Good day, and welcome to the Full House Resorts Q3 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 begin.
Thank you, and good afternoon, everyone. Welcome to our Q3 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. 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.
With that all said, I'm gonna make one big point before I turn it over to Dan. This is a very, very big call for us because it is the last time you'll hear from us without Waukegan open. The next time we talk to you, Waukegan should be open, and Dan will give you some more color on that timeline and everything else. I'm gonna reinforce that point right from the start. With that, I'll turn it over to you, Dan.
Well, recognize Waukegan is. Certainly the permanent one will be bigger than our whole company, and the temporary one might be bigger than our whole company, so it's pretty significant. The recent results show that the Rivers Casino, which is about a half an hour to our south, is doing about $600 million in revenue. The Potawatomi Casino in Milwaukee, which is just over half an hour to our north, does about $400 million. The Grand Victoria, which is to our southwest, is doing about $120 million. The existing casinos in our neck of the woods are doing $1.2 billion. If we just take a small piece of that business, but we'll actually grow the market.
There's 700,000 people in Lake County. It's one of the wealthier counties in the country. We're the only casino in Lake County. We're in the middle of it. I think we'll grow the gambling by people who live there because it'll be much more convenient. We might nip a little bit away from our competitors, and then we probably take a bite out of the Video Lottery Terminals, which are doing about $100 million a year in Lake County. I think the biggest piece of it is we'll grow the market and
Hey, Dan.
Anyway, go ahead.
I was just gonna say speak up only because people, I think people.
Okay. I'm speaking solid. Okay. Well, it's come along very quickly. You can see it on the website, which is americanplace.com. You know, the parking lots are paved, lit, striped. The kitchens are in place. You can see it on the right side of the building. They're in 9 shipping containers at the kitchens. On the webcam, you don't see behind it, but behind it, we have basically a office complex that's a bunch of construction trailers, a modular office complex, and that's where the employee locker rooms and everything are. The decor is going up on the inside. This week we'll be rolling out carpet and putting in slot bases and starting to install the slot machines. We should have all the machines in by the end of the month.
Be about 1000 slot machines, 50 table games, 2 restaurants. We have a third restaurant that'll open probably in February. It's a little behind, everything else. We're hiring people. Probably the biggest challenge is that 50 table games takes a lot of employees. My guess is we will open with less than 50 and open more tables as we hire dealers. It's gonna be hard to find enough dealers and get them all licensed and trained and everything to open everything at once. Generally, once you are open, it's easier to get people to accept job offers. Especially since, if we open with less than maximum number of tables, the tip rates will probably be quite high.
Recognize this is a very big checklist that we have to go through, a lot of different checklists. You gotta remember each of these slot machines is basically a computer. Imagine if you had 1,000 computers from different manufacturers and different games, and they all have to be hardwired back to a server that's not done with Wi-Fi. There are miles and miles of low-voltage cabling that runs in the floor of this place to hook all those up to a server and make sure all of them work properly. It's gotta be proven to us and proven to the gaming commission. There's also hundreds of cameras all hooked up to surveillance DVRs and all have to be functioned properly.
You know, if everything went perfectly, we could be open in late December. We'd be the first casino in the history of the Midwest where everything went perfectly. I think more than likely it's gonna slip into January, but it's somewhere in that timeframe, we think. We're not gonna open until we're confident that we're ready. You certainly don't want a flawed opening like has happened at some casinos. When we're confident we're ready and the gaming commission is confident we're ready, then we'll open. It's coming. It's not very far off at this point and we're excited about it. We are hiring people and we're having job fairs and so on. In Colorado, we're also making good progress.
We're closing up parts of the building now. It's starting to get cold up there, 10,000 feet in the mountains. You can see that on the webcam for ChamonixCO.com, ChamonixColorado.com. Very good progress there, you know, wrapping it up so we can heat the inside so that we can continue the inside work through the winter. The drywall is going up in some areas. The glass is up on a lot of the building. The brick is up in the lower parts of the building. We have had some challenges. There are three different hotel towers there, for example. They are erected with medium-gauge steel. We had difficulty finding enough. The idea, we would've had three teams of workers working on the three towers.
We only had enough workers up there in the small town in the mountains to have two teams. The third tower really didn't start until towers one and two had topped off. It's a little behind. It's now going up, whereas towers one and two are being enclosed. Most everything else is doing pretty well. We're aiming for mid-2023. Some attributes, notably that third tower, might be a little bit behind. We're less certain on the opening date there than we are in Illinois, because after all, in Illinois, we're installing slot machines, so it's looking pretty good, and we're making good progress there as well. We've also been refurbishing Bronco Billy's, which is next to Chamonix.
In this past quarter, about half of it was closed, including the steakhouse. It's currently operating with much less gaming capacity than it has had in the past. It's got no on-site parking, no on-site hotel rooms. It's amazing that it's making any money at all, and it wasn't making much. In fact, I think it lost a little bit in the quarter. If anything, it was about zero. That gaming space, which is really the center chunk of Bronco Billy's, will reopen by the end of December. We're going into the slow season, but it'll be nice to have that gaming space back. It matters really, especially on weekends.
The restaurant, which was a steakhouse, will reopen as an Italian restaurant in the Q1 . We did that in part because the Chamonix has a high-end restaurant in it, which would be the highest-end restaurant in the complex. We took what was the high-end restaurant in the complex and are rebranding it as a more modestly priced Italian restaurant. In the quarter, there was a lot of pre-opening costs, about $2.5 million, which of course affects net income, even though we back it out for EBITDA. That's a lot of payroll. You know, we're hiring people and so on. There's some rent that goes in there, a lot of professional fees. That all gets expensed as incurred these days.
Historically, it was capitalized sometimes, but today it's all expensed as incurred. Obviously, is a big drain on current net income, but it's really not really a current expense. It's an investment for future net income. There's some other noise that was in the quarter. There's a progressive gaming tax rate in Indiana, and we're one of the smaller places, so we have a low tax rate. Indiana law allows us to not be taxed on a certain amount of free play, but it also allows us to sell that untaxed free play to other casino companies. There are other casino companies in a much higher tax bracket.
Every year for several years now, we have sold our free play, where we'll go ahead and pay the tax on our free play, sell the ability to not be taxed on the free play to a different casino company, and we kinda split the benefit of that with the other party on that casino company. It's been different parties, different years. This year and last year, both years, we got $2.1 million for selling the free play. This year, we did it in the Q2 . Last year, we did it in the Q3 . That confuses the results on both quarters. The counterparty wanted to do it in the Q2 . We didn't really care.
It may be a little better if you do it in the Q2 because back a few years ago when we had to shut down for the pandemic, we had sold the free play, and the counterparty didn't get as much benefit as they might have thought because they were actually closed for a period of time. Other than that, we're pretty indifferent, except that sooner might be a little better. Selling it in the Q2 instead of the Q3 is what happened and that confuses things. There were also stimulus checks last year.
I don't know what everyone else has been saying, but pretty much across our markets, we've been swimming a little upstream, because the stimulus checks went out in the middle of the Q2 last year actually. That helped the later part of the Q2 and the first part of the Q3 'cause some of those stimulus checks ended up in slot machines. We had that going. Our insurance costs are up quite a bit, because we have a big casino on the Mississippi Gulf Coast that tends to get hurricanes. We haven't had a hurricane there in a while, but it is definitely in a hurricane zone.
It's a big part of the company, so we've always maintained our insurance at a very high cost. We maintain very good insurance because if it did get hit by a hurricane, it would be pretty monumental for the company. That will be less true as the temporary opens and then as Colorado opens. We think our insurance costs will come down pretty significantly in the year ahead, or at least relative to income. Both because we'll be more diverse and could probably negotiate a better deal with the insurance companies, but also we might be willing to accept a little higher deductible and things like that on the Mississippi property, because it won't be half of the company anymore. It'll be much less than half the company.
Just to put that in perspective, the increase in insurance under the current contract is running about a half million dollars a quarter, and the insurance contract comes up for renewal on May first, if I remember correctly. Yeah, it's May first.
I think it's May first. Yeah.
We have another few months of that, and then I think we'll have much better comparisons on the insurance thereafter. We do have some new competition out there. Not huge, but in two different markets, there's new competition. At our Mississippi property, there is now online sports betting in Louisiana. We did have the closest sports book to Louisiana, so we would get some people coming over and gambling at our sports book. Now that they can do it on their iPhone from home, we're seeing that business being off quite a bit. Now, it was not a big part of the property. It was, like, 5% of gaming win, but it's down quite a bit.
We have one, a small piece of our gaming win is down a lot. That'll just be what it is. There is talk about Mississippi eventually having online sports betting as well, and I suspect that does happen and we would participate in that and maybe get some lift. At the moment, Mississippi doesn't have online sports betting, and Louisiana does. A competitor put these historical horse racing machines, which are really slot machines, into a racetrack in Boone County. They actually tore down a pretty decrepit building there. If they hadn't torn it down, it probably would have fallen down.
They've put up a building that's not the most beautiful building in the world, but it's there, and it's got a bunch of historical horse racing machines in it. As typically happens, customers go and check out the new place, and I think when they realize that the new place is a dark airplane hangar that sells hot dogs off a cart in the back, they'll come back to us. That was a little bit of an impact on us in September. We're not the closest casino to that competitor. You know, if somebody opens a new casino that really is nice, it tends to, you know, has a chance of growing the market, as I think we will in Waukegan.
In this case, they're not growing the market, they're just taking a little bit of market share. The revenues that they get are mostly from downtown Cincinnati and Lawrenceburg, but a little bit from us. Actually, the closest casino to them is Belterra Park, which is on the southeast side of Cincinnati. There is a new competitor in that market. Again, like everybody's talking about going into this election, the cost of food is up, and then that's affected us some too. On the positive side, we did not have a wildfire at Lake Tahoe on Labor Day weekend this year, and so that helped us out.
Really, this is one of those quarters where, considering everything that's going on, it was an okay quarter. It wasn't a great quarter. It wasn't an awful quarter operationally. Frankly, we're spending so much time getting these two new places open because they're really the future of the company. We're very excited about that. I think in future quarters, you know, it's almost like not even worth talking about some of the smaller properties. Anyway, on that, I'm happy to take questions.
Before we take a question, I'm gonna footnote everything that Dan said there. To put it all in perspective, if you go back to pre-COVID, the properties on a year-to-date basis back in 2019, property margins were about 13.5%. You compare it to today, year-to-date, property margins are about 25.5%. We've gotten a good 12 percentage points of property-level improvement, and that's with Colorado essentially at a break-even margin. That's with the additional insurance costs that Dan mentioned in Mississippi. Fast-forward to a year from now, two years from now, with both Waukegan open and then Chamonix opening, I strongly suspect you're gonna see those margins continue their way back up, for what it's worth.
I'm just gonna end it, Dan, with this is our last call before Waukegan opens. Next time we talk to you guys, that thing will be open.
Actually, I failed to mention, on the online sportsbooks, we have 3 licenses in Colorado, 3 in Indiana, and 1 in Illinois. Last year, all 6 of those in Colorado and Indiana were earning their minimum guarantees that we have. Churchill Downs pulled out of the business, so we have 1 available in Colorado, 1 available in Indiana. We're looking at whether we contract them out again or maybe just to keep the opportunity. In the meantime, we've signed 1 in Illinois. Illinois is by far the most valuable because the population of Illinois is bigger than Colorado and Indiana combined, and there's only 1 license permitted for each casino. There's fewer licenses and a lot more people.
That license is $5 million a year, which exceeds the minimum guarantees on the other four. If somebody comes along and offers us a great deal of money for those licenses, we'd probably contract them out again. We have been looking at the possibility of doing it ourselves, not to compete with DraftKings and FanDuel, who are in these big marketing wars that we wouldn't wanna spend the money to try to be in. We could offer online sports betting. You can buy or lease the software. You can even buy and lease the people who set the odds and all that stuff, and just do it really for our own customers.
That allows us to do 'cause we have mailing lists at each of these casinos of tens of thousands of people. Then we can tie it in that says, when you bet on the Final Four games and so on, we will give you credit towards a round of golf or towards a weekend stay at our hotel. It's a lot easier for us to do that than it is for DraftKings or FanDuel because they don't actually own the hotels. They're a little more complicated. We think we could probably do it and make a little bit of money. Maybe more importantly, the bigger opportunity in that area is online gambling, where you can actually play a slot machine on your iPad.
That's not yet legal in any of the states we're in. In the states where that's happened, that's been a much bigger market than online sports betting. That is a field we could do on our own. We think it will be legal in the states we operate in in the not-too-distant future. One of the appeals of trying our own online sports betting is we'd have to hire a handful of people and learn how to market it, learn how to run it, and so on, and we would be developing the expertise to get into online gaming when it comes along. That's where the online bet.
In the quarter you were comparing, 4 licenses versus 6 last year because Illinois will not be up and running until after we get our casino open, so probably in the spring. We have a temporary down comparison on contract sports wagering. Contractually, it's going to be up once we open in Illinois, and then when we figure out what to do with the other 2 licenses, potentially up even more.
Yeah. All right.
With that, let's take some questions.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star one to ask a question, and we'll pause for just a moment to allow everyone an opportunity to signal for questions. Our first question comes from David Bain with B. Riley. Your line is open.
Awesome. Thank you. First to Lewis, I appreciate your strong comments that you're gonna be open with Waukegan by the next call. At this point, what are the major items that determine a Waukegan opening, you know, next month versus January or February? Is it the Gaming Control Board reviewing everything, or are there more structural items that you need to tackle?
Well, let me be clear. Our interests and the Gaming Control Board are perfectly aligned. We wanna have a smooth opening, so when our customers come in, everything goes smoothly. You know, I'm old enough to remember the opening of the Taj Mahal in Atlantic City, where things didn't work properly, and they opened, and then four hours later, they had to close. They had Michael Jackson appearing in their showroom that night. It was a complete fiasco, and the image of the place never really recovered from it. I mean, we want everything to be working properly, and in particular, I mean, the slot machines. We don't need to have every one of the 50 table games open.
We want the slot machines to be working, and we wanna have the systems all working properly and the surveillance all working properly. You know, at some point when we are as we start zeroing in on the day, like roughly by Thanksgiving, we have to make a decision on when people actually start getting paid and because there's a large number of people who we then say, "Okay, you're on the payroll on this date." A number of them are already going through licensing. That's a long process and make sure they understand all the normal stuff you do when you take a new job, right?
You're training them in a new facility. There's a point where you say, "Okay, we're gonna have play nights," where you take two or three nights where you're playing with artificial money and you get the restaurants going with the invited friends and family, just so the cooks learn how to cook and the waiters learn how to serve. If all that goes smoothly, you can open thereafter. There are times where you go through the play nights, and then all of a sudden, you find out the cage didn't balance, and it's off. You're all scratching your head saying, "Okay, what happened? Why did the cage not balance?" You have to go back through it again.
You know, when we're confident that everything's working properly and that includes having the right staffing of the right people who are licensed. When the gaming commission is confident, we'll look at each other and say, "Okay, let's open." You know, I know everybody wants to have a date certain. It would be nice to have a date certain, but that's not actually helpful because if you're not ready, you shouldn't open. We're zeroing in, you know, on where it is, and I think it's somewhere in that six weeks. You know, and a little complicated by Christmas falling in the middle of it. You know, I think it's more than likely January.
Frankly, if the servers don't work right or if things don't coordinate right, you know, it could be early February. I think it's. We're zeroing in on it pretty quickly now, but I can't give you a precise date. Let me put it this way, I'm not going to give you a precise date.
We have one in our heads, just so you know, Dave.
Right.
We're doing that during our.
David, if I tell you it's January 15th, and we're actually ready to open on January 5th, don't you want us to open on January 5th? If I tell you it's January 5th, and we're not really ready to open, then we'll have a screwed up opening. You know, when we're confident we can open, we will open.
I'm gonna give you a little bit more color and maybe a different perspective on it, Dave.
Uh.
Part of it is, keep in mind, usually when you're opening a normal casino, you're building it for two or three years, and we're condensed. If you look back in May of this year, we had a site that was green. There was no sprung structure on it. There was no digging. There was no pavement. There was nothing. We're what is that? Six months removed from that and on the verge of opening. Now, I'll tell you, the good news is when the slot machines are on site, that's how you know you're very close. Those do start up, those get installed starting this week. Those, you know.
I don't wanna trivialize it, but a lot of what we're really looking at from the slot install point of view is really going through the checklist, making sure things are communicating right. When we did the slot install up in Northern Nevada, as an example, we had issues with the Konami server where we had to spend an extra couple days just working through some of the kinks. That stuff does happen. What just complicates it a little more than usual is if you get delayed by a couple days, you've got a whole slew of holidays right around this time of year as well. A couple days might throw you off by a week or two. That's really the reason for some of our hedging.
We feel very, very good about where that process is right now, how it's going. It's actually looking pretty darn spectacular, I think, on the inside. I think people are gonna walk in the doors and be very, very pleasantly surprised at what we've done on the inside. I know you saw it with no walls. Now we've got walls, Dave, and we've got cameras, and we've got decor hanging from the ceiling and very, very soon, slot machines. It's looking pretty cool now.
The other thing I will add is in early December, we will start the advertising campaign with a banner or a voiceover that says, "Opening soon." As we start to zero in, like when we're starting the play nights, you change the opening soon to opening on X.
Right on. Okay, perfect. Is there anything you guys are seeing from a macro perspective, or as you continue to visit both Cripple Creek and Waukegan during construction, that would change your return calculus either direction? Lewis, I mean, you mentioned, you know, I did visit Waukegan. I got a deeper appreciation for the surrounding hotels and potentially drivers with that and the ingress. I mean, either direction, are there some things that you can identify, one or two, that would make you more excited with either project? Then just the macro, anything that you're seeing there that changes your calculus?
I mean, I don't wanna speak for Dan, but I feel better than ever for what it's worth. You know, if you look at Waukegan first, part of the optimism comes from the fact that Rivers opened their expansion back in April, and since that expansion, they've been making pretty consistently $48-$49 million of gaming revenue per month. $600 million a year on a run rate basis. When you look at the numbers that we're striving for, we don't need to make $50 million a month to make our math work and get $50 million a year in EBITDA. We need $10-$12 million a month.
I will tell you, I am more optimistic as we watch their success and realizing that they're continuing to ramp up their own property by ramping up their own table games. Over at Chamonix, I think it's pretty true as well. Even versus a year or two years ago, the population that we have to go after right in that Colorado Springs market has continued to grow. That whole state population has grown, but especially Colorado Springs and even south of Denver, going down towards cities like Castle Rock have really grown. I think we have a bigger potential customer database than I would have envisioned three, four years ago. We've watched Monarch open up to great success.
I think most people two years ago would have said, "Wow, I don't know how Monarch is gonna get the numbers that they're gonna get." We were on the other side saying, "Well, absolutely, they're gonna do well because the gaming spend per capita is so low." Fast-forward to today, they're, I think, doing much better than people gave them credit. None of that cost-
Without hurting the others.
Without hurting the others. None of which caught us off guard because it was always, we thought, pretty apparent in just that gaming spend per capita figure. They've proved the concept all over again, and that's ultimately good for us. We're feeling very, very good, despite all that you see on the news. I mean, by the way, Davey, even if we're off by a little bit, you know, cycles come and go, but you can haircut our numbers all you want, but any way you haircut them, you're still gonna get pretty meaningful growth off the numbers that we have today.
Right. Right.
Actually, this is showing the old analyst in me. If you dig up the Churchill Downs 10-K, they own I think it's 62% of Rivers Casino, but they carry it as an unconsolidated entity because the decision-making is still shared with Neil Bluhm's company. They only have two material unconsolidated entities. They admit that themselves in their 10-K. The other one is Miami Valley Gaming, which they own 50/50 with Delaware North and similarly share control. In 2021, before they built their expansion, the EBITDA from unconsolidated entities was $306 million. If you go back and look at Miami Valley Gaming, which has been an unconsolidated subsidiary for several years, it does about $100 million a year of EBITDA.
That says that Rivers is doing about $200 million a year of EBITDA.
Pre-expansion.
Pre-expansion.
Yeah.
which is a pretty darn good margin on you know, $400 million or $500 million of gaming revenue. Now you gotta be careful, like if you're just looking at EBITDA and the gaming revenue in the regional markets, the margins are very high, like you know, 40%, 50%. If you're comparing to total revenue, well, the food and beverage adds to the revenue and doesn't add much to the profit. Then the margins are more like 25%, 30% when you add the non-gaming stuff on it. You know, if we can do $100 million of gaming revenue, which wouldn't be an ambitious number, we should be able to get pretty close to $50 million of EBITDA.
When you look at how well the ones around us are doing, I don't think those are aggressive numbers. Now, you know, do I wish? Well, legally, technically, we're not in a recession. Everybody talks like we're in a recession, but GNP grew last quarter, and a recession is two quarters of down recession. Now, the Federal Reserve is trying very hard to bring down inflation and threatens to cause a recession in order to do so. What's an ideal world for us? If there's no recession and inflation goes back to a modest number, and maybe they get rid of the tariffs, so when we build the permanent, we can buy steel and glass from China. You know, that's an ideal world.
We're doing okay. We're starting the design process for the permanent casino in Waukegan now that the temporary is just about done. Obviously, we've designed it. We had a whole presentation with renderings and everything, but we need to get into the details, the working drawings and, you know, precisely what are the restaurants and all that stuff. That's a lot of design work. We've been interviewing different architectural firms to help us with that. You know, we'll spend the next year doing the design, the engineering, the interior designs and all that stuff. Then it'll take about two years to build.
We're allowed to operate the temporary for 2 years, and then the gaming commission can give us permission to go a third year if it's necessary to build something of the quality we're building. I think it probably will be necessary. Of course, there's no certainty they'll give it to us, but I think it's highly likely they will. We promised a hell of a nice permanent casino, and we intend to do that, and I know that that's what they want as well, and you can't do these things overnight, so. As a practical matter, we didn't harp on this, but we should because it's pretty crappy equity markets, pretty crappy bond markets, and we don't need any money, which is a really good thing.
All of our debt is fixed rate debt, and we're sitting on $200-something million. It's in the press release. We're confident that that's more than enough to complete the temporary and complete Chamonix. Then we have about 2 years before we have to figure out how to finance the permanent one in Illinois. We still have a standby financing commitment from a large private equity firm that is always a backstop if we need it. It's expensive. We hope not to need it. You know, bond markets open and close.
We have a lot of REITs calling us all the time on whether, you know, they'd like to do Waukegan as a REIT-owned entity or we do a sale-leaseback of one of our other places. We have a lot of different ways we can finance the permanent. The real answer is, we've got two years to figure that out. No reason to do it now, or even frankly, you don't wanna rush into it now 'cause the negative carry would be high, and our bonds are not callable until February 2024. We have a long time to figure this out.
Right.
Currently, we're in great shape. We don't need money.
I know, I know we said a lot, Dave, but the Waukegan opens soon.
If you have another question, I'll take a half an hour to answer that one.
No, we're looking forward to a lot of good stuff very near-term from you guys. Thanks, Dan and Lewis.
Thank you, Dave.
Thank you.
Our next question comes from Chad Beynon with Macquarie. Please go ahead.
Hi. Good afternoon. Lewis, Dan, thanks for taking my question. Appreciate it. Just following on some of the numbers there. Can you help us with CapEx in the quarter and then what's left to spend at the temporary, including the license and then at Chamonix? Thanks.
At Chamonix, we spent about $34-$35 million in the quarter. The balance that's sitting in that construction, that restricted cash account is basically what we need to finish it. That's $156 million left to spend. Here in real time, we're spending roughly $12-$13 million a month in the near term. You know, you might get a $30 million spend for the Q4 and the balance in the next year. Over at Waukegan, it's a pretty hefty spend at opening and just after opening for what it's worth, in part because that build is so fast. We spent about $15 million in the Q3 .
You could have like a $30-$40 million spend here in the Q4 . The big chunk is really gonna be in Q1 because that gaming license fee is $32 million and change that gets paid, we expect, shortly after opening, not before. You get a bunch of construction payables that lag as well. Hopefully that helped you there.
That's perfect. Thank you.
Actually that $30 million might be delayed, too, because if we don't open all the table games, we don't have to pay all the tax right away.
Yeah. Good point.
As long as we hire dealers.
Mm.
The tax becomes due. There may be a large payment made in January and then smaller payments in February and March as we're able to hire dealers.
Very good point, Dan.
Okay. Great. Next, just on the current business, firstly, I know it's probably hard to dissect this, but any trends you can talk about within your databases? I know we're all expecting that lower end of the database and maybe some of that retail end to slip a little bit. Secondly, if you can help with anything that you are seeing in October.
Well, let's see.
Well, you're
So far, it's been pretty good October as far as what I've seen. Anyway. Depends on the property.
Yeah. Right. Yeah. You're not wrong there, Chad. That lower end of the database has seen a little bit of that play go away. I think part of that has been by design for what it's worth, where we're actively trying to incent people in the upper tiers versus the lower tiers. You know, if you look at using Silver Slipper as the example, you know, gaming admissions have been down. Part of that is sports book, but part of it is just slower end play not coming by. Customers and spends are the ones that are coming in the door are spending relatively similar amounts for what it's worth.
That cost line is what's really hitting us over at Silver Slipper right now for what it's worth.
Which is property insurance and food costs.
Yeah.
I'm not gonna digress.
Okay.
on the cost of crab.
Thank you. Thank you, Dan.
Thanks, guys. We'll be looking in our mailbox for the invitation.
We will make sure you get there. Yes. You'll be pleased, we'll-
Well, by the way.
We'll email you a week before.
By the way, to be clear, similar to Monarch and some other casinos, I mean, the actual grand opening party will be at some later date. Yeah. Yeah. That's what I was hinting at, Chad. Sorry. We'll probably find out a good week before.
Yeah.
what the opening day is, and then maybe a month later, we'll have the grand opening for guys like you.
Understood. Thanks, guys. Appreciate it.
Our next question comes from Edward Engel with Roth Capital Partners. Please go ahead.
Hi. Thanks for taking my question and looking forward to the grand opening. You talked about Chamonix, the hotel potentially not being open by mid-2023, at least part of the hotel. Can you just talk about some of the puts and takes for that property to open? Would you consider a phased opening at Chamonix, or is it just much better to open everything at once?
No, we would consider a phased opening. That's one of the things we're trying to figure out is, you know, what's essential and what isn't essential. Like, I know when we opened L'Auberge in Lake Charles, the swimming pool area and the spa were not done yet. It was no big deal. I mean, we just told people, "Come back when the pool's done." Even though we opened going into the summer, you know, it opened a month or two after the hotel opened. In terms of guest rooms, you know, when you stay in a hotel, you don't really know how many rooms are in the hotel. If we ended up opening with 200 rooms instead of 300 rooms, the guest experience would not be different.
Obviously, you want the casino open, you want the restaurants off the casino open, the parking garage open. You know, you want a lot of things open. Yeah, we end up looking at it and saying, "Well, you don't really wanna spend overtime to try to speed up tower three." When you say it's not done yet, it'll be enclosed. I mean, from the outside, it'll look finished. It's just there might be guys inside still installing carpet. You know, we're still several months away, so it's not certain that we can't catch up.
I think it's a pretty good likelihood that we end up opening most of it and then some other features catching up later, which is similar to what happened with Monarch and these. These are very big projects in these very small towns. So finding the construction workforce isn't the easiest thing in the world.
Great. Thank you. I guess relative to the top dog party you had in September, just any comments you have on maybe connectivity or just it's given, like you said, it's a smaller town. Is this a town that you could think can handle some larger events that you're hoping to host? Or is there still some connectivity that needs to be improved?
Yeah. I mean, we're 40, 45 minutes from the west edge of Colorado Springs, and about an hour and 15 from the east edge of Colorado Springs. We're an hour away from Colorado Springs. Teller County, which we're in, has, like, 25,000 people. It includes Cripple Creek, but and Victor, which is nearby, but it also Woodland Park, which is a pretty good-sized town. Florissant, which is a pretty good-sized town. I mean, 25,000 isn't huge, but that's where a lot of our employees come from. To put it in perspective, Black Hawk, as a casino industry, is probably 5 times what Cripple Creek is today in terms of number of employees and so on. It's in Gilpin County, and the population of Gilpin County is about 6,000.
Their employees all come out from Golden and Evergreen, which are 45 minutes away. You know, finding employees is a challenge in Cripple Creek, but it's actually an even bigger challenge in Black Hawk, 'cause we do have significant towns not that far away from us. Now, the customers principally come from the Colorado Springs area and the whole Colorado Springs MSA, which is Colorado Springs and Pueblo and Cañon City. Now, Pueblo is closer to 2 hours away, but we're the closest casinos to it. Cañon City is just a little less than 1 hour away. Then we have a strong secondary market, and that's Denver itself. Now, Denver is 1 hour from Black Hawk and 2 hours from us.
If you live on the south side of Denver, which is like Castle Rock down in there, and you take into consideration the traffic issues that Denver has these days, you're probably closer to us. And then there will also be, you know, there will be regular gamblers from Denver who will go to Black Hawk, say, once a month, but maybe once or twice a year, they make the extra drive down to our place just to experience something different. That's not unusual. But given that Denver is 4 million people, if we get a small slice of Denver, it's nevertheless pretty material for us. And recognize, I mean, I always have to remind myself, like, what we're building is really big for Cripple Creek and really big for Full House Resorts.
It's 300 rooms. It's 10% the size of Treasure Island. I mean, when you say we're gonna have meetings and conventions, I'm not talking about COMDEX. I think we already have booked the annual convention of Colorado Funeral Directors Association, for example, which I know in Las Vegas is a pretty good gambling group of people. They have to be very subdued in their hometown, but when they come to Las Vegas, they party pretty hard. We have some groups like that that we're booking, but they're not 1,000 rooms, they're 100 rooms, right? We are putting things on the books now for meetings and conventions, and I think we'll do a pretty good business of that, as does Ameristar.
Ameristar in Black Hawk has a nice meeting room area, and they keep it very busy, and it helps fill that hotel midweek. Monarch has very limited meeting area. Just the confines of their site, they didn't have a place. We actually have more meeting room space than they do, even though they have a lot more hotel rooms than we do.
Great. Thank you. Appreciate the color.
Good.
Our next question comes from Ryan Sigdahl with Craig-Hallum Capital Group. Go ahead.
Good afternoon, Dan, Lewis. Just maybe one from us. You've covered most of it here, but can you talk through the margin cadence throughout the quarter month to month and then into October? Mainly trying to think through, you mentioned a lot of different costs within each of the properties, and curious if Q3 margin is the right run rate going forward, or if they impact you more in the back half of the quarter. Thanks.
I mean, Q4 is seasonally slower than Q3, so you would normally, in a normal year, have some margin compression going into Q4. Looking at Q3 itself, like the food cost was up pretty steadily through the quarter. Obviously, insurance costs are up pretty steadily through the quarter. They're very steady. I mean, it's all an annual cost that's amortized, right? Turfway Park, their new facility opened in September, so that affected Rising Sun in September. I think it will, over time, have less an effect on everyone else in the market 'cause, you know, there's a natural tendency of everybody to go see the new place and then, okay, we saw it, and then you go back to your favorite. Some people stick with new places.
Some market share you lose forever, but most of it you get back. Then the sportsbook issue in Mississippi that's been happening ever since January 1st, when it went live with the online gaming in Louisiana. We will lap that at the end of the Q4 . It's like that little segment of our business is off like 50%, but it's actually a little segment of our business, even little relative to Silver Slipper. You hate to see a piece of business off 50%, but at least it's not a big piece of business. I guess I'm not, I mean, you know, at this point, there's different things that happen.
Like I know, I haven't heard the final outcome, but I know we had one of those great events that happened this weekend because we had a golf tournament in Mississippi, and we invited all these high rollers in, and they all came in on Friday night. Late Friday, I heard that it was supposed to rain and be very windy on Saturday, so they weren't going to be able to play golf. I haven't seen the numbers yet, but usually that leads to a very good weekend. You have things like that happening that you know on a month-to-month basis. I mean, you know, the Q4 , we don't get that gaming capacity back in Colorado until probably mid-December.
The Bronco Billy's will still be limping here in the Q4 . I think the Silver Slipper is much easier comparisons compared to the Q4 of last year. We're doing okay in Northern Nevada going into the Q4 . I don't know. Yeah, frankly, what's really gonna matter is what do we do in revenue in our first month in Waukegan? 'Cause we're all guessing a little bit. Even if it's at the low end of the range, it's gonna be a very important property for us.
Yep. No, I was more so thinking sequentially. It felt like a lot of the costs from Louisiana, competitive pressures, et cetera, Louisiana and the reset on insurance, et cetera, would have impacted Q2 as well. There was just some sequential stuff.
Yeah. I mean,
to impact the sale of your credit.
I don't wanna harp on it too much, but at the Silver Slipper, literally half of our food cost is crab.
Yeah. Yeah.
We give away a lot of crab in our buffet, and when you look at the cost of food sold, it goes up and down with the cost of crab.
Yeah.
It's not material to us. I'm saying this jokingly because a couple of conference calls ago, I got a little carried away with it and talked for 10 minutes about the cost of crab, and at the end of the day, it's not very material.
Yeah. Those insurance costs, those property insurance costs are pretty meaningful. Dan's right, that resets, I think, on May fifteenth of every year. You really didn't get a full quarter of that for what it's worth in the Q2 that we just had. It's there's stuff.
Right about now is when you wonder whether we had to make a tough decision last spring of do we maintain platinum insurance on the property because insurance rates went up so much. We opted to do so just because it's so important to us relative to the company today. We're right at the end of hurricane season. We didn't get whacked. Maybe we could have gambled a little bit. We would have been fine. It's easy to say with hindsight.
Good. Thanks, guys. No follow-up questions on the crab. Good luck.
Thanks, Ryan. Waukegan opens soon, by the way. I think we have time for one last question, Dan.
Our next question comes from David Levine with MidOcean. Please go ahead.
Hi, David.
Hey, guys. How are you? Thanks for taking my questions. First question, I just wanted to firm up the unrestricted cash point, and just the cadence, the next couple quarters. The next two, rather. It seems like if my math is right, unrestricted cash is around $85 million. You guys said that at Waukegan, which is where more unrestricted, or rather the CapEx would come from that's within, you know, earnings and unrestricted cash, that would be around, Lewis, I think you said like in the low $70 million range over the next two quarters. Then you have the interest payment, the bond interest payment of like $15-ish. That's like into the mid-$80s for, call it like fixed costs.
If you have like $85 million of liquidity away from Chamonix, and then that gets me to like $85 million between CapEx and interest, that leaves like obviously like your EBITDA to provide just like the rest of liquidity there. Is that the right way to think about it? Obviously, my
No, we have a $40 million credit facility.
The revolver, which I was gonna get to and say, like, you probably feel pretty comfortable about necessarily not needing to draw that just 'cause I just kinda laid out the CapEx and interest, then you have EBITDA to take care of the rest, right? Is that fair?
We will probably draw some of the revolver because you don't really want unrestricted cash going to near zero. The revolver is not very expensive, so we will probably draw some just to not.
Okay.
Close to the line.
You are thinking of it the right way, David. There's obviously a bit more liquidity from that revolver. Not a bit, a lot more liquidity from the revolver. The other thing I would just tap on is I kinda put numbers out there that are assuming all these bills come in in a timely manner. Based off of our experience, what you tend to see, especially with those construction payables, is those last payments actually lag on a bit longer than what I'm modeling, most likely. There's that piece too.
If you model our existing properties are paying the interest expense on our debt. When you start having free cash flow from the temporary, it could repay whatever you draw on that revolver in the next couple of months. You're gonna repay in the couple of months after.
Yeah.
Very quickly. I
Okay.
You're doing the math right. When we say we're confident that we have enough money to do all this, that's including a $40 million credit facility that's undrawn. If we didn't have that, we think we'd be okay, but it'd be a lot tighter. That's the math you're doing.
Yeah. Yep. Okay. I just had a couple that I wanna squeeze in. Any word on?
But, but-
Sorry.
Recognize $40 million, I mean, at this point, the numbers of what we have yet to spend are pretty certain. I mean, it's not like we're gonna have a $40 million cost overrun. That will not happen. Right?
Yep.
So.
Yep. Okay. Any word on the Hard Rock Menominee process? I mean, I'm sure the election tomorrow night might be somewhat important, although I'm not entirely clear now. Any perspective on that since the last time we spoke?
I'll make two quick points, and maybe Dan will add something there. I do think you're right. It's important to watch that election and depending on the day, it keeps swapping back and forth with who's gonna win. I think maybe the more important point is if you pull up a satellite photo of that area and look at what is relatively the space between us and going up towards Kenosha and Milwaukee, a lot of that land is largely farmland for what it's worth. The dense areas are going to the south of us, down towards Rivers, going to the west.
When you think about closeness of our casino to our feeder market, even with a potential casino opening up that way, I think we're still gonna be the closest casino, not to 1.1 million people anymore, but still a very high number. We haven't put it out there. It's the impact is relatively marginal because of the lack of population density as you go north. The other thing I would keep in mind is we should have speed on our side, so we'll open relatively closely. We'll have a proximity on our side, and then with the permanent, we're gonna have quality on our side as well.
You know, when you have one of those, it's always good. When you have all three, I think you should do quite okay.
The Potawatomi pay 1.5% of gaming revenue in a contribution to the city, and you can get into the city's municipal budget and back into it, and they're doing revenues about $400 million a year, gaming revenue, and have for a long time. This is a very successful tribal casino and a tribe with significant resources. Kenosha would have a much bigger impact on them than it would on us because it would draw from Milwaukee, which is their core. We're not assuming we get much from Milwaukee. We might get some.
Mm-hmm.
I think there will be. Let's just say that the two tribes may have a little bit to fight over here.
Mm-hmm.
I'm not sure.
You think the election is relatively important though for that?
I don't know. Because it's not clear whether either candidate would necessarily, you know, be in favor of this.
Yeah.
Yeah.
I would agree with Dan on that. I can assume one scenario versus another, but it's going off of assumptions for what it's worth. Yeah.
My guess is both of them have been as often happens in something like this, they are non-committal so that they can raise money from both tribes, because they need it for the election. Then after the election, you find out where they really stand.
Fair enough. Thanks a lot, guys.
I hate to be a cynic, but that.
No.
That's how it often works.
Yeah. No, we think we should be okay anyway, David.
Okay. Thank you, everybody.
We'll talk next quarter, Dan, when American Place is open, Dan.
Maybe we'll do this from American Place.