the Silver Slipper. She grew up in East Germany. It’s a very interesting background and was a foreign student over here and ended up living here. When we promoted her to finance director, in Rising Sun, she did a good job. And then when the GM left, we made her the GM. And she pretty quickly doubled the income. Of the place in a tough market. Despite new competitors. And so when John opted to retire, I thought, well, she’s the obvious person.

To bring down there. And a lot of times, just a fresh set of eyes finds things. I mean, like, we deal a lot with Hyatt. Hyatt seems to have a strategy of moving their GMs every three years or so. Which creates a lot of tumult but it gives you a fresh set of eyes all the time. And it’s actually not a crazy strategy. And so I think just having that set of eyes will improve the stuff there. And then, we had to replace Angie in Cincinnati. And Jeff Mitch, he used to work with Lewis and I at Pinnacle. And we knew he was a very competent guy. His wife is from the town next to Rising Sun, and her daughters are adults now and just had their first grandchildren. And so Jeff had sent me an email a long time ago that he was working for the big Indian tribe down in Tucson, Arizona.

He was commuting from Cincinnati because his wife wanted to be with her daughters and grandchildren. And if he ever had an opportunity to go back, and I was like, wow. This is an opportunity because he’s a very qualified guy overqualified for Rising Sun. But the perfect guy to build out Fort Wayne. And so I reached out for him. His email had sat in my little file you put that I might need this someday. So when we moved Angie, down, I reached out for Jeff, and that’s how that worked. In Colorado, I realized after we opened that the guy we had running it was just in overhead. And there’s just one thing after another. And he was deeply in over his head. And so six, eight months ago, I enlisted a headhunter. We interviewed all sorts of people. And then, the more we got into it, the more, you know, over their heads we found they were.

And so we made wholesale changes and I’m confident it will do better. In fact, the guy we hired this consultant who went up there for a week kind of undercover. He stayed there as if he was a gambler, and he looked around. This is the guy who built up the San Manuel Tribe Casino in California. It’s one of the most successful casinos in the country. And he now has a consulting practice mostly for Indian tribes and helping to figure out stuff like this. And he spent a week there undercover just taking notes. And then I called the property and said, I’m sending this consultant in to help us figure out how to get a better then he spent a week dealing with the management team trying to learn what we could from him. And then I fired the management team, and he helped us transition and helped us interview replacement people.

But he said, look. This property has all sorts of opportunity and it’s just mismanaged. And it’s kinda funny. I’ve given the example a few times. Where when we built Bellagio, had we taken the management team from the Golden Nugget Laughlin put them into Bellagio, they would have failed. And in effect, that’s kinda what we did. We had the management team from the old Bronco Billy stepping into Chamonix, and they didn’t know what to do. And but it’s funny when I give that example. Those in the know, management team at the Golden Nugget Laughlin at the time was headed by Bill Hornbuckle. And he ended up leaving and joining MGM and, of course, worked his way up in MGM and learned a lot. And today, he’s a very competent CEO of MGM. When I give that example, had we taken Bill Hornbuckle put him in charge of Bellagio at that time, even Bill, as confident as he is, probably would have failed.

Because he needed the experience that he gained in the last twenty years. And so the fault is on me. The team we had did not had never run a place like never opened a place like Chamonix. You know, for example, they should have had a sales and marketing team two years ago. And when Marriott builds a new hotel, they hire a sales and marketing team when they break ground. We never really did. And so all of a sudden, we’re open, and we have very little business on the books for this great meeting room space we have. And so it’s like once you finally realize it, it’s like, okay. We have to do a restart. It’s almost like turning your computer off and turning it back on. That’s what we’ve done. So

Ryan Sigdahl: Very good. Thanks, guys. Good luck.

Dan Lee: Thanks.

Operator: Your next question comes from Chad Beynon of Macquarie. Your line is already open.

Sam: Hey, guys. This is Sam on for Chad. Thanks for taking our question. Maybe just one from us. With margins at American Place approaching 30% almost. How should we think about that for the rest of the year just given what you’re seeing from current trends?

Dan Lee: Well, it’s kinda funny. We’ve been playing with that a little bit. I think margins will stay roughly in that level but the permanent will be higher. Because the permanent first off, just economies of scale, doing more revenues per square foot, which the permanent will probably do, get you higher margins. Offsetting that a little bit is as you go up in revenues, the tax rate gets higher. In Illinois. But the other thing is, we’re a little bit encumbered. That 30% margin is despite over $100,000 a month we pay to rent the kitchen. Which are modular kitchens attached to the building, and then the offices are also in rented construction trailers. And when we go to the permanent we save a couple million a year in rent. Because parts of the temporary big parts of the temporary facility are leased modular stuff.

And in the permanent, it won’t be. It’ll be part of the building cost. So I think the margins on the permanent will be in the mid-thirties possibly even a little above the mid-thirties. And that’s not unusual for a high-grossing regional casino. And so, anyway, that’s I think I think you won’t get much above 30 until we get the permanent open. I think you’ll get a nice lift when we get the permanent open. We’ll also have a better customer in the permanent building, which will also flow down pretty nicely to the bottom line.

Sam: Great. Thanks for the color. Have a good second quarter.

Operator: Thank you.

Lewis Fanger: Probably have time. I’m looking at the clock, Dan. Maybe one, possibly two more questions.

Dan Lee: We stay here long enough. Nobody can go listen to Golden Gate. Oh, they’re on it, down there. But we actually do sell a lot of people. Let’s take one much to talk about anyway. We’re more fun. Let’s take maybe one or two more. We’ll see.

Operator: Okay. Thank you. Your next question comes from Ricardo Chinchilla of Deutsche Bank. Your line is already open.

Ricardo Chinchilla: Hey, guys. Thank you so much for squeezing me in. I was just going to ask one quick one given that you guys have given us so much great color. Since the variation date, have you guys seen any particular change in, you know, visitation frequency or, you know, spend per trip from some of your customers? Is there any difference between the high end or the low end of the database that you worth noting? Thank you.

Dan Lee: Okay. Actually, before I say that, I gave a little dig there at Golden Gaming. Blake Sartini is a neighbor of mine. He’s a really good guy. And so that’s a little unfair. They’re a good company. But the sure. Going back on your question of liberation, not really, but I’m not sure we would. You know, just to walk you through a few things, like in at the Silver Slipper, which is a market where nobody knew has had been added to the market or anything. Although there is a little positive thing. Churchill Downs through the fairgrounds operates a group of about 15 off-track betting parlors. That under Louisiana law for a while now, they’ve had video poker machines of think it’s 50 machines if I recall. And then they got a little law through that allowed them to have historical racing machines, which is basically a slot machine.

And for a while now, they’ve been operating slot machines in these little places that are scattered all over New Orleans. And, and there’s a lawsuit that came out of Slidell that went all the way to the supreme court and those machines have now been ruled not legal. That it’s an expansion of gaming, and that would take a statewide referendum. And they didn’t so you couldn’t just do it in the legislature. And so they have to remove their soft sheets. That’s not a huge plus for us, but it is a plus. And it’s not a huge negative for Churchill. They’re a big company. But that’s indicative of the little political fights that happen sometimes in the industry. So, you know, our results were down a little bit. The revenues were down a little. Our profit was up a lot.

So you kinda wonder, well, is that a recession? And I think it was really very rainy Mardi Gras. Mardi Gras is one of our busiest weekends, and this year, it kinda got rained out. And so I don’t think it was a recession. I think it was rainy. And Colorado, everything’s new. Hard to tell. Chicago, still, everything’s new and growing. Hard to tell.

Lewis Fanger: And both of those markets are so unsaturated that even if they weren’t new, don’t know that we’d ever feel it. Because

Dan Lee: Yeah. Right. Exactly. At Tahoe, it was not a very strong winter, but Larry Ellison tore down part of the building to be replaced. And so it’s got much less banquet space. He tore down the highest-end suites. And, you know, we’re still doing okay. So, you know, it’s kinda like, was that recession or was that the fact that he tore down part of the hotel? To rebuild? And I think the second thing is more important than the first thing. So we’re not that’s a good question for somebody like Penn National or Boyd who’s got, you know, dozens of properties all over the country. And I’m not sure we’d know. So and I guess a lot of this tariff stuff affects international stuff, like Canadians don’t you know, there are all these news stories about how bookings of flights coming to the US for this summer are down a lot. Well, you know, if somebody from Europe wanders into one of our casinos, our jaws drop open. So I don’t think that impacts us at all. So

Ricardo Chinchilla: Got it. If I may have a mulligan in that question then, could you quickly give us some capital expectations liquidity for the second half of the year? Thank you. Well, the

Dan Lee: I’m sorry. The first part of that? Second part was liquidity. Yeah. Our liquidity is in good shape. Now as you start spending money on the permanent American place, out of cash flow, then your surplus cash doesn’t grow. Right? So we’re watching it pretty carefully. But, eventually, somewhere in the next year, we expect to refinance. You know, our bonds mature in 2028. So you nobody ever waits until the end. You would refinance in 2027 anyway. So refinancing, they’re callable now at +1 02. +1 02 and change. Yeah. So, you know, it’s the normal time frame where you would refinance the bonds in the foreseeable future. And we think the most economical way to finance the permanent American place is to refinance our debt with a new debt structure, which might include a bigger credit facility so we don’t have to carry as much negative carry on the debt while we build.

And a new bond deal. So you refinance the existing debt and as part of that, you raise the money to build permanent American place. That’s our expected strategy. There are other means for us to do it, but we think that’s even in a bond market that might be a little choppy, we still think that’s the most efficient way to do it. And you have to remember these bonds, even these bonds won’t be outstanding all that long. You get the permanent American place open, and we will jump to a better tier of credit and could probably refinance them yet again. So whether when you model everything out, you start looking at it whether you pay, you know, 9% or 8% on the debt doesn’t move the needle all that much. That’s probably not out there all that long. And so we will get the debt refinanced at the right time.

But if we didn’t build American Place, we would start building up cash pretty fast. But, of course, we intend to build them. So we do pay pretty close attention to our liquidity, because up until you know, when we say we’re going to we can start construction without redoing the bonds, as we do that, we have to make sure that as construction accelerates, that we’re watching carefully our liquidity.

Lewis Fanger: I’m gonna take a different stab at it and maybe that’ll help you too. If you think about the way our cash flow is typically go, we you know, especially Colorado, you know, a lot of our business tends to be second, third quarter seasonal. And so over the next two quarters, we should start to you should see an outsized effect from EBITDA for what it’s worth. The spend on the American Place facility from here is extremely modest for what it’s worth. Maintenance CapEx historically for us has been in the ballpark of $3 million a year. You know, some years is as high as 5, but it’s, again, not a huge number. And then from a cash tax point of view, you know, we ran some very preliminary analysis with our outside tax consultants the other day.

And we’re not looking to pay cash taxes because of all the stuff we’ve built and the depreciation shields that we get from that. We’re not expecting to pay cash taxes through at least 2029. There’s some chatter on, some tax laws getting changed and potentially some retro tax effects as well. And if some of those things come into play, then it could be well into 2030 before we’re paying cash tax. So I think when you take all of that in its totality, we’re just fine. I mean, we, you know, we always talk about how we can go well into 2026 before we need to be out and financing for the permanent. A big part of it is because quite frankly, you just don’t spend a lot of money here in the near term on the permanent. You don’t spend a lot of money, you know, leveling up the land or putting you know, pouring foundations or spending right now is on architects and civil engineers and so on.

And that’s probably in the next three months less than a million dollars. And that will grow in the fall. At some point, you pull a permit and you start the foundation. But, initially, that’s a guy driving a bulldozer. It’s not a lot of people. It’s late in the construction project that the spending per month gets high. So most of the money to build the permanent American place will actually be spent in 2027 second half of 2026. Some of it is even post because you paid those bills in arrears. And so our need for outside capital is really your way.

Lewis Fanger: And I think the only other thing to kind of reinforce there is Silver Slipper is on the uptick now. Colorado is certainly on the uptick. It was a cash drain over the last several years and is on the verge of becoming a cash generator, a positive for the business, that’s obviously extremely helpful. And then you’ve got American Place, which continues to grow as well. And not insignificantly, by the way. And so I think when you take all of that in its totality, you know, we’re, you know, we’re mindful of the capital markets and where they are, the reality is I don’t need I did not need to be in the market a month ago, and I don’t need to be in the market tomorrow. So, you know, we’ll we can sit tight for a little bit and prepare for the right day.

Ricardo Chinchilla: Yeah. All the color. Thank you so much.

Dan Lee: You mentioned it briefly, but I’ll underline it again. Chicago is not very seasonal. There’s a little bit of seasonality, but not much. Silver Slipper, same thing, not very seasonal. But Rising Sun, Colorado, and Tahoe. Are all seasonal favoring the summer. And it’s almost like all the casinos in Atlantic City, they make at least half their earnings for the year they make in July and August. And those three markets, it’s similar. We make most of our money in the summer. Disproportionate money in the summer.

Lewis Fanger: Hey, Dan. We’ve got two minutes. So we can be if you can take one last question really quick, let’s do it.

Dan Lee: Okay.

Operator: Okay. We can take the last question. It’s for Duane Myers of SMH Capital Advisors. Your line is already open.

Duane Myers: Yeah. Thank you for all the color on everything. If the bond market doesn’t open back up, kind of what are your opportunities as is there, like, joint ventures available? You know? Okay. Besides going back to the legislature, and how likely is that to get approved, I know that they don’t want you know, any downtime in their collecting taxes off of it.

Dan Lee: Okay. I okay. Well, first off, I think it’s highly likely to be approved because they don’t want us to lay off 600 people and stop paying gaming taxes. And the last time we had to do that was the Potawatomi lawsuit and it was readily approved. So if we went now and said, look. The tumult in the bond market is causing us to have an additional delay, we’d like to have additional time, I believe we would get it. I don’t think we need to do that. You have to remember in the bond market, and some of you are in the bond market, every day they get interest payments and the cash starts to build up. And at some point, the floodgates break, and they have to go put that money to work. And so we’re waiting for that to happen and it will happen.

The windows open and close pretty regularly in the bond market. But if it didn’t, certainly a joint venture would be a possibility. Don’t need to go there. I think that’s pretty expensive. We could do a REIT like Valley’s is doing downtown, and we get phone calls from REIT guys all the time who one of the few casino companies who still owns most of our real estate virtually all of our real estate. We’ve never gone the route route route. We could do Waukegan as a REIT, or we could REIT our other projects and do a sale leaseback and raise cash that way. Now that ultimately is very expensive capital because you can’t unwind it. It goes on forever. And so I rather not go that route but we could. Or you just suck it up and pay a little higher interest rate.

As I said a minute ago, you know, it’s not gonna be outstanding for all that long. And there is some interest rate you get the bonds done even in a rough market. But we’re not we don’t have our backs to the wall. We have about a year to figure this out, and I’m confident the bond market will return to normal somewhere in the next year. The one thing that I’m certain we will not do is issue equity or anything equity-related at a price anywhere close to where our stock is now. That would be the most expensive capital we could do. And so that is not going to be done.

Lewis Fanger: I think too what you can’t forget is if you go back to COVID, you had a debt market that shut down for all the reasons that you know. You didn’t have a functioning debt market. If you fast forward to today, like I mentioned at the start of the call, you do have a debt market that’s starting to function behind the scenes. It was you know, look. If we went out at the March, the market was extremely functioning. We actually we could have gone out and gotten a very good well-priced debt deal done. We weren’t ready back then for what it’s worth for us. Should be. Yeah. And then the world kind of unwound kind of overnight. What just don’t forget that as quickly as it all, unwound, it can wind back, into a positive light.

And it’s been doing that in real time over recent weeks. So I would just kind of reinforce that for you. And I wanna put out one other thing. Back when we were competing for this license, against some companies that were bigger than us, to prove that we could finance it we arranged a backup financing with a large private equity firm. And that agreement requires us to it anonymous, but it’s a very large firm. It’s expensive. We’d have to tweak some of the covenants in our existing debt. But it’s still there. So we do have a backup financing facility that we could turn to, and I’d much rather do that than, you know, anything related to equity or even the REIT thing. Yeah. And so we have a number of avenues we can go to. To get this done.

Lewis Fanger: But I think I just wanna I mean, look. The likelihood that the debt market are completely shut down for the next year for smaller companies, I just that’s extremely unlikely for whatever. We have lots of alternatives.

Dan Lee: One of the alternatives is just stall. Go to the and worst case is listen. I would not wanna do this. I’m fighting very hard not to do it. But if you ended up closing the temporary and opening the permanent a year later, financially, our company would be fine. Now I’d rather not do that because of the 600 employees and so on. But if that’s what if that’s what the position you were in, the legislature did not give you the reprieve, financially, our company would be fine.

Lewis Fanger: And so you don’t not lose the license if you don’t open the permit.

Dan Lee: Exactly. That’s my point. There is no deadline by which we have to open the permanent. There is only a deadline on which we operate the temporary. So we are rushing not rushing. We are diligently working towards opening the permanent at the time that the temporary has to be closed, so we can transition the employees over smoothly. That’s in our best interest. It’s also in the best interest of the state. Which is why I’m confident that if we needed a little gap in there where we could operate the temporary longer, think we’d get it. I mean, it’s this is a pretty rational state. The governor has been behind the scenes very supportive of this because we do pay a lot of taxes and we were doing our best to be a good licensee. And I think the gaming commission recognizes that. And so as long as we are operating diligently to fulfill all the promises that we have made to the state, they’ll work with us.

Duane Myers: Okay. So Okay. That clears a lot.

Dan Lee: Okay. Thank you very much.

Lewis Fanger: Yeah. Thank you. Alright. Thank you, everybody, and we look forward to

Dan Lee: Chatting another quarter, Dan. Chatting another quarter. And, so

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