Full House Resorts Inc (FLL) 2018 Q2 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Full House Resorts Second Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Lewis Fanger, Chief Financial Officer of Full House Resorts. You may now begin.

Thank you. Good afternoon, everyone. We're at the Silver Slipper today, surrounded by the management team. It is literally a full house, Dan. My one bad joke for the day.

Anyways, as always, before we begin, we'll remind you that today's conference call may contain forward-looking statements that we're making under the safe harbor provision of federal security laws. I'd 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 press releases that we issue. And lastly, we're broadcasting this conference call at fullhouseresorts.com, where you can find today's earnings as well as all of our SEC filings.

With that said, do you want me to kick it off, Dan?

Yes, sure.

So very pleased with the quarter. Company-wide, as you saw, EBITDA was up about 20%. Starting here at the Silver Slipper, where Dan and I are today, Silver Slipper had a great quarter. There's a 6% revenue increase. EBITDA was up 10%.

And if you think back to a year ago, we opened up a couple new amenities. We have the Oyster Bar, which serves great food, gives you a faster alternative to the Blue Bayou, which is our fine-dining restaurant. But we also opened the Beach Club, which, unfortunately for us, opened at the end of the summer season last year and then shut down for the winter. So we didn't get very much use of it last year. Now it's back open. It's in full force. It is a beautiful advertisement for the property. And when you see it, it does make you want to stay in the hotel the next time you come by. And with that beach complex, we're seeing some of our best hotel occupancies here in recent months.

June was one of our -- actually, I think, our best month on record at 95.2% for occupancy. So very, very pleased with the amenities that are now finally springing into results, and we're now on the verge as well with a brand-new amenity. William Hill is in the process of putting in brand-new sports book for this place. Mississippi, as you probably know, legalized sports betting not too long ago. We did the training -- started the training yesterday. The equipment is going in. And we should be live with our first sports bets by the 1st of September.

Looking over at Bronco Billy's. We've had some unique challenges there in the recent past with things like weather. We're working through some of those operational challenges right now. They include other things like the increase in the minimum wage throughout the state. We are trying to be more diligent there with monthly slot expense.

And then we also had bad slot hold as well. And if you normalize slot hold versus the last year, it would have been about another $175,000 on top of EBITDA, so close to a flat quarter for EBITDA for that property.

Behind the scenes -- I'll let Dan talk about all the development that's going on there, but behind the scenes, we did make a couple CapEx improvements. One is the purchase of the Imperial Hotel. That's a nearby hotel. It adds about 12 more rooms to the complex. It will be incorporated into the overall plan. And then behind the scenes, we also executed on a lease for the nearby Imperial Casino. We plan on reopening that towards the end of this year with a brand-new theme, a pretty exciting theme, and I'll let Dan elaborate on that.

Rising Star had a great quarter. Much like the Silver Slipper, it had an amenity that opened late in the season last year. That was the RV Park. That opened up in August of last year, right before the winter when it shut down. It's back open now. It's a very, very nice RV park, surrounded by unique amenities that you don't usually get at a normal RV park in that area. You've got the golf course. You've got our casino. There's a historical district nearby. Occupancy is starting to ramp up at the place over there. We've been running price experiments, talking to our guests on ways to ramp it up more and it's doing that now.

So exciting times there. We just finished a revamp of the hotel lobby. We redid the pavilion. It all looks brand new and great. The pavilion is one of the first things that you see when you walk in the door. It used to be a large, cavernous space, and what we did was we put in some new flooring with rope trees, overhead string lights, and it essentially looks like an outdoor streetscape now.

On the verge of launching with our ferryboat, recently christened as the MS Lucky Lady, putting the finishing touches on the roadwork there right now. But we're weeks away from taking our first guests there.

And then lastly, Northern Nevada. Another pretty strong quarter in Northern Nevada. If you think back to a year ago, again, we had amenities under construction. Those are all finally opened up. A year ago, the Grand Lodge Casino was completely torn up. We only had about 1/3 of the casino for our use. It looks beautiful and brand new now.

Grand Lodge was the same way. We had construction cones and heavy equipment that surrounded the place. And now the parking is improved. The parking is on the right side of the building. You've got -- you've got a landscaping -- someone doesn't know Dan's on a conference call right now. You've got a -- it looks brand new, both outside and in. And also behind the scenes in Northern Nevada, you've got the Navy base nearby, which has been consolidating, has had a lot of bustling activity, and that's showing in the results as well.

So all told, a very, very good quarter. I'll let you do the heavy postscript on all that, Dan.

Okay. They actually gave away some of my thunder. First, if you recall, the fourth quarter and first quarter results we had were weak, and a lot of that was driven -- issues at different times, and we cooked a lot of that from second quarter. So the second quarter was strong, offset some of the weakness from the first quarter. We do have pretty easy comparisons from the second half of the year and then the first quarter next year.

Three of the properties, including the one we're in, have all been fixed up recently and doing well. So Lewis kind of addressed all that, although we're ordering new carpet for the casino here, which needs it, and some wallpaper and sort of sprucing that up.

And I don't think you mentioned that we've been doing real well, even though Island View down the road added a $75 million expansion several weeks ago, and we went over and looked at that. And we think they're doing okay, but they haven't had any impact on us at all -- we can tell. And so I don't know if they've grown the market or they're just stealing some share. But if they're stealing share, they're not stealing from us. So we seem to be doing fine.

The ferryboat is in place. We've had to take the little tug boat and make some modifications to it to make it more maneuverable, working with the Coast Guard to get their approval, and recruiting the staff and everything. We should be up and running in -- somewhere around the end of this month. The date keeps slipping, but of course, we want it to be safe as does the Coast Guard. So we don't completely control it. We started this process 3 years ago. So we're really down at the finish line now.

I've actually ridden on the ferryboat back and forth across the river. The Kentucky side is paved, and the Indiana side is being paved -- if it's not raining tomorrow, I think it's tomorrow. And so we're very close to the finish line.

And that should be pretty big for that property. It's hard to compute exactly how big, but the boat can carry 10 cars each way. It'll do 4 roundtrips an hour, and even if it's only running 50% occupancy and even if only half those people go into the casino, if you have 2 people per car, you start playing with the numbers, we get about $65 for each person that walks into the casino. And you can see that little ferryboat is kind of, the old saying, a dripping faucet will fill it. And it's kind of the same sort of thing. If a few people come through every 15 minutes, and it could easily double the profits of the property. And so we'll see.

In Colorado, when we were assembling the land for the bigger project, which is the hotel and the parking garage, the owner of one of those pieces owned a -- also owned a historic hotel and a casino that had closed several years ago that this guy ended up owning. And he's an older guy, and he basically said he wanted to kind of wash his hands of all of it. And he made us a pretty attractive price at which we can lease it and/or buy it.

We chose to lease it initially -- I think our -- do you remember our rent offhand? Not that big a number. And whereas a casino in this space had lost money before, we can run it as an adjunct of our operation. So we don't have to have a freestanding 24-hour security department or accounting department or any of that stuff. And we believe we can make money. Even if the revenues are no different than they were before, we should make money in that place. I think the revenues will be better than they were before because we're renovating it with kind of a unique theme, which I'm not ready to disclose yet.

But we expect to open November 1. We actually exercised our right to take it down a little bit early. As of tomorrow, it's ours. Originally, it was going to be the end of August. And that's because we want to move quickly and get open.

It's $220,000 a year, Dan.

$220,000 a year rent for a pretty good sized casino. It'll have 175 slot machines and a restroom at the back and a bar at the front. And it's on a key corner in Cripple Creek.

And it's not something that we've talked about before. It was one of those little things we were working on in the back. And everybody was focused on the big casino, which obviously, we're working towards building.

And we have a competitor who sued the city, trying to block construction of the bigger one, and it's kind of fun to come back and open a little one right in his face, right across the corner from him. As we oppose his lawsuit, he wasn't focused on that. And his lawsuit, if -- and we're happy to provide their pleadings and the city's response and our response. And you can read it for yourself, and I hate to forecast lawsuits, but he basically said the city shouldn't have approved this because he doesn't want the competition. And the city, who has a very good attorney, came back with a whole raft of common law that says the fact that you don't like competition does not give you standing to oppose what City Council did.

So -- and our lawyers, who are also very good lawyers, filed a similar response. And so I -- judges don't like to give like summary judgments and usually like to take it to a trial. We might actually get summary judgment on this case. So I don't know. We'll see.

But it doesn't actually slow us down because we will be opening the Imperial Casino quickly. We'll be starting on the parking garage shortly, takes like 6 months to build the parking garage. We have to finish that. We're negotiating the construction contract with the contractor. So I think we're within 2 months of starting on the garage.

We can't start on the hotel until the garage is done because the [co.] uses up the surface parking we have. But it's all coming along, and it's pretty exciting.

And frankly, the statistics out of Colorado is -- are still impressive. I mean, Denver and Colorado Springs are absolutely on fire in terms of growth of cities, people moving there and all the economic numbers. And you see it in Black Hawk. You haven't seen it much in Colorado -- in Cripple Creek, because the product is still 20 years old and not really reflecting the prosperity of the city right down the way. And so it's a pretty exciting place to be doing business these days.

I think Colorado has become kind of the new Texas. I like to point out, the city of Denver increased its population in the past 5 years by 400,000 people, which is the population of the city of Reno. And you stop to think of how many locals there are in Reno, and you start thinking, that's just the increase in the population. So -- and Colorado Springs is like the small cousin of Denver. It's only an hour away and it's growing similarly.

Now we also have to figure out how we're going to pay for that hotel, $100 million. And we will look at everything: bringing in a REIT as a partner, bringing in a partner as a partner, doing it ourselves through some combination of financing. And we will look at everything and try to figure out what's best for our shareholders. And I'm confident at the end of the day we can pull together the $100 million and build it.

Yes, I point out to people, when we proposed Bellagio in Las Vegas, it was $1.6 billion. We had no idea how we were going to pay for it, right. And we figured it out, and it's making $500 million a year 20 years later. And the same thing -- I've done 12 of these big projects. And pretty much every time, we didn't really know how we were going to pay for it. But if you have a project that make sense, the money can be found. And then it's just a matter of what's the best terms that you can get for your shareholders.

And in fact, before I joined Full House, Lewis and I had our own company called Creative Casinos, and we had proposed a casino in Lake Charles, Louisiana, for the last license in the state. And there was a competitive process. Penn National, among others, made proposals. In fact, Alex, who works with us now, was the guy at Penn National working on that proposal. And of course, Penn National is a big, solvent company, and they had a nice proposal. And we had the bigger dream. Our company literally was capitalized with $100, and we proposed a $500 million phase for the golf course and a hotel and everything. And it's hard not to go for the bigger dream.

And the gaming commission looked at it. We had built the most successful casino in Louisiana before that when I was at Pinnacle, and they chose us, even though we didn't have a balance sheet. And then we went around, got all the financing arranged. The financing was kind of expensive, and at the last minute, Ameristar called up and offered us $32.5 million. And at that point we had invested about $10 million, declared victory and sold it.

They went on and started construction. And then Ameristar was acquired by Pinnacle and antitrust authorities made them sell it, and that hotel is the core part of Golden Nugget's hotel chain at this point, a very important part of their business.

Many months, Dan, where that property now leads the state in gaming revenue.

Right. Yes. And so, but we kind of looked at it, and -- so that's the entrée to the new thing that we have. The state of New Mexico has a number of tribal casinos and a handful of racetrack casinos. Of the compacts that they have with the -- tribal casinos allow 6 racetrack casinos. There are today 5.

The sixth one was supposed to go to a town called Raton, which I think means rat in Spanish. And the developer in Raton was unable to get the financing, and they took the license back. There was some litigation and so on, and -- but that's -- finally the state prevailed and took the license back and has started a process to issue the license.

And it's a competitive process. They've indicated that Letters of Intent were due on July 30. The actual proposals are due August 17. And they expect to move quickly and might even have someone selected by year-end. That's the target they've talked about.

We've put in a proposal in a town called Clovis, New Mexico. If you've never been there, it has the world's largest cheese factory, which is not what you'd expect in New Mexico. Turns out there's a huge dairy industry around Clovis. If you Google Earth it, you'll see great big crop circles.

But this isn't really about Clovis, New Mexico, just like Lake Charles wasn't really about Lake Charles, Louisiana. It was about Houston, Texas. Clovis is the closest location that we found where it would be viable to Amarillo, Texas, which is 90 miles away, and Lubbock, Texas, which is 90 miles away.

And it's pretty much near the center of a physical thing called the Llano Estacado. That's a high mesa with short grass, which is what that means in Spanish, so this is a very Spanish heritage place. And there's 1.2 million people living in the Llano Estacado. It's about the size of Indiana.

And we think we could do very well building a racetrack/casino in Clovis, and that would be an important stimulus for the economy of Clovis and important for the state of New Mexico. And we think we could get a pretty good return on it.

I don't really want to go into anything else about it. (inaudible) we'll have it all pulled together by the 17th. But it's kind of interesting. There are a total of 11 proposals. We're a tiny company and we're the big company in this. I think we're the biggest company to have made a proposal, which is interesting. And so when you're 1 of 11 proposals, you're never going to say that you have a 50:50 chance. Of course not, right. But I think our odds are better than a 1 in 11 chance, and so we are chasing that deal pretty aggressively.

We also have some time studying the state of Washington. There are large tribal casinos in the state of Washington, but they also allow what they call card clubs, but they're not really card clubs. To me, a card club is like the poker rooms in Los Angeles or in California, and at the Pinnacle, we actually owned a couple at Hollywood Park. And in California, you cannot bank the games. So it's a poker game and you're taking a rake off it, and it's hard to make much money with that.

In Washington, it's evolved where you can have banked games. So if you have a restaurant and a liquor license, you have a restaurant and a bar, in certain places in Washington -- not in Seattle but the cities around Seattle and so on, you're allowed to have up to 15 table games, and those table games can be blackjack. They can be baccarat. They can be Spanish 21. And in a few cases, the same company has 2 of them right next door to each other. And so you actually get 30 table games. Now you've got to have 2 restaurants, 2 bars and so on, so it's a -- and the tax rate is relatively low.

Not a lot of dead slot machines. We think it's a place we could go and build something for $5 million that might make $1 million or $2 million a year, and if you can have one that worked, then you could roll out others. For a small company like us, that's kind of attractive. And so that's something else we've identified.

Now part of this is a little bit sequential, like we have the approvals we need in Colorado now. There's one lawsuit we have to deal with, but it probably doesn't stop us. And our lawyers have actually said, go ahead and build it. They won't prevail, and even if they do prevail, they're not going to make you tear it down. You might have to rent the street from the city instead of having it deeded to you or something.

So we've kind of gone through the entitlement process in Colorado. It's taken a year. We're there now. And so now we're just trying to get the contractor lined up and start construction.

But meanwhile, you have to start -- you're running a growth company, you have to start thinking about what's next. And so along comes this New Mexico thing, and it's like, well, let's start that process because by the time you get all the way through it, entitlements and everything, it's going to be at least a year. And by the time we can start construction in New Mexico, we would be open in Colorado.

And then it's like, well, what if you don't get New Mexico? It's like, well then let's look at this Washington thing because there's actually no restriction for us to go in there. There's no limit as to the number of licenses or anything.

Now that doesn't mean you do everything. If you get New Mexico, you'd probably be pretty [(expletive)] busy with New Mexico. Colorado might be -- or Washington might be a little off on the back burner.

But I just wanted you all to know that we look at lots of expansion opportunities all the time. We intend to grow this company thoughtfully and profitably over time, and it's what we did at Mirage; it's what we did at Pinnacle.

And I don't want to forget to mention we've been working now for quite some time on the possibility of moving our excess capacity out of Rising Sun. In Indiana, the casinos are limited in size, and we're allowed to have about twice the capacity we actually need for the gaming revenues we have at that location. And so we've proposed to the state several times to allow us to move our excess capacity and have another small casino somewhere, where the state can have more jobs and more tax revenues. And there's no reason for us to have slot machines sitting in a warehouse. Let's go open something new in a different place.

And we've been working quite -- at least a year now on Terre Haute, Indiana. Now it takes legislative approval, and the legislature there meets every year, but when they meet in an even numbered year, it is a finance session, and they're not supposed to take up major issues. They just try to get through the budget. And so the big session will be coming up in January, and that's where we have a reasonable chance to try to get approval to move our excess gaming capacity somewhere else in the state, and a place where we've been actively dealing with is Terre Haute, where there seems to be a lot of support for the idea.

There's no casino anywhere near it. There's a pretty good-size population base, and you can make a pretty good living with a small casino in Terre Haute. And so that's coming too. So we have a number of things on the horizon, none of which are certain, but odds are one of them will probably happen, and that allows us to continue to grow the company.

Did I hit everything?

Got everything on my list, Dan.

I guess our -- let's say, our total debt is $100 million and our cash is like 20...

$99.5 million and total cash is a little above $22 million.

$22 million. So we're in pretty good shape on our balance sheet, which is a whole lot better than it was 3 years ago when we came here. So with that, we're happy to take any questions.

(Operator Instructions) We'll take our first question from Chad Beynon with Macquarie.

Wanted to start with a lot of things going on this quarter, as you mentioned. Can we start with sports gaming, since that's real? You talked about kind of your approach that your starting to install the equipment, and that's going to be coming down the pike in the next couple weeks here. Not to kind of show us your playbook or talk about what your projections are, but could you kind of help us think about -- do you expect for this to be a driver of visitation, hotel revenues, food and beverage revenues? Or in just kind of, since it's something new in the gaming industry, what do you think this really means to the market, to your property? Will it bring in new customer? Just kind of a high level in terms of what your expectations are.

Yes, we're not sure ourselves. I mean, in Europe and especially England, sports gaming is a huge business. And so a company like William Hill have betting shops on every corner, and so on. They even bet on whether Hillary Clinton is going to be president. Some people made that bet. And so in this country, of course, it's been limited to Nevada and Delaware...

Delaware has it now and Jersey has it now, too.

Yes. But then there was a federal law that didn't allow it. And that -- the Supreme Court overturned that law recently. And so now it's subject to state approval. Mississippi moved quickly, so Mississippi is going to have it early. From our point of view, if we open our own -- and by the way, we have a race and sports book in the Grand Lodge at the Hyatt Tahoe. Now we lease the space to William Hill. We make some rent, and they have a small counter there. They get the profit and loss of that. Under the Mississippi rules, we have to be the entity taking the bets and playing the customer, but we don't really have the expertise, and hard for us to go hire -- it doesn't really make sense for us to hire a bunch of people with the expertise. So we have a joint venture with William Hill. We're -- that would be the William Hill sports book here, and it will open soon. It's being built as we speak, and -- but we share in the profit and loss of that, so we get a pretty significant chunk. I don't think I'm supposed to...

Don't say what it is.

Right, but it's over half the revenue. And so -- but we don't really know what the revenue will be, honestly. And I'm a little cautious about it because, on a day-to-day basis, it's probably okay, but for example, if the New Orleans Saints end up in the Super Bowl against the Patriots, we're going to have a (expletive) of a lot of bets on the Saints. And so we have to be ready to block our risk at some point because nobody's going to show up betting on the Patriots. If we had a casino in Rhode Island, we could kind of hedge that, but given where we are, we can't. And so we have to basically say, well, maybe only our best players can make bets on the Saints up to a certain number, or we have to move the line, at which point we're not as competitive a bet as somebody else might be. So it's a little bit of a precarious situation. We don't want to find out that we lost $2 million on some sports game because we didn't manage the risk. So we're trying to understand those risks. I think, on a day-to-day basis, it's like normal gambling. Everything covers itself up, but it's the Super Bowl that you really worry about. And if the Saints get into the Super Bowl, I'll be the guy who's most nervous about it, so we're trying to understand that. Now if you think of having sports betting on the casino floor, it will probably bring additional people to the property and almost certainly initially because Mississippi moved much faster than Louisiana, and we're right at the border between Mississippi and Louisiana. And so there's at least probably a couple years head start. And so if you live in New Orleans or on the north shore of Lake Pontchartrain and you want to place a sports bet legally, we're your closest place. And that may drive some incremental visitation to our place. Hard to know how much, okay. And when I say we're putting in a race and sports book, don't think like the one in Caesar's Palace, which is about the size of our entire casino. I mean, this is a little desk. I guess it's slightly bigger than our keno desk, right. And it's got 9 screens behind it and about 15 people can be in front of it. But hopefully, there'll be a line of people trying to make bets, and maybe they'll play the slot machines while they're here. The only downside for us, I suppose, is if somebody makes a bet at the sports book that is kind of in place of making a bet at the craps table or playing a slot machine. I'm sure there'll be some of that, but I don't think there'll be much of that. And I think the incremental visitation we will get will probably be bigger than that. In our case, it may not be very long-lived because, eventually, Louisiana will probably do it as well, and then all of a sudden, people in New Orleans can place a bet at Harrah's in downtown New Orleans. Now, the north shore of Lake Pontchartrain doesn't have any casino, so we'll always be the closest place for them to go to. And so I think it's a plus. I don't think it's a huge plus, but I think it's a nice plus. And now Indiana's starting to ask questions. I think they're going to try to figure it out, have it there, and obviously, we'll be more experienced after we see how it goes here, but we would love to put it in there. Look, this could eventually evolve into being a very big business. It is big business in England. There's estimates of how much illegal gaming is going on in the U.S. And it's in the billions of dollars, and a lot of you work on Wall Street. I worked on Wall Street many years ago, and I still remember, on every Friday, you'd get these parlay cards where you place bets, and some guy would show up and he paid you in cash and all that stuff. And I actually never did it, but I remember every week that they'd come through the trading floor with the betting lists. And I remember thinking, oh my god, there's the mob. And that's completely outright illegal betting, and it was done on the trading floor of Drexel Burnham Lambert, which blew up, I guess, but I suspect that still exists in some form. Maybe not on the trading floor. It's more restricted these days, but the illegal sports betting is a very big business, and if that can get shifted into legal venues like ours where it's properly taxed and regulated, it could be big business.

That's great. Okay, moving on. Just with respect to...

You're chuckling. You must still get those parlay cards, huh.

Tomorrow. It's Thursday, Dan. Tomorrow. They come through on Friday. And then moving on to the Imperial Casino purchase. You mentioned that it's a kind of a small lease, but is there also a piece that you are purchasing and then, with respect to the slot machine and the kind of the refurbishments, could you just kind of ballpark what this is from a cost standpoint? And then if you are able to share any type of win per day or how that property was performing before it closed down with those 100 or 200 machines, just any color just in terms of how we should think about what it costs and then what that opportunity could be?

I'm going to go off the top of my head, but I read the lease this morning as I signed it, so I still remember it pretty well. The rent is $19,000 a month for 3 years. Then we have the right to extend for 2 more years, and I think it's $23,000 a month for the 2 more years. We have a right to buy it for $2-point-something million, then it goes up a little bit each year because the man who owns it really wanted to incentivize us to buy it and buy it sooner rather than later. And we kind of took the approach of, well, let us get it reopened with this unique theme and see how it does. So if -- I think it will work, otherwise we wouldn't be doing this, but if I'm wrong, we have limited downside. We're spending -- I don't remember the exact number. We'll call it $1 million on renovations to that building.

Yes. Little more.

A little more. And initially, there's 107 machines. Most of those we're getting from the slot companies on kind of a participating basis because, once we've finished the parking garage, as I mentioned earlier, we'll tear down part of our existing casino to be replaced as part of the new hotel, and we'll have extra slot machines, right. But then when we open the new hotel, we'll be buying new slot machines. So we're kind of moving some machines around here and using the slot companies to help fill in the filler. And obviously, 100 and -- if you bought 170 new slot machines at $25,000 a pop, it's a few million dollars. But in effect of other than bridging the gap, having the slot machine companies help us, we're kind of moving 170 slot machines from our existing casino down to this. It also helps us with payroll issues and customer issues because, when we close roughly 1/4 of our existing casino, those people move up and help with the Imperial, and then when we open the bigger project, we'll be growing the total payroll and total number of machines. I believe the Imperial was doing about $170 per machine, per day. I've never verified that, but I was told that by the landlord, which in Cripple Creek is a pretty decent number. And we were kind of surprised with that number, actually, but it is a pretty important corner. I think it's maybe not completely relevant because we're going to have a completely different theme and marketing approach. I think the biggest difference between us and the prior owner, under Colorado law, you have to have a 24-hour surveillance room. That's pretty expensive. You have to have an accounting department, an HR department, all that stuff. And as a freestanding little casino, it's hard to make that work. And as an appendage of Bronco Billy's, it's actually not hard to make that work. And so we have to run fiberoptic lines down to tie it into our slot system, tie it into our surveillance system, but this is -- we can run that with much less overhead than it could be run as a stand-alone place. So we -- look, for a pretty modest investment, we think we get a pretty good return. Yes, (inaudible) I think we'll have (inaudible) good return on $1 million.

And then the Imperial Hotel itself, we paid $1.7 million for it, Chad, but that's already out of the June 30 cash balance. And that ticked up about 12 rooms that have already furbished, which increases our room count by 50%, but -- and so those rooms come at a good time when we need them. The summer is important.

And actually, they're pretty nice rooms. This hotel used to have tiny rooms, and the guy we bought it from had it refurbished at combining 2 rooms into 1 room. So pretty decent rooms, arguably the best rooms in town, actually.

Great. And then just the last one. Just thinking about the margin improvement in the quarter. So your revenues grew portfolio-wide, a little over $1 million. Your EBITDA grew $700,000. So nice flow-through, it looks like. Obviously, your revenues grew the most, and really, most of the growth came from Silver Slipper, but your margins improved throughout the portfolio. Is this a company-wide initiative that is just taking more attention now? Is this something that we should expect going forward? Or is this just kind of what happens in these quarters with better operating leverage? Just some kind of overall color in terms of what's going on from the cost standpoint and flow-through, particularly as you have some nice amenities that are starting to kick in and bear fruit.

If you go back and look at the fourth quarter, I wasn't very happy with the quarter, and our revenues -- everybody around the table is laughing. Because I showed up in Mississippi and said, "What the (expletive)?" (inaudible) And when the revenues go down, you have to make sure the payroll adjusts accordingly. And so we did start a process. It actually started here in Mississippi, and we've expanded it through the company of just paying attention -- much more attention to staffing. And so we now have reports of what's the payroll hours or covers served in the food and beverage department and so on and so forth and really examining each and every position and the staffing of each and every position. And usually, when you have margin issues in the casino or the hotel industry, it comes back to staffing and being efficient with the staffing. And everybody is better off if you're efficient with the staffing. If you have too many waiters, then the tips are getting split too much apart. And same with the dealers. Too many dealers, nobody's making as much in tips. You have to have the right number to give the right service, and you can waste a lot of money if you aren't paying attention to staffing and overtime issues and so on. So yes, we have had an initiative, and some of the people around this table have been pretty instrumental in that. And they even went out to our other properties and showed them how they're doing it. I think we can improve a bit in Colorado. You notice that was a little bit of an exception where the revenues have been kind of flattish, but the EBDIT has been soft. There was an increase in the minimum wage there, but that can't account for all of that. And so we've been talking to them that they have to be more cautious of this, and they're aware of it. They're very seasonal with the summer being strong. So it's really more of a focus of let's make sure we staff accordingly as the revenues get softer in the fall. So I don't want to say don't forecast our margins are going to be 35% in 18 months, but yes, are we paying more attention to cost? Yes, we are paying more attention to cost. And we will continue to do so.

(Operator Instructions) We'll hear from Jim Marrone with Singular Research.

Yes, I'm just kind of following up on the gaming as well. Most of it was answered in the previous question. I was going to address kind of like other states legalizing gaming and how that would impact your operations, but -- and that was kind of addressed, but I was kind of thinking as well, more along the lines of the recent declines in ratings and if that's a -- if that's considered a particular headwind in sports gaming, number one. And maybe just other than gaming, just kind of discussing a little bit about the capital expenditures. There seems to be a rise in wages and the like, and you've addressed as far as wages as far as your operations, but I'm just trying to get a sense of what does it mean for your CapEx as well when you have tradespeople and other suppliers increasing their cost on to you. So that'll be it, and I'll just listen to your answer.

I'm not sure what you meant by decline in ratings. Did you mean like ratings on our stock, or...?

No, just the recent decline in NFL ratings, just because of the whole situation, and I know the NFL has been kind of hurt quite a bit over the past couple seasons over it. And I'm just kind of getting a sense on how that -- how does that impact gaming revenue?

Well, okay, 85% of our gaming revenue are slot machines, and they wouldn't know what an NFL player looks like, right. And so -- and even with the sports book going in, it'll never be 5% of our income. If we had it in every one of our casinos, it would be small. I was -- as many of you know, I was the CFO of Mirage Resorts for many years. We have large race and sports books at the Mirage and at Bellagio. It wasn't even 2% of our revenues, right. So it's a nice little side business, but I don't think it will be a dominant business for us. If you -- there are companies like William Hill that specialize in this (inaudible). It's a public company, so if you want to invest strictly in sports books, go invest in them. But don't invest in us because of a little sports book except that we think it'll help drive some business to us. The -- look, we are in the entertainment business. You find and -- every now and then, I'll have somebody say, well, isn't all the growth gone in regional gaming, and everything's kind of mature. And it reminds me of -- this will date me, but went I went to the Cornell hotel school, the interstate highway system was done, and the professors would say, well, you guys missed all the big growth because Holiday Inns, Ramada Inns just followed the bulldozers and plunked one down every 4 exits, and that was easy growth. And there was a guy by the name of Bill Marriott who was about 30 years old and had just become CEO of Marriott Hotels. And I remember him giving a talk. He wasn't that much older than me, and he was like, yes, we think there's lots of growth opportunities. Now to put it in perspective, Marriott at the time had 6 hotels. Look how big they are now, right. And Marriott finds ways to grow. And there are lots of ways to grow. And frankly, all of a sudden New Mexico says, oh, we're going to legalize another racetrack, and by the way, if you get a racetrack, you can have a casino. And it's like, huh, and we started looking at New Mexico, and so where could that go? And then Ellis comes in, scouted it. It's Clovis. World's largest cheese factory is there. And I'm like, no kidding, and we went off to Clovis, and we have an option on the site in Clovis. It's 4 crop circles, if you figured it out. We own -- or we have the right to own 4 crop circles in Clovis, New Mexico. And they're right near the border with Texas, and a casino there would make a lot of money. And so you find these opportunities. The state of Washington is a good example. There are opportunities there to develop card clubs, and if you go and look at the card clubs that are there, most of them, the restaurants are kind of, the food's virtually inedible. And it's like, well, why couldn't you have something that looks like a Yardhouse restaurant that's a good restaurant that has a bar and just happens to have 25 blackjack tables. And there's actually a couple of examples like that in the state of Washington, but there's 50 card clubs in the state, and most of them look like offtrack betting parlors in Queens. And so there's an opportunity there. And is it a big opportunity? Well, it's only a big opportunity if you do several of them, but if you can get one to work, then you start looking at what else you can do. And so there are still lots of opportunities in this business. You just have to dig and poke a little bit, and find your way to Clovis, New Mexico, sometimes.

Okay, that's great. And again, in regards to perhaps CapEx and how should we kind of forecast that going forward. Could I get...

(inaudible) We're in pretty good shape for all the stuff we're doing now and the parking garage in Colorado Springs. In other words, we have -- between the cash we have on hand and the cash we generate, clearly, for the bigger project, Colorado Springs, which is $100 million, we've got to figure out how to finance it. And that's -- we got about 6 or 8 months, and we'll figure it out. And it could be anything from -- there are certain strategic partners that would be interesting to have as a partner, to we can probably borrow most of the money. We could do a deal with a REIT but as a way to borrow money, in effect, so we're evaluating that. We're 1 of 11 proposals in New Mexico. If we're lucky enough to get chosen, we'll figure out how to pay for that at the appropriate time, but it's a long ways down the road. Card clubs in Washington at $5 million a pop, we can do that internally. So you know it's -- we don't pay a dividend. We probably won't pay a dividend for a long time. Our taxable income is sheltered. So we don't have any -- there may be a provision for taxes once in a while, but we don't actually pay taxes. And so we generate pretty good cash flow internally, and we keep reinvesting it on behalf of shareholders. We try to get a 15% unlevered cash on cash return. Now you can actually lever probably 2/3 of that, which gets you a really nice return on equity, and that's how we grow the company.

And in terms of all the growth projects in the past, those are basically pretty much done. So you've got some cleanup work for the ferryboat with the roads that are attached to it, but everything really is for Colorado going forward. The sports book that's going in here with William Hill is marginal CapEx on us, so yes, it's really Colorado Phase 1.

Okay, great, that gives me a better sense of the CapEx.

Yes, I mean I will tell you a couple of stories of projects I did in the past, I mean, I cited the one earlier where we got the last license in Louisiana, got all the entitlements lined up and then sold the project for 3x what we had invested. I'm not saying that's what we're going to do as a company, but it's always something you could do. I will tell you, at -- when I worked at Mirage Resorts with Steve Wynn and I was Chief Financial Officer and Head of Development, we had 43 -- we had bought the land to build Bellagio. We had 43 acres of land at the back that we didn't need for Bellagio, and it had some frontage on The Strip. And we had paid $400,000 an acre for the land, and we sat down with Mike Ensign and Bill Richardson, who are good entrepreneurs in Las Vegas who had a couple of small casinos but pretty successful, and we said we'll throw in 43 acres valued at $1 million an acre. Forget the fact we didn't pay that much, but we just bought it. We said we think it's worth $1 million an acre. And if you put in $43 million, then you can own half, and I'll arrange nonrecourse financing to build Monte Carlo, which MGM is just now renovating to call it...

Park MGM.

Park MGM, right. Monte Carlo was like a $250 million project that made $90 million, $95 million a year every year for 20 years now. It's one of the highest ROIs on the strip. And so all we did was parlay the land and kind of the right to build it and had a partner put up cash, and then we get nonrecourse financing for the rest. Did the same thing for the Borgata in Atlantic City. We had gotten the land from Atlantic City for free, provided we committed to build a 1,500-room hotel, and then we got Boyd to do the joint venture to build the hotel and that got the thing done. So there are lots of different ways to do this, including just straight up raise the money and go build. But first you got to get the project, get all the entitlements and everything lined up, and then you figure out how to pay for it. If the project makes sense, the financing's virtually always available.

At the end of the day, we guide all of our decisions based on the share price. Management and the Board owns, what, almost (inaudible) percent of the stock outright. So we'll figure it out.

We have an additional question from Andrew Boone with Quantum Capital.

Just within that line of thought, I just wanted to ask how you guys think about retaining the upside. Just given your earlier comments on kind of the growth in Denver and Colorado Springs and the potential of Cripple Creek, how do you guys think about retaining the upside? And then secondly, just noting that recently Nevada Gold in Washington is up for sale. Just with your commentary around poker rooms, any kind of thoughts there and whether M&A would be a potential? Or would that be too big of a bite?

We look at a lot of different deals in the industry. Nevada Gold recently announced that they have an exclusive agreement with somebody. It's not us, I will tell you that. In terms of retaining the upside in Colorado or any of these other projects, it's all a tradeoff. I mean, if we -- let say we're chosen in New Mexico, and we go off and build a big project in New Mexico. I've got a fair amount of money invested in the company, and so does the rest of the board. You don't want to put everything at risk, and so it's a tradeoff. Do you -- if you -- do you bring in a partner, which reduces the upside but reduces the risk, and you try to figure that out. We're not a very big company. If somebody called up and offered us an incredibly good deal, look -- I'll tell you, we looked at. That was a dead deal, so I don't mind talking about it. We actually looked at buying the Fontainebleau and finishing it. Now that's a -- $2.3 billion was invested in the Fontainebleau before it stopped construction and filed bankruptcy. And you could buy the carcass for like $600 million. We spent probably $100,000 analyzing it, maybe a little more -- and had architects go through it and thought about if we didn't finish the whole thing, what would it cost. It was going to cost about $1.2 billion to finish it. And then we turned to a major hotel company and said, well, if you guys run the hotel and put your name on it, we'll run the casino and get fees for running the casino. You get fees for running the hotel. Let's go talk to some real estate companies and see if they'll put up the money to actually own the hotel. If you know, the hotel chains actually don't own very many hotels. They're the management companies, and [grants] that own it. And so we spent a few weeks going around talking to really giant real estate companies and showing them, here's our concept and everything else. And they kind of came back and said returns weren't really high enough to get them interested. And we looked at it and said, yes, we kind of understand that. And so we just moved on, right, but that was an example of a big opportunity for somebody. We actually went back to Carl Icahn and said we can't pay you $600 million upfront. How about if we lease it from you with rent starting when it opens, and then we have an option to buy it for $600 million later. And if he had been willing to do that, we might have been able to make everything work. He wasn't willing to do that, and so we said, okay, well, we're not -- we can't take on the risk of doing this ourselves, and we couldn't find somebody else willing to step in and own. So that was -- there's a lot of upside in that if you could pull the numbers together, but we're not going to risk our company. If we can -- all we do is execute what we're doing and don't get New Mexico or anything else, the stock has got a lot of upside. And so we go to work every day saying let's not screw this up. Just kind of do what we're doing.

And Dan spent a lot of time talking about partners, but I'll tell you, when we kicked off the process for this refi, I mean, really, we've been talking about Colorado for, I feel like, 1.5 years with our new lenders at PIMCO and Sagard, and it is -- they, I believe, strongly have bought into this concept of financing that. They are amazingly huge, as you know. So we will have several options. It's not just the partner route, and as Dan said, we're going to -- once we have cemented our construction contracts, we've honed in on costs and everything else, we're just going to go down the list and pick the thing that's right.

And the whole isn't $100 million, I guess, is your point.

Yes, that's right.

(inaudible) $70 million of it. We'll generate some of it from cash flow during construction. So the whole is like $20 million. And if our stock is $4 a share, then you look at it and say, well, let's issue stock. When the stock is at $3 a share, it's like, well, maybe we should find a partner. And because that's a factor. There's a very big difference between a $3 stock price and a $4 stock price, so...

And we have no additional questions in the queue. I'll turn the floor back over to your speakers for any additional or closing remarks.

Good, because we're out of time, Dan. Do you want to say anything?

No. Thank you very much, guys.

Thank you. Ladies and gentlemen, again, that does conclude today's conference. Thank you all again for your participation. You may now disconnect.