Full House Resorts Inc (FLL) 2022 Q1 法說會逐字稿

Good afternoon, and welcome to Full House Resorts First Quarter Earnings Conference Call. (Operator Instructions)

I would now like to turn the conference over to Lewis Fanger, CFO of Full House Resorts. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to our first quarter 2022 earnings call. As always, before we begin, we 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 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, I was going to talk about our newest news really quick with Circa Sports, and then let Dan go into operations and our growth projects. But we did just announced today our newest agreement with Circa Sports to develop and manage the on-site sports book at the temporary as well as at American Place. If you've been to the Circa Resort here in Las Vegas, you'll know exactly why we're working with them. They have an amazing sports book here in town. It's the largest in the world. It's 3 storys tall with a podcast studio, really fun and great sports book, and they really embrace sports. If you haven't seen in person, you need to.

But they also have a mobile app in several states. As a part of our agreement, they'll use our expected sports skin in Illinois to launch their Circa Sports, mobile sports app throughout the state. And then usually, we don't go into some of the details of these agreements, but because of confidentiality clauses, but this is a larger one. And so disclosure-wise, we think it's wise to give out some of the details. This agreement had a $5 million market access fee that was paid last week upon the contract signing. As typical with those market access fees, we'll amortize it over the 8-year life of this contract once operations go live.

Also similar to our other skin agreements, we do share in the revenue subject to an annual minimum. That minimum is $5 million per year, which, of course, also doesn't start until operations begin. Beyond the 8-year initial term, there are 2 potential 4-year renewal periods, both at Circa Sports' option. And so for those of you keeping track, we do have 7 total skins. This one that we expect in Illinois, 3 in Colorado and 3 in Indiana. We're getting back, one skin in Colorado and one skin in Indiana, we get both of those back in the middle of May as we previously reported.

And so when you total all the annual minimums from our various contracts, we're sitting at $9 million per year, not including anything incremental from the 2 skins that cease in mid-May. We certainly hope and believe that we'll find a replacement operator in each of Indiana and Colorado. And so we do think that the $9 million figure should go higher. With that said, do you want to...

I'll just point out that the market access fee that we've charged on each of these agreements is not refundable. So we don't take it in income. GAAP has to amortize over the life of the contract, but it's not refundable. And so there is a similar market access fees. I think it was a total of $3 million on the Churchill deals. Churchill opted to exit the business. It's a little bit surprising because they really the first people in it. But they're exiting the business. They don't get that back. So we will take into income. In their case, it's $1.6 million that was still unamortized as of December 31, yes.

And we take that in the first quarter and the time they told us they were out in May 15 when they discontinued operations, okay. And so there's that, and we are talking with other companies to replace them. So ultimately, this should be a little bigger business met. But we're excited to work with Circa. If you haven't been down town to see their place just to put it in perspective, and you may recall, we live in Las Vegas and been here a long time. But they are the most successful new casino to have opened in Las Vegas since when opened in 2004. There's been a number of failures, but they kind of focused on sports betting more than anyone else. And so it's all over the place. It's up by their pool, it's in their casino and it works. And they're a private company and they -- but they probably -- they do it really better than anyone else. And so we're pretty happy to be partnering with them.

The -- but let me go back to the quarter, yes, it was a pretty decent quarter except that we're up against a really strong quarter last year. But we were down, and the biggest piece of that was the Silver Slipper. And if you look at the story page here, if you look at the overall EBDIT, we were at 10.4% versus 12.6% or 12.7%. Most of that was at the Silver Slipper which was down 1.6% in EBDIT. Colorado, which is very turn up with the construction, I'll mention in a minute, it was down a couple of million and Nevada, which suffered from a wind percentage swing was down about $400,000. Indiana was flat.

So let me address Mississippi, there were 5 things that I think are worth noting. Last year, the government stimulus checks came out in the middle of March. And we definitely saw a lift in our business at that time. We saw lift right away and then it continued strong through April and then kind of petered out gradually over the year. Hard to know how much of our $30 million. We did $30 million of the EBDIT at the Sliver Slipper just under $50 million company-wide. Some piece of that was related to stimulus checks, maybe a couple of million, $3 million, something like that, but that's a guess. We don't really know.

But in the first quarter, our slot win at the Silver Slipper was flat. Our table game win at the Silver Slipper was flat. So despite the fact that there were stimulus checks issued in the middle of March last year, property had flat revenue in terms of slots and tables, which, of course, is the bread and butter. And so that was actually not a factor in the quarter. Even though everybody was kind of like, well, last year, we had the stimulus checks. But when you really get into the numbers, we did okay this year without the stimulus checks. The -- almost all of the swing in revenues was our on-site sports book, where we have the closest online on-site sports book to New Orleans and Baton Rouge. And it opened about 5 years ago. It's going to be a nice segment of the business there. And they legalized online sports betting in Louisiana. There was a build to do the same thing in Mississippi and it didn't pass in Mississippi, because the industry couldn't get their act together.

But in Louisiana, it passed and it opened at the beginning of the first quarter. And that pretty much hurt our business quite a bit. And so we were down like 65% in terms of the tickets written at our on-site sports book. We shared that with William Hill, who actually runs it. So we get a piece of the income and they get a piece of the income. Now, given that it's down, and I think it's probably perpetually down because until Mississippi allows online. And even when they do a low online, population of Louisiana is bigger than Mississippi. Mississippi is about 3 million people and Louisiana is about 4.5 million. Of course, a lot of that population in Louisiana lives a long ways from us like Shreveport.

But the fact that Louisiana approved it and Mississippi didn't hurt us. If Mississippi had approved it, we probably still would have been hurt, but not by as much. And so to put it in perspective, though, of the $30 million of EBDIT at the Silver Slipper last year, $1.4 million was from the sports book. And so if that drops by 65%, then that would be $1 million out of the $30 million. And that might be a reasonable guess. I mean the swing in the quarter was $400,000, now part of that and an income from the sports book. But the wind percentage is a little lower than normal and the first quarter has things like the Super Bowl in it, so it's seasonally a little stronger. So I don't think you'll see that biggest swing every quarter. I think it'd be more reasonable to expect that we're going to make something like $0.5 million at the sports book there instead of $1.4 million, and it just is what it is and less perpetual.

Another thing I'll mention that is an ongoing issue and that was our insurance costs, our property insurance is up significantly. And in the quarter, at the Silver Slipper alone, it was $280,000. The increase was $280,000. And we're not alone on this. I think a lot of companies are dealing with us. There's been a number of hurricanes and flooding incidents and the insurance companies were upside down. And then on the flip side, when interest rates are low, that is a negative for the insurance companies. So they have been ramping up their cost of insurance pretty steeply the last couple of years really. And it's affecting us kind of across the board.

Now I know having been dealing with this for a long time, especially on the Mississippi Gulf Coast. It was kind of a long sign wave on this. In other words, you'd go a couple of years where there isn't a storm. And at this point, with what they're charging us twice as much for our insurance as they were a couple of years ago. And if you go for a period of time without a storm, then competition starts to set in and you'll get better insurance rates. And I think in our unique case, as we get open in Illinois and as we build out the Chamonix in Colorado, we get bigger, more diverse, less reliant on the hurricane area of Mississippi. So I think we can do better going forward.

And I also think we're kind of at a peak in the long-term signed wave of what the insurance companies can charge. Given what they're charging today, I think it's probably a pretty profitable business and people will come into the business, whereas in the last couple of years, people were exiting the business. So -- but that is -- I don't think a perpetual thing. But I think the rate at which insurance costs improve will be years, not quarters. So for at least the next few quarters, we're going to struggle with the cost of insurance. The other one is rather unique, and that's the price of crab. Our food cost was up $800,000 at the Silver Slipper in the quarter. All of that was crab. Actually, was up -- crab accounted for about 110% of the increase in food costs. We used to buy the crab at $8 a pound, now we're buying at $17 a pound. And it's a very popular part of our buffet. Our buffet is very popular.

For the 12 months ended March 31, the recent 12 months ended, we spent $4.6 million on crab. We went back and looked at the 12 months ended March 31, 2021. We spent $2.4 million on crab. So the amount of crab we bought was up $2.4 million, and that was a significant cause that caused over half the swing in income at the Silver Slipper. So what's going on with -- first off, what can we do about it? Well, we could try offering other things people like crab. There are local crabs, but they are tiny little crabs. And we've kind of made a name for ourselves by offering the snow crabs and Dungeness crabs, which have much bigger claws.

But if you look at the crab industry that when people like cut about supply chains, this is a supply chain issue for us. Because in 2020, there wasn't any fishing. You couldn't go out on a boat with a bunch of the people and collect crabs. And that was kind of okay initially because there were no restaurants open either. And people tend to eat crab more in restaurants than they do at home. And so -- and there were frozen inventories. Most crab comes from frozen inventory anyway. Certainly, all the crab we serve is frozen, we don't bring (inaudible) little things all the way from [Hudson South] into the Mississippi. We buy tractor trailers full of the frozen crab.

And so the crab we are serving today, we probably bought 4 or 5 months ago. It's been in a warehouse in Mississippi. It came out of -- it was a crawly thing one to 2 years ago. So this is very different than buying crabs in marketplace in Seattle. And so when you first had an absence of fishing, you also had an absence of restaurants and to the extent crab was still being sold, it depleted the frozen inventories. But what happened in 2021, the restaurants all opened everybody wanted crab again. You didn't have any frozen inventories and the crab season is now, not in the summer. And so the price of crab doubled went from $8 a share to $17 a share. I saw -- I was looking around something there was a restaurant chain with crab in their name, who's like really doesn't know what to do, right?

And we've just got to bite the bullet. Now we did do some steps. We stopped offering 2 for one buffets midweek. Now we've stopped having crab on the buffet midweek. But 65% of our buffet is comp for our casino customers. And so what we charged to go to the buffet is kind of relevant for two-thirds of the people using the buffet. And so to some extent, we're just -- we'll just muscle through it. There is -- I found another little factor. There is some snow crab that comes to this country from Russia. But as nearest I can tell, it's not significant enough to move the market. It was a comment I heard when I went looking at it, I don't think that's a benefactor or will be a factor.

And in fact, it's the opposite now because people are out fishing now. And guess what, there's a lot of crab and they're a little bigger crab because the pandemic, nobody was fishing form. And so I think we're going to have a pretty good crab season this year. And eventually, the inventories get, frozen inventories get rebuilt and but you're kind of -- you're trying to fill the inventories where you also fill the supply chain. So if you go out to a restaurant and order crab, it's pretty expensive these days in most restaurants, much higher than it used to be, but people are still ordering crab. And so they're trying to fill the current demand and rebuild the inventories, and it will take a little while. But eventually, I suspect it gets back to where crab is $8 a pound, maybe it goes to $9 a pound, because oil is more expensive than the crab boats use gasoline, right? But there's no other reason long term why the price of crab should be twice what it is. And it's kind of funny, because I went looking to see if inflation was a factor. No, our payroll costs are up less than 3%. The cost of all of our other stuff has not changed much. It really came back to crab. And I think that's a short-term thing.

And in fact, we had the price of crab escalated in September. So we have one more quarter to deal with the price of crab year-over-year, and then we should be on a better situation in the second half of this year. So the biggest factor at the Silver Slipper and really company-wide in the quarter was ironically the price of crab and I think it's short term. And then wind percentage affected the Silver Slipper a little, but it's rare. We talk about what percentage because usually, with portfolio theory, once you get through having 4 or 5 properties, it evens out. And then if you start adding together different quarters, over the course of a year and company-wide, we see very few swings in win percentage. This was a quarter though where company-wide, it was about $2 million.

But if you look at the revenue line, I mean not the segment, but on the total income statement, casino revenue was down about $3 million. Two of that was company-wide win percentage, and the rest was the sports book in Mississippi. When we get -- so that explains the silver slipper. I mean it was really crab and sportsbook and then in property insurance. Those 3 things account for 100% of the swing in EBDIT. And the biggest factor is short-lived, at the price of crab and the other 2 are a little more on current.

In Indiana, we had a very good result. We had flat -- I think it's good because remember, we had stimulus checks last year this time. And we also have an increase in insurance cost there. And the -- and yet, despite that we did fine. Where the win percentage number, where did I put that.

Yes. So well, in the big swing would have been on the table game side, it was a 17 percentage point, sorry, 16 percentage point difference in hold share versus last year. When you look at both spot and tables, it was roughly $150,000 of lost revenue when comparing this year to last year...

Property offset that, and they ended up the quarter with flat income.

So that's why I viewed flat as being actually pretty good.

Yes. Because they offset some headwinds and came in just fine. Colorado is quite turn up with construction at this point. We have no on-site parking. We are running valet parking. We have a parking lot 3 blocks away that we have a shuttle bus to -- the market as a whole is doing very well since April of last year when they get rid of the betting limits. And so we're down despite the market being up, and that's a direct reflection of how turn up the property is. We've actually turn down a good chunk like 25% of the Bronco Billy's building was torn down, because it will become part of Chamonix.

And then this is a seasonally slow quarter there. And so that's the only reason we had a loss -- we won't have a loss on that over the year. But I also wouldn't expect much income for the year. I think we'll have something -- but it's kind of irrelevant. We're building a $250 million place. Do we really care whether we make money this year. Obviously, we care and we're doing the best we can. The construction people, of course, would prefer to just close it, that would make their life easier. But we have a couple of hundred employees there have been loyal employees to us, and we want them to be part of Shamini and our customers.

We have very loyal customers who we want them to be part of Shamini. And so we are expecting and willing to have this construction disruption this year, and Xiamen should open about a year from now and we'll have a much brighter future at that point. In Nevada, the Grand Lodge at the Hyatt, Taco actually had a pretty good winter. It was okay ski season and certainly better than the year before when the pandemic inhibited capacity at the ski areas. But it had a pretty big wind percentage swing there of cost at like $600,000 in revenue, and that accounts for pretty much all the swing in income. And so Northern Nevada was okay, except for win percentage.

Really wasn't anything else going on there. In the contracted sports wagering, we talked about lots of different things coming and going. Last year, we didn't have all the 6 skins up and running. This year, we did going into the quarter at all skins and then 2 of the skins said they were going to discontinue their business, and then we signed the deal with Circus. So that's all the different things going on there. And corporate was about flat. Really, the more important things in the company is that we have these 2 major things that we're building. We got -- it took us longer to get started in Waukegan than I would have hoped. But I understand it. This is a big project for the City of Waukegan and Lake County.

And when we went in and said, okay, we want to get going really quickly. They hired outside parties, outside lawyers, outside consultants as they should. And those people all said, well, we want to review the whole plan. We won't see the whole -- how you're laying out the parking lots and so on before we let you start construction on the foundation. So the irony is the strong structure is completed and ready to be delivered. We don't have a foundation to build it on yet. We got the building permit on Friday, the fence and erosion protection stuff is going up today, which allows us to be putting in the foundations this week.

And when you take that timeline out, we had hoped to be open in the summer. It's going to be the fall. If I were to guess at a month, it's probably October, and it might be late in October, but it's somewhere around in there. But the good news is we're now underway, finally. And there, I think the supply chain issues, we've been ahead of the curve. As I mentioned, we have the 10, which will enclose an area of the size of 1.5 football fields. We will have 1,000 slot machines, 50 table games, 3 restaurants, 20 acres of parking. It's kind of a big deal. And we will get open as quickly as we can. And having gotten the permit at this point, I think that was the biggest hurdle.

It was not only the city but also the gaming commission, which we got the approval. And so we're off and running now. I think we're ahead of the supply chain issues. We got the tent. We have a floor that goes in. It's kind of a raised floor if you've been to G2E at the Las Vegas Convention Center when you go in and look at the slot machine manufacturers stuff, that's all on a raised floor. In other words, the convention center here as a big concrete floor, they bring in this kind of a plastic sort of thing that raises you up like 4 inches, and that allows you to run all the cabling in it to get all the slot machines, and that's what we're doing because it's the most efficient way to do it. We were able to find whatever says 3 acres of raised floor that we own now. And we've been dealing with the slot manufacturers to make sure we can get the slot machines.

One of the bill validating companies is having supply chain issues out of Japan. Fortunately, that's not the one we're using. So we think we're in good shape there. And so we've started to hire people. We've hired a number of department heads now and that will continue through opening. So that's -- you could talk recession or inflation or any of that stuff far more important for us and for our stock is getting Waukegan open because it's the closest casino to 1.2 million people, and it will do well. And so we're looking forward to that. And then the construction is still ongoing pace and quite well in Cripple Creek. It's on track to open in the second quarter of next year.

We're also just starting to renovate Bronco Billy's itself -- so we're going to have additional disruption within Bronco Billy's, but it's going to be significantly better when it's all done. And you could see those on the website a couple of different websites we have. But the one I usually go to is just Shamonico.com, think of shamanicolorado.com, and there's links to the webcam you can see the construction in progress. The elevator towers, which are the caller things on the project are done. The guestrooms are getting filled in. You can't see it from the webcam but behind the main building is the meeting room space and it's getting filled in and closed.

And so it's coming along pretty fast now. And there -- we were a little concerned whether we could find the manpower. We've actually found the manpower just fine. And we've had some issues with getting the light gauge steel on time, but it really came from the architects. We didn't finish the drawings on time. But we've overcome those and we're doing better. And so we're on track to open in the second quarter of next year. And we -- we've had a couple of little bumps on price, but we're pretty close to that $250 million number well within the contingency. So I think we're in good shape there. I can't think of anything else to say about Chamonix.

It's pretty exciting because we're now starting to buy some stuff. In fact, I'll find a way to put a picture up of -- we have a piece of art that was like $300,000 as part of the budget that hangs at a prominent spot in the place that's made of solid gold because it's a gold mining town, we're near a big gold mine, and we want something that kind of stands out. So we're getting into kind of the exciting stuff. And this isn't like the Steve in art, we did at Bellagio. It's much less expensive, but it's going to be a pretty showy thing, and it's kind of fun. So that's coming along.

Rough day to report earnings, rough day in the market. And so I know everybody just wants to go have a scatter something. But I will tell you, business wise, we're just fine. I mean, I feel like the Canadian Lighthouse when was the ships was coming towards them and they announced on the frequency, the ship that's ahead of us on so many miles, we suggest you have your course. And the other person said back, we suggest you be, of course. And then the enterprise this is the USS enterprise, we're an American aircraft carrier, and we have a whole fleet of ships that's escalating us. Again, we request that you would change course and Canadian came back and said, yes, we're a fucking Lighthouse do what you want. And it's kind of like, okay, the markets all over the place.

Well, you know what, we have our money, it's fixed rate. Our business is doing fine. Our business does find during recessions we're building this stuff. There's a site and says, yes, bring on a little recession. Maybe we can build this stuff cheaper, right? And so I think we're just buying, and the stock is volatile. But at the end of the day, we're building value for shareholders and the stock will reflect that. The only other thing. Let me just tirade a little bit about crazy gap.

No. Well, I will tell you, you will see the charges on debt restructuring. And to me, it's a little illogical, but we issued another $100 million of bonds that are the same CUSIP as the bonds we have outstanding now. And as a result, some of the fees that are associated with the issuance of those bonds get expensed under GAAP, and that's why you see the charge. Had we issued them with a different CUSIP they would have been capitalized, which makes no sense to me at all, but that is GAAP. So we followed GAAP. And the end result is the charge we take this quarter on that is basically offset by slightly lower interest expense over the life of the bonds. And so it's kind of a big much to do about nothing. But that's what you see there. we couldn't -- and of course, the bond buyers wanted to be in the same because it's more liquid.

Yes, yes. The only other thing I was going to mention, Dan is from a liquidity point of view, we still have a lot of cash. And so here in real time, we're sitting on about $318 million of cash with $205 million of that reserve for the build-out of Shawnee. But on top of all that cash, we still offer a $40 million undrawn revolver. The only thing being utilized on that revolver is a $1 million standby letter of credit for the bill out of the temporary in Waukegan. So we've got quite a bit of additional liquidity there. But that's all I had. If you're ready for a question.

Yes, going for any questions. I mean the only real supply chain issue we've been dealing with is crab.

Yes. And operator, before you go to questions, I actually got 2 e-mailed into me from David Bain who is having connection issues. So I get to ask you questions, Dan. Here's his first. Dan, hoping we could leverage your experience with minor recessions, major recessions or macro events that impacted operations for Mirage, Pinnacle, Full House or through your general industry observations over the years. For regionals, the impact is relatively benign based on historical gaming revenue data, but we're dealing with a fixed cost base. And in every recession, if in every recession, it tends to be a bit different. While real-time trends are not worried and we're getting questions about the back half macro, we would love to hear how you think about the world as it relates to the portfolio. You kind of did that already, but go ahead.

But we'll recognize when somebody goes to our casinos, we're a cheap trip. We're an easy trick, you get in your car with 2 or 3 people and drive there. So it's not -- the cost of gas as it's -- you're not driving very far. So it's not a lot of gas. It's being split between 2 or 3 people. It doesn't matter a lot. Whereas when the price of oil goes up, the price of air fare goes up proportionally more and you're buying a ticket breach person. So it has a much bigger impact on Las Vegas. And then, of course, a big part of Las Vegas is a convention business has impact there. When you have a recession, companies tighten up on who can go to conventions and so on. So it has a much bigger impact on Las Vegas than it does on the regional casinos in general. And so we become the stay vacation at home or something. So if you go back and look at the recession in '08, '09, which was what the great recession, the biggest recession in our lives, regional casinos did just fine. And so I think we'll see not much impact going through it.

Now availability of gas, and if you go way, way back in history, if you're in L.A. and you could only buy gas on even days of the week, and you got to be wise to remember those days, right? Well, then you don't necessarily want to go across the Mojave Desert and find out if you can get gas to go home, okay? But nobody seems to be talking about the availability of gas. They're talking about -- and so I think -- and even there, it's kind of interesting. I recently bought a new car and all the manufacturers are shifting to electric and my other car is an electric car, that is the wave of the future. And so somewhere 5 years from now, 10 years from now, you're going to have gas stations that are empty, and you're going to be charging your car up and you'll have solar batteries on the top of your house. Well, for example, in the parking garage at Chamonix, we have a whole bank of places where you can charge your card because we think that in the not-too-distant future, that's going to be important. And so I think there's -- if you build the hotel these days and you think of 30 years, you better be thinking about having enough power in that parking rash for people to be able to charge their cars.

And so I think the availability of gas doesn't seem to be an issue. Price of gas is an issue, but it probably works to our favor. Recession, I don't know, every time they talk about all these people trying to get across the border and like, no, let them in because we need employees. But of course, that's -- I don't make to be political. Of course, we don't want to just take the border down. But yes, we've had -- unemployment is still 3.5%. We do find employees. It's a little bit of a challenge, but then we try to make sure that we are a good employer so we can keep the employees we have and so on. And so I'm not worried about a recession. I'm not actually worried about interest rates. I mean somewhere out there, we'll have to refinance our existing debt. But it's a couple of years away, and we don't absolutely have to. We could find other ways to finance the permanent one in Waukegan if we had to and leave our existing bonds outstanding, but we've always been assuming that we'll be able to borrow cheaper at some future date when we're more diverse and so on. And so we would just call the bonds we have.

And I guess if interest rates went up a lot, it might not make sense to call the bonds we have, you keep bonding you figure out how to finance something and the other things. So our balance sheet, I wish I could say it was -- must have been Lewis' brilliance because we are perfectly situated today for what's going on in the world. We have the money to build these things and our debt is all fixed rate. And so it's just a matter of getting them built.

And it all starts opening in 6 months, Dan. Here's the second question, and then we'll open it up to normal Q&A. Are there any changes that you would make now either in design and development or operations to hedge for a softer consumer or is it pure execution mode based on real-time trends?

No, nothing really. I mean, Yes, I wish we could have figured out how to build Chamonix with less disruption to Bronco Billy's, but there really isn't a way I mean it is what it is. And Silver Slipper is solid. We have been slowly working on getting entitlements to expand the Silver Slipper someday, but we're so busy building the other 2 things that's kind of on the back burner for now. And we do keep inching our way forward with different entitlements. But I think even if everything cleared up tomorrow, I don't think we'd start construction right away because we're busy trying to build what we have. And that's what I do. I guess I mean I think we're in pretty good shape. I mean maybe -- some of that is brilliant and some of that is luck, but I can't think of what else they would do. These are all assets bill for the long term, and that's what we're doing. That's what we're doing.

I mean once in a while, we're offered different properties in Las Vegas, we live here. So of course, we look at it and I had operated casinos in the last way as before. But this is not an underserved market anymore. When you think that California used to be half of Las Vegas visitors stay it's still 30% of Las Vegas visitors and you have 60-plus tribal casinos in California that are newer and just as nice, many of them are newer and just as nice as the casinos in Las Vegas, this is kind of a tough market. And so we've looked at a lot of stuff and not done it. And I think that positions us well at the moment. Now I never say never. I mean if somebody offers to sell us Pelagia for $50 million, we try to figure out how to do it, right? But that has not happened.

So. Let's go into proper Q&A now. Yes. We will now begin the question-and-answer session.

(Operator Instructions) The first question comes from Ryan Sigdahl with Craig-Hallum Capital Group.

Curious on -- so congrats on the Circa sports book. I agree with you have been there. It is absolutely fantastic and the best sports book in Vegas. It draws people. So curious if you're able to disclose, I guess, scale and any plans you have on the one that will go in your casino if it's similar to that or anything to comment there?

Well, the one in the temporary, we're trying to build this so quickly. So that will be a pretty normal sportsbook even. We bought 2 air stream trailers that are like little food trucks that will be located near it so that you can get a beer and cappuccino pretty easily. That's about as creative as we're getting in this tank because we're trying to build it so fast. Now in the permanent casino, we're actually -- I'm looking forward to working with Derek Stevens to try to figure out how to have the best sports book in the Midwest.

And our design is early enough there that we can do some things there to make it a really Circa sports book. And it's fun -- it will be fun working with them because they really get into the details of it. He -- I love people like this. He went out of his way to like pull a light ballot of the late display to show how it's got a little cover over it so that you can see the lights in the sunlight of Las Vegas, the one he has out by the pool and all the stuff is like, "Wow, this guy really lives and breathes this stuff, which is great. And -- and so I think we have the opportunity to do something in the permanent that would be the best racing sports book in the Midwest. And that's -- as I've said many times on these calls, that's a business we've been hesitant to do it ourselves because not only is it kind of a unique expertise. But as a small company, if we end up with a team in one of our markets in the Super Bowl and we're not in the -- and if the other team is not in one of our markets, we'd be unbalanced. He's got enough of a business with a base of Pure in Las Vegas where people come all over that he doesn't have that problem. He's a private company.

So if he has a bad quarter because the wrong team won the Super Bowl, he's okay, right? And so we're happy to partner with him, and he's got a good online stuff. And he's kind of everybody knows Draft Kings, but this guy is a private company, does a pretty good job. And in the place he has downtown I didn't quite realize. I knew out by the stream, you have this big design, and they charge like $20 to get out by the pool. And it's up on the roof. When you go out there, there's like 6 swimming pools, and he kept them heated all winter long. So like normally swimming pools in Las Vegas close in the winter. He had met, so people were out there sitting in heated water in like 50-degree temperatures, watching football games in January. And I was that worked yes, worked really was like good on you. Is any had the windows on that side of his hotel tower, the extra thick glass because he knew he was blasting sound out by the pool and he didn't want to keep people up at night.

So somebody told me that they had dinner the other night in the steakhouse on top of Binions, and they could hear everything going on by his pool a block away. And I said, well, he's got extra thick windows on his guest group, so he doesn't really care. So maybe he has to step spend these days point, wherever the steakhouse on top of opinions need thicker windows. But this guy pays attention to his business. I like that. We try to pay attention to our business. So I think it's going to be a really good partnership.

And to your -- the beginning of your question, we do expect you're going to walk into our American Play Sports book and say, wow, that is our goal. Yes, that's our goal. And we're working to...

Yes. To follow-up on that. I guess the $5 million annual skin fee, does that include only sports book, online sports betting? Or is that also iGaming? It's legalized? And then secondly, does Circa have online sports betting in Indiana or Colorado? Or is that an opportunity with the lost Churchill skin?

Yes. No, they -- they currently, they're in -- they're not in Indiana. They are in Indiana and Colorado. They are -- I'm pretty sure they're up and running. They're not interested in being with us in Indiana and Colorado. I think they are up and running. If they're not, it's because they probably have a deal with somebody else. There are other companies we are talking with for Indiana and Colorado. That is -- it is not -- they are not in Internet gaming that I'm aware of, but our agreement is strictly for sports bet. If Internet gaming becomes legal in Illinois, then we would be able to do that separately.

One more for me, kind of switching over to the core business. Anything you've seen in March into April and even early May, given all the macro challenges, anything impacting the consumer that you've noticed?

I will tell you, April last year was one of the best months in this company's history. And I think that was the stimulus checks that came out mid-March. So we don't have our month closed yet, but I think April is going to be a little behind last year. Now it's early in the quarter, and I hope we can make that up. But I think even our budget showed us being down a little bit in the second quarter. So we have a little bit of a -- I mean, what those stimulus checks were for us? I don't know. But I mentioned earlier, it might have been $3 million of income and a good chunk of that would be second quarter comparisons. Apart from that, April was actually a pretty decent month, but you're kind of looking at it and say, well, some portion of the revenues last year. were kind of a blip over any April and any year before that. And so we like this April compared well with any prior April, except last year Okay. And other than that, I mean, if there's -- I mean, you got to remember a year ago, you still had mask requirements in some places. We don't have that now. People are back to their normal lives. The senior citizens who were -- who disappeared in the pandemic because they're afraid of getting sick and dime. They're now vaccinated and they're out of yet. That market segment is back for us back to where it was pre-pandemic, which is a good thing. And we've kept some of the younger people.

So when I look at the April results, the only thing I see that stands out a little bit is we definitely got a lift last year from the stimulus checks. And I know that the -- the big infrastructure bill was another big government surge of money into the economy, but it's not immediate. It's that you didn't get a check in your mailbox. And that's going to be customers of ours who get a contract to build a new bridge or in new road, and that will eventually end up in the economy and eventually end up with us, but it's not the same as a stimulus check in terms of the immediacy of getting into people's pockets and ending up in our slot machines. And I recognize, it's not like everybody got a stimulus check and went to a casino. Some people went to stimulus check and went to a casino, right? And I think if you were to -- if you could get the best buy numbers, I know the Best Buy year had a line of people trying to buy televisions. And I think it was probably a much bigger positive for Best Buy than it was for us, but it was a positive for us for sure.

The next question is from Chad Beynon with Macquarie.

Lewis, you mentioned the current status of the balance sheet, you're at $318 million of cash. So that kind of indicates that you haven't spent much on Shamini. Can you just kind of help us think about how the CapEx should look through the remainder of 2022? And what will slip, I guess, more into '23.

Yes. So well, we did spend roughly about $15 million for what it's worth. This is the point where it really starts to ramp up. So here in the second quarter, I look at Halak, as I said, but my gut is we're about $25 million of CapEx here in the second quarter. That's going to ramp up towards $45 million of CapEx in the third quarter and then maybe a little more from that in the fourth quarter. So it is starting to get in a ramp-up phase. And if you think about it just from a site level point of view, as you get more people on site, showing up not just for the steel, but now people on the inside with electricians and plumbers and that sort of stuff, that's -- by having more cars in the parking lot and people working, that's when you see the number really start to go up. So -- but rough figures, that's how it's looking to ramp up from here.

I mean recognize the commitments we've made are quite a bit ahead of the money that's actually been spent -- and so you commit for somebody to make a light fixture or furniture or steel, right? And so some foundry someway is making steel to our specifications. We have to buy that, but we don't actually pay for it until it's delivered to the property and accepted by us. And so the commitments are -- if we looked at the construction in progress, do you have that at the end of March showed., well -- with relatively small numbers. It was like 10% of the... About $45 million... In. Okay. So we've spent out the door, $45 million.

Of the $250 million we spend about $45 million.

Yes. But I'll bet our actual commitments that we would be obligated to pay for if we stop construction, for example, is probably at least $45 million.

Yes, I would agree with that. Yes.

So it's -- so we're well into it at this point. In fact, we're pretty close to the point where we will be able to have a total GMP from our contracted pension opps. And so most of the risk is behind us at this point.

Yes. And if it helps you as well, Chad, for the temporary, we're about $7 million of spend here so far of the $100 million. The big number, the fee that's due to the gaming commission, that doesn't happen until after the door is open. But what was that number, Alex, $32 million.

Currently, after it opens, I think $32 million.

Yes.

And the slot machines are $20 million. for those until they're delivered. Yes. And so here in the second quarter, you could have a sizable number. So far, it's just a lot of deposits, but you could have a number that's in the ballpark of $30 million here this quarter and then the balance in 3Qs you prefer in October opening.

Okay. And Lewis, sorry if I missed this. What was the reason why the opening day cut pushback? Was that just more certainty in getting the licensing and the permits and everything. It's just going to be a higher later than, I think, what you said.

Yes. And maybe I was a little optimistic. I was like, okay, we need to get this tent here. So we actually paid them a little premium to get the tent quickly. While the tenant has to go up on a foundation. Well, we went to the town said we just want to build this quick ringing foundation so we can start building the 10 and then we'll design the park lots and everything else, and they were like, no, no, hold down. We want to look at the whole thing, we view it in its entirety. We need to first hire outside consultants and there's a process they have to go through to hire outside consultants as municipality, they can't just pick somebody. They have kind of their own little RFP. And so they hired the outside consultants we had to get a preset in the process. And like literally, so we designed all the parking lots and then their outside consultant who wanted the handicap parking to be in a different spot so that the people and their real chairs wouldn't have to cross any traffic.

And we pointed out that that's not actually what the ADA code requires and we wanted it to be very much like Red Rock Casino here, which works very well, and we went back for that. So eventually, we got there and we pulled the building permit on Friday. And by the way, they've been working with us I would -- they've been very good to work with, as has been the gaming commission. I think we were a little too optimistic about how quickly we could get going. With hindsight, they were probably right to -- in fact, we got a message from the gaming commission at one point that was actually very clear and they said, we're rushing, rushing and saying, you want the gaming taxes and you want the employment, and they're like, it's more important that you do it right, then you do it fast.

And remember, I got that message -- that's pretty clear. It was a very simple statement. And so we were like, okay, take a deep breath, let's design it and meet their approval and so on. And so we now have -- I mean it took us 7 weeks longer than we had hoped in order to get the permit to put this in. And I think that was a function of us being overly optimistic of that process. And I think they kind of forced us to go down a more empathetical process, which with hindsight was probably a smart thing to do anyway. And as a result, we'll open in the fall instead of the summer. This leads into the permanent, and that's a 30-year business. So when you opened in October or July in the grand scheme of things and the overall shareholder value, it's more important to do it right than do it fast.

So, agreed. And then separately, and I think we've heard from all of the operators a lot of your competitors and other companies in other markets. It sounds like the reinvestment rates for players hasn't really changed and everyone continues to be rational. I guess the big market for you guys, Mississippi. You called out some of the things that caused a little bit of a decline. But within that region is blocky and Bay St. Louis being rational at this point and then the properties across the Louisiana line as well?

Yes. We recognize we compete more probably with Paras in downtown New Orleans and the fair grounds that we do with BlockBoxes quite a ways east of us. And even the casinos and Baton Rouge are probably more important competitors than Biloxi. Bay St. Louis and Gulfport are important. And yes, they're being rational. I mean, we're -- I mean, we deal with this a little bit like should we stop offering crab should we put quantity limits on the crack. But 2/3 of the buffet is comped. And so we've kind of just bitten the bullet and buying craft and hopefully, it's only at these prices for a limited period of time because it's important to our customers. So maybe that's being a little irrational. I mean, put it in perspective, our buffet is now $50 on a weekend in the evening. The average President buffet eats 2 pounds of crab at $17 a pound, that's $34 worth of crab before you get to stakes or any other cost of food, let alone the payroll. So if somebody really does eat 2 pounds of crab and on average, they do, we're upside down on the buffet. And I could raise the price even more but 2/3 was capped anyway, so it doesn't matter. So I could take crab off the buffet and our current earnings be better, but that's kind of what we're known for. And so it's kind of like we'll sustain the pain for a little while longer and hopefully, guys go and catch a lot of craft crab seasons right now. So hopefully, this will come back to normal.

The next question is from Edward Engel with ROTH Capital.

Just wondering, since Golden Nugget acquired Wildwood and Cripple Creek, I was wondering if you've heard of any talent plans that they have for that property?

I haven't. I actually viewed that kind of positively. The Wildwood was screwed up property, I mean they vary a parking garage underneath it, which is like an odd decision because land cryptos not that expensive. And there are 3 ways to park cars. You can do surface parking, which is really most of our parking even a company will be surface parking, but we do have a garage coming in. And service parking is like $2,000 or $3,000 of space. You can build the garage, and that's about $30,000 a space. You can vary the garage, like the Cosmo was built in Las Vegas with Barry garage, lotto's very crutch. And you're digging a big hole in the ground and putting a garage in that hole and then putting the hotel on top of it. That's really expensive, not only dig in the hole, but then you have to have all sorts of special ventilation. And even with the special ventilation and sprinkler and all that stuff, it's still not a very pleasant crash. I mean, every time I might go down to Caswell, I hate that garage. And why they would do that in couple I have no idea. So they got a 5-story deep parking garage and the lowest floor floods all the time because it's underneath the water table. And then they've built a pretty simple casino on top of it. I think they spent $80 million bus really fast.

And then one of the key guys became kind of debtor in possession, stay running it, and they kind of got it maneuvered and it got sold to a REIT out of Scottsdale, who owned it. So it's kind of run by this guy owned by a REIT. And I think he saw what we were saying about how the town needs more hotels. So he persuaded the REIT to build this little hotel with 100 rooms. It's a stick-built motel. It's like a Fairfield in at best. And it's actually across the street from his casino. But we've heard that it doubled their income from like $5 million a year to $10 million a year. more than that we hear Yes. And which is great. I mean it kind of proves our point that we're going to have a high-end 300-room hotel. And so watching their little motel open a year ago, their income went up a lot. And then Timanus it. Well, Tillman is actually a pretty good casino operator. And recognize, I worked for Steve When, I worked before that, that Jerkins head, [Mike Milka]. Biggest ego I've ever met with [Dominick Fertitta], right? But he's good at running his business. He's actually really good at running his business. So I will hand that off to him. And he'd probably be proud to say he's a big eagle. And so I expect them to come in and fix it up and do things with it and which the REIT and Scottsdale probably wasn't willing to do.

And I think that's an important part of turning Cripple Creek into a better destination. So I think it's great that gold nuggets coming there, and I would expect them to fix it up. And he's kind of on the edge of town. Now he's on the edge of town as you come into town, but everybody wants to come down to the Main Street anyway. So it's kind of like the resort it's in Las Vegas. Technically, it's on the strip, but it's not really where you want to be. And so I think -- but I think a little bit of money into that property will enhance it and enhance the experience of the town. And I don't think the REIT would have done it, and I'll bet Timon well. And so when I heard that, I thought that's probably a good thing. And so -- and by the way, I've met Tillman a couple of times. He's actually a nice guy, Big Eagle, but not a bad guy okay? And maybe on the right to have a big ego. And Dan, technically, we're out of time, but if you can keep it short. We've got one last question.

All right. All right.

The next question is from David Levine with MidOcean.

A couple if I could squeeze them in. First one, just on the temporary -- anything left that we should know about that's kind of major in terms of approvals? I noticed in the press release you just said, subject to customer regulatory approvals I wasn't entirely sure what they're related to? I know that a lot of these are kind of -- are not a big deal, but just wanted to kind of confirm. And then has your outlook changed at all in terms of what you called out in terms of what that temporary can do from an EBITDA perspective? Or do you still feel pretty good about that.

I feel really good about it. I mean, it's -- we're -- literally, this was a better deal than I thought it was when we got the deal. I mean I was -- we got the deal. I had been to Waukegan a few times, it's kind of a down-and-out cross-belt town. And then I sort of look at it and like, wait a minute, Lake County, Waukegan is of the Capital City of Lake County. And Lake County is like 700,000 people, Kagan's only 80,000. And Lake Company is one of the wealthier counties in the country. And you realize there's some neighborhood pretty close to us that are pretty wealthy. And it's like in fact, I went down to Cosmo this weekend to specifically eat at China Poblano because we have a big American restaurant, burgers and pizza, what you'd expect. And then we had another restaurant we kept labeling at ethic. And it's like, well, what is ethnic because the population is 22% Hispanic and 8% Asia, but the Asians gamble. And so which is -- well, China Poblano is both, it's Chinese and Mexico. And it actually works pretty well. So we actually have trademarked the name Senior Wags, and we're going to have senior on, which would be Asia and Mexico, right?

And so you start running into stuff like that. And the other regulatory, they recognize in our business, you need approval of a gaming commission at every step of the way and as it should be, right? And so they're constantly looking over shoulder and take their approval. I will tell you so far -- well, it took Illinois a long time to decide who would get this license. But since they chose us, they've been very nice to work with. They have an agent who's assigned to us, been very reasonable. He's not a pushover, but it's very reasonable. And I haven't met him yet, but all the people that have worked with them, say he comes through when they need it and various approvals. So I don't think that will be an issue. It's a union construction environment, which has its challenges. And we've found out that one of our subs was about to give a contract to a non-union shop, and we had to staff head and say, no, this is supposed to be a Union job. It's got to go to a union chat. So we have those challenges, but the big one was getting started, and we've started.

And now we've started -- we have an MOU with the city for what the lease will be -- we have yet to have that lease finalized. So our lawyers are working with their lawyers to finalize the lease, but the MOU is very much in line with what was discussed with the Gaming Commission when the license was awarded. And I don't expect there to be any problem there. But actually, a very good sign of how well the city is willing to work with us. They're allowing us to start construction on the MOU. So we are starting construction on a piece of land. We don't know. And we're not even leasing yet. So we're starting construction on a piece of land that the city owns and intends to lease to us in accordance with the MOU. So we're all working together to make this happen as quickly as it can. So I don't expect there to be a problem. Now I will tell you that when we went through the -- we spent a day the other day going through the construction timeline, it could slip into November. It's also possibly be done in September, but I think it's unlikely and kind of worst case is December. But at some...

In terms of like the customary approval thing, that's like not. You just don't think that's really a big deal just from the...

Yes. And to help you out, David, Illinois is one of those states, there are many where you don't get your gaming license until the second before you open. So you're going to see that language up until we open, not just so you don't get freaked out. It will continue for another quarter or 2.

You'll see that same language on we refer to Colorado. And I think you'll see that same language, any casino company building any casino anywhere that is subject to gaming approvals.

Yes. And if I could just squeeze one in on Colorado. Obviously, you're still kind of a year out, so there's a lot to do. But anything kind of major that we should be kind of looking for in terms of major milestones that could cause -- could cause issues or you'll feel a lot more comfortable once you -- once it's kind of complete? I know I've probably asked this question over the course of the last couple of months. But just curious your thoughts on that, like anything kind of major -- the time line here where you feel kind of like the major hurdles are coming?

Well, for example, we just are about to open. I don't think we're done yet. We're about to open a new table games pit in a different part of Bronco Billy's so we can take the old table games pit and refurbish it. And we're going to be doing lots of stuff like that in the next year, moving (inaudible) within recoil, which is going to be confused for everybody, but it's what you have to do to do it. There is a milestone, there's a point we're getting there, where we have, as I mentioned, a GMP contract from HP. But otherwise, we're kind of at the point where this stuff is just on rails as I just finish it. Like I mean (inaudible) sitting here had the designer, Sean Idea had an epiphany about 2 weeks ago that one of the cages in Bronco Billy's was designed in the wrong place and the bathrooms are in the wrong place. We swapped it, right?

And it was like an oversight. I like that shouldn't have been there. And so we're kind of at the point where you really try hard not to make changes like that because you just want the construction people to finish. And so there's -- I'm purposely trying to keep my fingers out of it because I know that change orders at this point are expensive. And in Shamen, it's -- and even that was in Bronco Billy's, which is a little later in the process than Semone and Shamen we're trying not to make any changes at all. And...

Just let the construction guys build it. I mean they're building it now. And literally, I say that our Head of Construction, I said the other day, I said if you need me to jump on anybody because they're not being timely, let me know, but otherwise, just build what we told you to build, right? Let on do it. What's your last question there, David?

Yes. So just so I get the sports wagering stuff, right? So with this new circa deal, obviously, it's going to kick in once the temporary opens, it will be $9 million on sports wagering with an upside if you get additional partners in Indiana and Colorado for those 2 skins and then upside also on Circus. So it's kind of $9 million at minimum with upside. Is that kind of the right way to think about the sports wagering.

There's a gap. We lose Churchill May 15. Well, the $9 million doesn't have Churchill in it.

Yes. Right.

Run rate. I'm just saying run rate, yes.

Yes. We're currently 7. We're going to lose 3 and we pick up 5. That's right. But there's several months here where we are at 4.

Right Yes. $9 million is the way to think about like the base case kind of run rate with potential for getting those other ones back.

And we will get something for the other skins. We just don't have it under contract yet.

And just a modest correction to what you said there, David, Technically, we share in the revenue with all of the skin. So it's not just potential for additional upside with circa it's potential upside with all of them. But you are right. It's $9 million with more to come, hopefully.

Yes, this concludes our question-and-answer session. And I'll turn the conference back over to Dan Lee for any closing remarks.

No, I wish it were a brighter day in the market, because I think we have a pretty good situation here. And -- but we got taken down along with everyone else and hopefully, we'll grow out of it eventually. So thank you, everybody, for listening to us on a rough day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.