Full House Resorts Inc (FLL) 2019 Q1 法說會逐字稿

Good day, and welcome to the Full House Resorts First Quarter Earnings Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Lewis Fanger, Chief Financial Officer of Full House Resorts. You may now begin.

Thank you. Good morning, everyone. Welcome to our First Quarter Earnings Call.

As always, before we begin, let me remind you that today's conference call may contain forward-looking statements that we're making under the safe harbor provision of federal securities laws. I would also like to remind you that the company's actual results could differ materially from the anticipated results in these forward-looking statements. Please see today's press release under the caption forward-looking statements for the discussion of risks that may affect our results.

Also, we may make reference to non-GAAP measures such as adjusted EBITDA. For a reconciliation of those measures, please see our website as well as the various press releases that we issue.

And lastly, we're also broadcasting this conference call at fullhouseresorts.com, where you can find today's earnings release as well as all of our SEC filings.

And with that said, Dan, I had a few notes on the properties, do you want me go ahead and do those really quick?

Sure. Go.

Starting over at the Silver Slipper. We did have another great quarter there with revenue up 17% and adjusted property EBITDA up 33%. That's despite a significant expansion that occurred in the middle of last year. And much of that boost really came from 2 things. One, last year, we had a really bad winter. And if you recall last year, we had freezing temperatures, which led to slippery roads and highway closures on the way to our property. But just as importantly, last year, about this time, we led an operational review, just trying to find new ways to get work done. And those efficiencies from a year ago really set this quarter up well for success.

At Bronco Billy's, we had bad weather at the wrong time. So if you look at March 2019 as an example, we had 13 snow days this year. Last year, in March of 2018, we only had 4 snow days. And of those snow days this year, the majority hit on a weekend versus none last year. And not a surprise, whenever you have those snow days on a weekend, you always cringe a little bit. Estimated loss in gaming revenue from that was about $550,000.

Looking forward, though, we have a great new General Manager in Baxter Lee, who's waiting for his gaming license to be approved. In the meantime, we've revamped some of the operating hours for our food outlets to better match demand. We have some marketing tweaks that we're working on as well, which will likely start rolling out in July. And I won't go into detail on those since I see we have some competitors on the phone.

But -- and then you have Phase 1 as well, which is kicking into gear, that's really the parking garage, the biggest and last component. And I'll let Dan speak to that in a second.

At Rising Star, we had some flooding issues. In the month of February, as an example, we had 18 days where the road to the ferryboat was flooded. So while the boat could go, you couldn't actually get to the boat via the roads. And on top of that, Route 50 was under construction toward the end of the quarter.

But that all said, the same operational review that happened at Silver Slipper, also happened a bit later in the year at Rising Star. You're not yet seeing the results of that in these financial results, but you should start seeing it shortly.

We're also in the early innings of some marketing changes over at Rising Star, including a brand-new campaign that just launched. It highlights Lucky Ben, our General Manager there. And in the face of all that, you also have a ferryboat operation that's starting to ramp up now that the weather is better.

In the winter, you can get delayed by fog or snow or rain. And in the summer, it's a bit easier for us to have a consistent ferry service. And you're seeing that in the results with April. We had 3 times more cars that used the boat this year than in January of this year.

Last property is Northern Nevada, that was really just a hold story. The normal hold there is about 14.8%. Last year the hold was pretty close to normal at 14.6%. This year, it was 9%. And so that resulted in about $325,000 of lost gaming revenue. For the quarter, we posted essentially flat revenue and adjusted property EBITDA, but they could and should have been a bit better with normal luck.

Consolidated. All of that led to a pretty decent quarter, with revenues up 17 -- sorry, 7%. Adjusted EBITDA up 20% and on an LTM basis, we're up about 70%, 7-0, from where we were when we came into this company at the end of 2014.

If you look at net loss, net loss has a bit of -- has a few swings, mostly noncash, but if you -- we have those warrants that are still outstanding, that's a piece of it. And then last year, we had a pretty big swing. We refinanced our debt, if you recall last year, and so there was a pretty big extinguishment. But that's the financials in a nutshell. If you want to...

I'll just expand on a few things. The -- it's rare that everything operates like all cylinders, and that's true this time. The -- we had a strong quarter at the Silver Slipper and kind of a weak quarter at the other 3. So fortunately, the Silver Slipper's our most important property, and it did extremely well. And I think the quarter was the best in that property's 10-year history, and so we're pretty happy with that.

Part of that reflects the stuff we've built recently, the Oyster Bar which opened a little over a year ago; The Beach Club, which also opened a little over a year ago, have kind of matured and they are now standard parts of the property.

We upgraded the Konami slot system in September/October. That was a pretty significant upgrade, investment over $1 million, but allows us to do more marketing things. And we've always been very creative with our marketing there. And all of this was achieved despite the fact that Island View added a big expansion last summer. We're not done yet either the -- in fact, this month, we're refurbishing the casino for the first time since the property opened, which is new carpeting, new wallpapering, new slot stands and so on. Also, almost $1 million.

So -- and then we continue to work on getting entitlements to eventually add another hotel tower there. Still a ways off, but we're working towards it. And we'll keep you posted on that.

At -- just Rising Sun next, like Lewis said, better weather. One of the things we're finding with this ferry is the number of cars that show up to take it depends a lot on the weather. It's a little bit surprising because it's 2,000 feet across the river. The ferry is just as fast whether it's raining or sunny, but I guess people are more likely to get on a ferry when it's sunny than they are when it rains. And certainly as we get into this spring, the trip numbers are up quite a bit. That's masked by the fact that they're repaving -- I forget that number, but the highway that leads to the property. And so there's -- if you're driving past our competing casino and you got 11-miles further to go to us and there's construction disruptions on that 11 miles, you're maybe a little more likely to stop at the competition. So that construction is supposed to be -- well, not finished until later this year, but the major disruption of it is supposed to be done this month. And so we did grow mostly past that.

We're also refurbishing a restaurant at the property converting a deli into a bistro. It's the first refurbishment we've done to that property in 25 years. And as part of that, we add a little coffee place, like a Starbucks.

The -- similar to the Silver Slipper, there's stuff we've done in the past, and it takes time for this stuff to show up. And I think the ferry is one of those. The RV Park is another one. Now the RV Park opened kind of late in the summer of 2017. We couldn't do much with it in 2017. In 2018, pretty much throughout the summer, the occupancy in that RV Park built gradually over the summer. And we think it's likely to have a good summer, this summer, as the word of mouth has passed around the RV community. It's actually a very nice RV Park, a short walk from our casino, from our golf course, from the cute little town of Rising Sun. So I think that will continue to be a benefit.

We've made quite a few management changes there. And trying to look forward -- and Ben, who worked for us for many years in Colorado, and then ran Stockman's for a couple of years is a good guy, a smart guy, good personality and has lots of good ideas. So we're going with that.

And in the casino, among those ideas, there's -- we've introduced the Interblock Stadium gaming, just came up a few weeks ago. That allows us to not operate the table games 24/7 as we have for decades. Many times at 5 and 6 in the morning, we had more employees in there than we had customers, which doesn't make any sense. And so in Colorado, we don't operate the table games 24/7. And so we decided we could save money by doing the same thing here.

And $5 blackjack tables, if you run the math, you don't make money at -- even if the table is filled, if everybody's only betting $5 a hand, you don't cover the payroll costs of operating the table. Now if somebody's betting more than $5 a hand, you do. But -- and so like other companies, we're looking at trying to push the person who might want to gamble $5 a hand, we'll even let him gamble $3 a hand at the Interblock -- or IGT's got a similar unit that's kind of a table game experience, but in a machine context, and so it doesn't take as much payroll.

And then we still offer live table games during -- most periods during the week, just in the very slowest periods we won't.

Similarly, for decades, we've operated our buffet, 3 meals a day, 7 days a week. Buffets need high volume to make any sense. Otherwise, the food sits there getting dry and the employees stand around looking at each other. And we started analyzing it, realized that a lot of our competition does not operate their buffet during slower periods, and so we no longer do either. We only operate the buffet during peak periods. And this kind of ties in a little bit with converting the deli into a bistro so we have a good alternative that's easier to operate and frankly, offers better food because it's cooked to order. And then we will operate the buffet at lunch and dinner on weekends and holidays, which is when we have volumes that make sense with it.

Along those lines, we've introduced a $10 resort fee in our hotel, pretty common thing in the hotel business and certainly here in Las Vegas. And with that, you get a free buffet, but it's not the buffet we've operated for years, it's a buffet similar to a Fairfield Inn or a lot of budget hotel chains, where you have to pour your own coffee and maybe even make your own waffles, and that allows us to operate a breakfast buffet with 2 employees instead of a dozen employees. And people are paying us because we charge a resort fee for it. We get some grumbling, but I think overall, we're still providing a better breakfast experience than most of our competition. And we do so at a much lower cost, so that's something we've recently implemented. And we're looking at things kind of across the board to try to be more efficient there and make money.

I will say the -- there is a bill that has passed the state legislature. It's waiting for the Governor. The Governor has until Wednesday to either sign it or veto it. If he does nothing, which a lot of observers think will be what happens, then it becomes law as of Wednesday. And that bill has some pluses and minuses for us. The principal minus is that the 2 race tracks outside of Indianapolis, which Caesars bought recently, they are scheduled to get table games a couple of years from now. Under this bill, that accelerates to year-end. As of January 1, 2020, they can open live table games.

That's a negative for us. It's hard to know how big a negative it is. The closest of those is about an hour away from us. We don't get a whole lot of customers from that direction. And frankly, we don't do a whole lot of table games' business. The thing that's hard to quantify is there could be somebody who lives midway in between, where the husband plays table games and -- but isn't really a high roller, but the wife is a major slot player. And will they come out of their driveway and turn right instead of left, and that's very hard for us to know. We don't think it's huge.

Also, if you were to go to those racetracks today, they have a large number of blackjack-type games, where you sit at a blackjack table and there's basically an iPad built into the table. You make your bets on that iPad, I'm simplifying this, right? And they even have a person standing there dressed as a dealer, but the person doesn't actually act as a dealer. They're there to like smile and offer you a drink or something, right? But it very much gives you a blackjack playing experience. And so when they're now allowed to take that table out and put in a traditional blackjack table, that's certainly a plus for them and somewhat of a negative for us, but I don't think it's as big a plus as they think it is, and I don't think it's all that big a negative for us. But that's in this bill, they get to do that sooner than they would otherwise.

Now somewhat offsetting that, in fact, probably significantly offsetting that, it alters the tax rates for casinos at the lower end of the tier. There's a progressive tax scheme here. And for any casino with under $75 million of gross gaming revenue, we do about $45 million of gross gaming revenue. So we're significantly under that, and there's one other casino in the state that is also significantly under that. And right now, the tax rate on the first $25 million of revenue is 5%. And under this bill, it goes to 2.5%. Under the next $25 million, it's currently 20%, and it goes to 10%. And then on the next $25 million, which for us is kind of an aspirational target, it goes from 25% to 20%. So that's a pretty significant reduction in our tax rate. Unfortunately, it doesn't take effect until July 1, 2021. So it's 2 years out there. They didn't want to affect the current fiscal budget, they do 2-year fiscal budgets there. But at least on the horizon, we would get a pretty significant decrease in gaming tax to offset the fact that the tables are coming sooner to the tracks.

The other things in the bill is it calls for a new casino in Terre Haute. We have spent a couple of years getting to know Terre Haute and all those civic leaders and so on. It will be a competitive process. And to be the developer of that casino, we think it's a pretty good opportunity, and we'll probably look at doing it. The Gaming Commission will choose who gets to do it, and so we don't have an inside track other than we know where it is, and we know a lot of people there. That doesn't necessarily -- we still will have to come up with the best proposal I'm sure, and we'll look at doing that. But that's in the bill.

The other thing that's in the bill is it legalizes sports betting and does so but it has to be done through the licensees, and we get a certain number of skins and so on. And so we will now have a sports betting capability, both at the property and online in the state underneath our license. And in fact, it's just as -- we're treated the same way as some of the big casinos. So what might not be a very big plus for Caesars is actually a pretty big plus for us. So that's in the bill. So we think that probably becomes law on Wednesday, although in Indiana, you never know, the Governor might veto it.

So in Colorado, Lewis mentioned the weather issues, it seemed to snow every weekend, which is not a good thing for us. The -- but more significantly, we have started construction on the expansion, and it's the parking garage. The connections that go from that parking garage into the casino, which is a little complex as the terrain is pretty complex. Those are basically tunnels. And then a back-of-house corridor. Today, all of our supplies arrive and our garbage leaves on an alley that is between the parking garage and the casino. And basically, we have to build a service corridor on that alley as the tunnels from the parking garage into the casino go underneath that service corridor. So it's a little complex, but not that complex. And that service corridor gets built now, even though it's really part of the bigger hotel expansion because it's a very narrow building squeezed between the parking garage and the casino. And if you came back and tried to build it later, it would be really hard to do.

So the -- there's nothing happening on the site yet, as the people on this phone call from Cripple Creek would probably attest. That's because the parking garage is being built in precast. And that -- it's hard to find labor up in Cripple Creek, a small town. And so there is a subcontractor down in Colorado Springs, who's started the work to precast the units there. And that will go on for a couple of months.

Later this month or early next month, construction trailers will show up in Cripple Creek and start boring holes and setting up the foundation work so that later this summer and into the fall, the precast units come up by truck and get craned into place. And it's kind of a -- really most parking garages are built in precast, it's a very efficient way to build a parking garage. And think of it as that kind an Erector Set or Tinkertoys, if you will. And so -- but in effect, we have started and expect to have the garage in about 10 months.

It's -- the whole project is $15.5 million. We have $20 million of cash on the balance sheet today, roughly just under $20 million, about $10 million is used in operations. We will generate cash in the meantime, but out of an abundance of caution to make sure that we have the money to do everything, we requested, and our lenders have agreed, to a $10 million increase in our $100 million credit facility. We expect to close that later this week. Everything's been documented and approved, we're just -- there's some technicalities, we'll get it closed this week. It's been approved by all the gaming regulators and so on. And so with that, we will frankly have the cash in-house to build this $15.5 million project.

The garage is a significant plus to the property. Most of our competitors have garages. This garage is -- will be the most convenient garage in town and leads right into our casino. But more importantly, it allows the construction of the luxury hotel that we intend to build. That hotel will use up most of our surface parking lots. And so while the garage is being built, Lewis and I have about 10 months to figure out how to finance the hotel, lots of different ways we can do it. We can do it with REITs, we could do it with a high-yield bond deal done by -- on the company -- company's own balance sheet. We could bring in partners, and we will look at everything.

At the end of the day, we want to do it in a way that's comfortable on our balance sheet and good for our shareholders. And so -- but we have 10 months. And frankly, if the financial markets didn't cooperate and we had to put off building the hotel to a later date, we could do that. I don't think we'll have to do that, the financial market's pretty good right now. And -- but if we did have to put it off, that's okay. We'll have a functioning parking garage and a nice back-of-house service corridor and we'll wait until we can do it on terms that are favorable for our shareholders. So that's that.

Northern Nevada. Last year was a story of a terrible ski season. This year, we had a good ski season and a terrible hold percentage. It is what it is. The underlying metrics are good. It makes -- Northern Nevada makes most of its money in the summer, really driven by the Tahoe property. And the winter is a secondary season, and so we're looking forward to a good summer.

I mentioned Terre Haute. The other thing we're -- we've been pretty prominent is in New Mexico. The State Racing Commission, last summer, put out a request for proposals. They received 5 proposals. Ours was more ambitious than anyone else's. We have a square mile under option in the town of Clovis, which is the closest casino you could have to Amarillo, Texas and also pretty close to Lubbock, Texas. And we propose to build a 300-room hotel and a racetrack, casino, golf course, full-on resort. And we were pretty creative in trying to figure out how to resuscitate the horse racing industry by having a moving grandstand and all sorts of other things in it. Couple of hundred million dollar project.

The other proposals -- there were 2 others in Clovis. They were a fraction of our size and ambitiousness. Another one in Tucumcari, which is not far from Clovis, and that was also much less ambitious. And then there was one in Lordsburg, New Mexico, which is the southwest corner of New Mexico, very small town, hoping to attract people from Tucson, Arizona, except that Tucson already has significant tribal casinos that you'd have to drive past.

And so the Racing Commission had an outside firm do a study on all the proposals. And while it didn't make a recommendation, it rated them on like 10 different criteria, like, largest investment, most jobs, most tax revenues and so on. And not surprisingly, we ranked first, in I think every category or virtually every category, which you'd expect. We were the most ambitious project. That caused Lordsburg to file a lawsuit claiming that the study was somehow flawed. This went back and forth. Meanwhile, the press came out and pointed out that the Chair of the Racing Commission is involved in business relationships with R.D. Hubbard, who was -- who's grandson was one of the other proposals, including owning some race horses in a joint venture with them.

And I actually did the unusual step of calling for him to recuse himself, which he refused to do, which is pretty unheard of. And I think -- and the Racing Commission kept dragging this on. And finally, the -- there's a new Governor in New Mexico, and I think she looked at it as wanting to start with a clean state and make sure it's a clean and open process that's fair for everybody. So a couple weeks ago, she replaced the entire Racing Commission. So there's 5 new commissioners. By law, all 5 must have history in the racing industry, which all 5 do. And they just met, I believe, last week and figured out who their Chairman is and so on. And I'm sure they're trying to figure out what they do now because the former Racing Commission spent 8 months requesting proposals, reviewing the proposals and everything else. It wouldn't surprise me if they want to kind of start the process again or get new presentations or they might even decide not to even issue the sixth license.

And so -- but I think it was a good thing for New Mexico. And I think potentially, a good thing for us that we're starting with a clean slate. And a gaming -- a Racing Commission, that as far as we know, doesn't have any conflicts of interest with any of the bidders. We've always kept our nose clean in situations like that, and we will continue to do so. So I think the developments in New Mexico probably, ultimately are positive, but hard to know what happens there. It's a -- it's very early with the new Racing Commission.

Guess, that's it. Our debt is now $110 million, callable at $102 million?

$102 million.

And that drops in 6 months or 8 months?

Yes, we're sitting at [$98.750] -- $98.75 million of debt. This tack-on, that you mentioned Dan, will be an incremental $10 million on top of that. So we'll be a little shy of $110 million.

Well, it was kind of -- we needed the Indiana Gaming Commission's approval, as we do for almost everything. And in that discussion, they said, "Well, so how levered are you?" And I said, "Well, we're a lot less levered than Caesars." And they started laughing. They said, "Well please don't use Caesars as your modicum of financial proprietary." And I said no, we don't. But we are probably less levered than other licensees in Indiana as well, probably a little more levered than I would normally like to be. But I hope we can get delevered through growth. And we did this at Mirage, we did it at Pinnacle, where you go and build something that might cause your leverage to go up in the meantime, but then when it comes onstream and does 20% cash-on-cash return or something, then ultimately, you come out of that with less leverage than you had before.

So at Mirage, we were highly levered when we built Treasure Island, and when we built Bellagio and when Bellagio opened we were investment grade. So I don't think we're going to get to investment grade any day soon but that is the goal, and I think our balance sheet is in far better shape than it was 4 years ago. And it will continue to get better, although the leverage will go up and down as we build different things.

So I guess we're ready for questions, right?

Yes. Let's take some questions, Anna.

(Operator Instructions) We take our first question from David Bain from ROTH Capital.

First, I know you reviewed several onetime issues hitting the first quarter EBITDA. And I know you did quantify the Grand Lodge hold impact, I think it was $320,000. But have you done any other impact analysis by property, maybe like a weather add back at Bronco Billy's or any big picture adjustment for the quarter?

Well, I mean clearly, if you adjusted for weather, we would have been up instead of down a little at Bronco Billy's. It...

About $600,000 in...

Swing factor.

Yes.

In revenue or...

In revenue.

Revenue. And then you take out the gaming tax rate's pretty low there, so most of that would fall to the bottom line. And at Rising Star, it's a little tougher to quantify. But the -- because highway disruptions come and go, and it's hard to know exactly what that influences. But I think if the ferry had operated every day in February, which it just couldn't because the river was flooded, and if the main road there wasn't under construction, we probably would have been up there as well, but hard to quantify.

And quite honestly, there's a -- rarely in a quarter does every property operate. Occasionally, we'll get a quarter where everything works. But there's almost always pluses and minuses. And if you're going to have a quarter where 1 property does well and 3 just do meh, you want the 1 property to be the Silver Slipper. So...

Right, right. Okay. And then I was trying to better encapsulate your chances in Terre Haute. And my understanding at least is that first, Spectacle Entertainment would need to close one of its casinos likely in Gary and then voters need to approve in the county, which obviously seems likely. But I guess the question is, if the other competitor does close one of their casinos allowing for the additional license, does that imply any sort of consideration from the gaming board or just put them on equal footing with other bidders? I know that there -- the gaming board's going to look at tax contribute, whether they want more tax, right, to them. But the media seems to make it seem like they'd be frontrunners, that competitor. I'm just trying to encapsulate that.

This has been all over the place during the legislative session. And so for a while there, it was designed that Spectacle got it -- just got it handed to them for a while there. And then it was -- Spectacle would have some advantage in going forward. In the end, Spectacle did -- does come out of it if it becomes law with a pretty significant win in that they have 2 licenses in Gary, that -- it's the old Trump boat, which was run about as well as he's running the federal government, and the Majestic Star -- and they're across the way from each other, went through bankruptcy, ended up controlled by Wayzata. And then Wayzata was a high-yield distressed debt firm, sold it to Spectacle.

And Spectacle gets to combine those 2 licenses and relocate it from -- right now, to get to it, it's in this strange little harbor that is behind a bunch of abandoned steel factories. And then once you park, you have to go over railroad lines and a levee, it's a very, very complicated, convoluted property. And it is coming from Chicago. Not only does Chicago have its own casinos, of course, in the suburbs of Chicago, but then you pass Hammond and then you pass the Penn facility in East Chicago and then you get to Gary.

Well, they get to relocate and build the casino right off Interstate 80, still in Gary. But a far, far better location, and I believe they have to pay $50 million upfront and consolidate their licenses. Now don't hold me to that. David, you can look up the bill. But that's a pretty big win for them because that will be a great location. Chicago is still an underserved market, and they walk away with that.

They ended up without any advantage in Terre Haute, except that they are well known in Indiana. Well known -- and Rod Ratcliff, I think is the largest single contributor to the State Republican Party. But ultimately, this isn't being determined by the politicians, it's being determined by the Gaming Control Board, which I will tell you, in Indiana, the Gaming Control Board has always been pretty apolitical. They're -- it's a pretty straight up Board and always has been. So -- in a state where sometimes things do get political.

And so I'm optimistic that this will be an open process. But it's also open to anybody. So you could have some Malaysian casino company come in and offer to build something huge or anybody. And so I think it'll be an open process. I guess the advantages we have is it's a relatively small market. So said Malaysian company is probably not going to be interested just because of that. We know the market. We're pretty good at proposing new places. I think we -- the Gaming Commission knows us. I think we've been a good licensee, we have a good relationship with them. And Spectacle has some of those same advantages. And -- but that doesn't mean it can't be anybody else. So...

I'll do my real-time fact checking. $20 million is what he'd pay, not $50 million.

$20 million, okay. So Spectacle came out of this with a pretty big win in the northern part of the state. And -- but you're right, through a lot of -- some of those press articles reflected the state of the bill as it worked through -- it's work -- as it worked its way through the legislature, it finally went to a joint committee. And what came out of the committee actually doesn't give them any advantage in Terre Haute. And I know Alex is on the line. Did I say anything incorrect, Alex?

No, that's right, Dan. Yes, there's $20 million, and they do have to surrender that second license as soon as they apply for the relocation within Gary. That's the second license that then gets assigned to Terre Haute. And they get a tax credit in exchange for surrendering that second license. But yes, the decision is made by the Gaming Commission.

Yes. So we don't have to -- like if we were to get Terre Haute, we don't have to close Rising Sun to do it. We're not moving the license, it's a totally new license.

We take our next question from Chad Beynon from Macquarie.

Dan and Lewis. You finished your prepared remarks or before Q&A remarks related to leverage. You also talked about a lot of good updates here and organic growth and some good opportunities. It does sound like there are some assets for sale in kind of this sub-$30 million to $40 million EBITDA range that are just too small for some of the bigger companies that have all consolidated here. So what's your appetite for potential -- more M&A? I know you've done a couple small tuck-ins over the last couple of years. But should we think about the near-term vision as head down and kind of focus on everything that you've talked about? Or if one of these assets came along at the right price and you could get the financing with either a partner or on your balance sheet, that this could be something to kind of bolt-on to your current business?

Lewis, just reminded me that we sign an NDA around here about twice a month, so there's a lot of acquisition opportunities we look at. Bronco Billy's, after all, was an acquisition that we did. And so we will do an acquisition if it makes sense. A lot of times, the stuff that the bigger companies are trying to shed are declining properties. And you end up looking at them and trying to figure out what the hell you do with them. And there's a few that we've gone and looked at and said, "Oh my God, this would be a quagmire."

And so -- but yes, if we see something that makes sense where we think we can add value to it and do something with it, where we think the market is one with potential, like Colorado is, sure, we'd look at acquisitions. We look at them all the time. But I -- but we're pretty selective, and we've got a pretty sharp pencil. So I wouldn't buy the stock because you think we're going to do brilliant acquisitions. But we will do them when we see them.

The stack is as tall as me, Chad.

Okay. Perfect. And then -- okay. So related to Colorado, at what point will we have more details on the Phase 2 budget? I think you said you would start construction at the end of Phase 1, which should be about a year from now. So at what point do you kind of finalize the budget, go forward and announce it to the Street, where we can put more pen to paper on what type of returns or EBITDA generation you can get from this?

Well, with the $15 million being done now, that would leave about $115 million with a bigger reserve, maybe $120 million to go, on Phase 2. That's a soft budget. You can use that number, just for your own math.

When we're done, we end up with about 200 guestrooms all-in and a casino with about 1,000 slot machines in the heart of Cripple Creek. And I will tell you, a part of what appeals to me, as I look at Black Hawk and I look at the gaming per capita in other places, like people don't realize the gaming per capita in California is now about [$300 million] per person. The tribal casinos in California do about $8 billion a year and California accounts for about $1.5 billion of Southern Nevada and about a $0.5 billion in Northern Nevada, and then the card clubs in California do about $1 billion a year. So that's about $300 per capita for the 40 million people in California. In Colorado, it's less than half that. And in the southern part of the front range, it's 1/3 of that.

And there's no inherent reason why people in Colorado wouldn't gamble the same amount per capita as those in California. When you think of where those tribal casinos are in California, they're not in Santa Monica, they are -- people have to drive an hour to get to them for the most part. 85% of the people in California live in Los Angeles, San Francisco, Sacramento and San Diego. And in every case, you've got to drive at least a half an hour and in most cases, closer to 2 hours to get to the nearest casino. And of course, $1.5 billion of that's in Nevada, which is a 4 or 5 hour drive.

And so you go to Colorado and say, here's 4 million or 5 million people living in the front range and they're gambling less than half that. And so the demand is there or potentially there, and the reason we don't have it is the product. And if you go up to Cripple Creek, all the casinos, including our own, are just little brick buildings that they shove slot machines into. And if that's what the customer wanted then Las Vegas would be a ton of little brick buildings with slot machines in them. And that's not what it is. And people are looking for more of a resort experience.

And in the entire state of Colorado, the only property that is kind of Las Vegas quality in my view is at the Ameristar in Black Hawk, which does extremely well. And you can go through and figure out the history of that property, and we have because originally it was a separate public company. It was called -- it was run by Hyatt, and it was owned by a weird -- a company with a weird name. You could Google it and find it. It was a partnership out of Texas that had public bonds outstanding, so there's SEC documents available. And when it first opened, it had a big cinema, it didn't have a hotel. And it didn't do much better than anybody else in that town. And then Ameristar bought it and started fixing it up and then added the hotel. And the results went up dramatically, and the size of the casino didn't change. And Ameristar broke it out as a separate set -- as separate property. So you could follow it through the years that Ameristar was an independent company.

And then Pinnacle bought Ameristar and decided to try to confuse the world by lumping it into the Western division. Well the only other casino in the western division was Jackpot, Nevada, which has made, like, $15 million a year forever. It's a very stable little place, 1.5 hour south of Twin Falls, Idaho. And so you can pretty easily back out your guess as to Jackpot, Nevada. And you'll figure out that the Ameristar and Black Hawk probably makes about $85 million to $90 million a year of EBDIT today and dominates that market. And yet it's sitting there with only 1,000 slot machines, but it has 586 guestrooms and a big parking garage and a high-quality place.

And when we looked at what happened, its revenues went up and then its margins went up, went up rather dramatically. Because the -- a lot of the costs are fixed. So if we can get our win per slot machine per day to $200 instead $100, well the cost of the surveillance department, the security department -- there's a $1,300 a year slot tax per slot machine. All those are fixed. The HR department's fixed, even the General Manager's a fixed cost. And we operate our front desk now, that's largely a fixed cost. And you add the hotel, okay you got to -- you have housekeeping. You'll have -- that's an incremental cost. But then the restaurants, we are adding one restaurant, and we're demolishing and replacing one restaurant with one that's a little bigger as part of this plan. But for the most part, it's the same food and beverage department we have now.

Well, all of a sudden you're putting a lot more volume through the same restaurants and of course, a lot more volume in the casino. And that's why Ameristar is running 25% or 30% margins. And so between the revenue increase and the margin improvement, you get a pretty dramatic increase in the bottom line. And we think we get a very comfortable return on the total investment of about $140 million, which includes parking garage.

And this isn't just Ameristar. If you go back and look at the Borgata in Atlantic City, it did the same thing, Beau Rivage in Mississippi, where somebody came in and built something that was significantly better than the competition in that market, and it was an underserved market. In fact, you could even argue that Bellagio was that sort of property. By the time you got to CityCenter and Cosmopolitan and so on, California was no longer an underserved market because of all the tribal gaming. And so the -- you didn't have the jump. Plus, after all, Cosmopolitan, just to pick a very nice hotel, didn't stand out head and shoulders above what came before. It was really more of the same.

What we're doing will stand head and shoulders above what stands in Colorado Springs in an underserved market. So that's a formula for a good return on investment. And so going back to acquisitions, if somebody has something similar in a different market, we'd look at it pretty carefully because not only can we get a good return on the acquisition, but it gives us an opportunity to make a subsequent investment that we get a good return.

Now, that's a long-winded answer to a simple question. Sorry, Chad.

Chad, I'm going to postscript on the other side. So on the financing side, if you look at these capital markets and the [Dow] markets, in particular, you've got companies running around issuing senior unsecured bonds for 6.75%. And the argument for us to make to those guys is, why would you not want a little more yield although you would have to fund some construction, right? And on the flip side, you've got guys that are financing brand-new greenfield construction deals, with no EBITDA.

With no (inaudible)

Yes, on the -- on Native American land. And we could say to them, "Look, why would you not want a little more -- take a little -- have something that's a little less risky and fund our operations where we have existing operating cash flow?" And so we'll see where we shake out on the funding side. But there are a bunch of conversations that are happening behind the scenes, and we'll get to the right place.

We think there's some middle ground in that, and we've dealt with both. At Pinnacle, we built L'Auberge, and we built all this stuff in St. Louis. And we did it with high-yield debt on balance sheet. And then when we had the separate entity to build the second casino in Lake Charles, it was all project financing. And we did have that all pulled together, as it was expensive and complicated. But we had $500 million on $10 million of equity. And we had it pulled together -- $12 million of equity, we had it pulled together and then Ameristar offered us a really good price, and we took it. So we never pulled it down, although with hindsight that property's doing real well. I kind of wish we hadn't sold it. And -- but it showed that our underwriting was correct to begin with. And so I think here it's kind of a hybrid. We're a small company taking on a project that's kind of big relative to the company, but we're a lot less risk than a lot of project finance deals, but maybe a little more risk than some of these guys borrowing money at 6%.

Okay. Great. One last one, just a point of clarification on the Indiana Sports Betting. Part of that bill, if that is passed this week, does that include mobile wagering off the site location? And if so, would you look to potentially monetize that to someone who's looking for market access? I know there were some different types of sports betting proposals, and I wasn't sure what the final one was, if it was just retail or if that included mobile? If you could just help me out on that, and that's all for me.

Chad, this is Alex. Yes, you're correct, you're allowed three skins for mobile sports betting in Indiana. And importantly for us, it allows for remote registration. So somebody does not have to -- they can just register from their phone wherever they -- even if they're sitting in Indianapolis or Fort Wayne, they don't have to come into our property to register. And we are looking to monetize those with market access deals as we speak.

Okay...

We're unlikely to do it on our own. It's a lot of software and knowledge that a number of companies have that we don't have. So we're probably going to joint venture on that stuff.

(Operator Instructions) We take our next question from Brian McGill from Telsey Advisory Group.

I want to touch on a couple of the properties. But I wanted to start Indiana with the ferry and maybe thinking post road construction here. So you had said in the release you did, there were 6,000 cars in April, which is obviously great. Now you had previously put out numbers for 25 or 50 cars a day. And if I'm doing the math right, it looks like that's about 200 cars a day. So are we going to begin to see a real benefit from it that you're kind of alluding to? Or some of the cars obviously that are going across, not going to the property, obviously?

Yes, I -- listen, I hope so. We're scratching our own heads, wondering how do we get more of those cars to go to the property. We're not really running this ferry to collect $5 a car. And in fact, we're just announcing that for the month of May, we're not going to charge at all. And let's see what that does to it. It's kind of a little bit of an experiment. But while the road's under construction, we're just going to say, "Hey, come on down and try the free ferry." And let's see what it does. And then -- so we're playing with lots of different tools to try to figure out how to do it.

I mean the good news is carrying a couple of hundred cars a day is a good number. That's a great thing. Now that's both ways, and so that's 100 cars coming our direction each day. And if you work backwards, a ferry runs 14 hours a day and it takes 4 trips an hour, so it's for from at capacity. It can carry quite a few more cars. But yes, we're -- look, the good news is there's people there. We're just trying to figure out how to help the casino more because when you look at the casino revenues, they've been kind of weak for a while now. And so we're doing a lot of things to try to figure out how to improve the casino revenues. And the fact that the ferry is there and is carrying cars is certainly good. And hopefully, we can figure out how to translate that into an increase in casino win.

Yes. And you know what it reminds of me of, Brian? And Dan reminded me of this the other day. But if you go back to when we were at Pinnacle, we had a road that went across the Markland Dam on the way from Cincinnati to Belterra. And I remember when that road first opened, Dan and I went a month after it opened, and we were like, "Why isn't anyone using this road?" And then a year later, everyone was using the road. And it took some time before you saw the road usage and then saw as well the impact on Belterra's results. And these things take a little bit of time. It's nice to see, as Dan said, the cars coming across. Dan is right, those are two-way numbers that we gave, not one-way numbers. But the promising part is people are using it, and so now we've got to work on the part 2, which is getting those guys actually in the casino as well.

Right. It seems like the sports betting could certainly help it even further, if you have people traveling across the river to do it, right?

Although as Alex just mentioned, you can actually sign up online and gamble then going forward without ever entering the casino. It's a little different than it is in Mississippi. But yes, the sports betting is definitely a plus, and we're trying to figure out -- it might make sense for us to actually put a race and sports book in the property, just as an additional amenity. And we've got a couple of places we could put that. So we're exploring that.

You have to do that...

By the way, I don't think the -- go ahead.

No. I was just going to say, do you have to do it on the ferry or can it be just on the property because you have a lot of space there?

It's one of the things we're trying to figure out. And I think we can put it on land. Can we not, Alex?

I -- it's not defined, the Gaming Commission is going to set the regs for that over the next few months. So it's not defined in legislation. But we believe that it'll be allowed to be in the -- on the land-based part.

We have a lot of space in either one. I mean I'd rather put it on the land-based side, but we also have lots of space on our boat we could put it on if we had to. And these -- with the drop in the price of large-screen TVs, I can remember when we built Bellagio the cost of the race and sports book was a huge number because it was a very expensive large-screen. And today you can put one together for a lot less money. So...

Yes. The only thing I was going to add, Brian, and I know you love the sports betting side, but you're probably well aware of Colorado, and that was approved. And so it now goes into the hands of voters. But stay tuned, you may get sports betting here in Colorado in the near term as well.

Yes, it's...

Has there been anything polling on that at all? Have you seen anything at this point? I didn't see that if it would...

No. But it seems likely it'll pass.

Okay. And then...

It's got the backing of the industry. And the place that legalized pot, is now looking at legalizing mushrooms. It's hard to imagine they'd turn down sports betting.

Well they've turned down gambling and other gambling enough, but this is a little bit different.

Then maybe last one for me. How about on Mississippi with your sports book there, how's the experience? And where does Louisiana stand right now? Are they getting closer to trying to get something done? Or how long you're going to benefit from that traffic potentially?

There's a bill in the Louisiana legislature. It still has a few weeks to go. It's had some controversy around it. I suspect it will pass, but it's -- there's a chance it won't. We're doing pretty well with our sports book, and it's not much more than a simple little desk. It's actually doing well enough that I'm scratching my head wondering if we should build a real race and sports book in Mississippi. That property doesn't have a lot of extra room to do it in, but if we build the hotel expansion, it would. And so we're contemplating that. But I would -- we're making $0.5 million a year there maybe?

We made $300,000 in the quarter of EBITDA.

$300,000 in the quarter. So maybe it's -- but that was a quarter with the Super Bowl in it. So -- and March Madness, so I wouldn't forecast $1.2 million of income. It's certainly been a plus to us, but it's not -- probably not the biggest driver in our results. And if Louisiana legalizes, we'd probably give up some of that. But recognize, we've made no investment. The investment was done by our partner, and we get 60% of the revenue. But then we have to pay for the employee who's sitting there. And so we're making a, I don't know, several hundred thousand a year. And maybe that drops to slightly less than several hundred thousand a year if Louisiana legalizes. While it's easy to say we're the closest place to make a bet from New Orleans or from Baton Rouge the fact is most of the people in the line at that cage are from the Northshore Lake Pontchartrain and Hancock County. So...

Yes. It's a business for us, Brian, where we have, as Dan mentioned, 3 writers standing at a computer, the kiosks we really have been waiting forever for those to be approved and to roll out. So it's essentially a 3-man operation there right now and doing okay. So...

Thank you. That concludes today's question-and-answer session. I would like to turn the conference back to our host for any additional or closing remarks.

I don't really have anything. We're just continuing to move along. I think that a trailing 12-month EBDIT is now?

$18.2 million.

$18.2 million. And I think if we had a -- some of these unusual things in the quarter to -- we actually had a -- quite a few unusual negatives in the quarter and still pulled out a pretty good quarter. So I think the ongoing number is probably a little better than that actually.

So okay. Thank you very much, everybody.

Thank you, everyone.

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