DEF 14A: Full House Resorts Reports Strong 2023 EBITDA Growth, Focuses on New Casino Expansion

Full House Resorts highlights a five-fold increase in stock price over the past decade and significant EBITDA growth driven by new casino openings in Illinois and Colorado.

Summary

• Full House Resorts (FLL) reports a significant increase in Adjusted EBITDA, reaching $48.6 million in 2023, compared to $10.5 million ten years prior.
• The company opened two new casinos in 2023: American Place in Waukegan, Illinois, and Chamonix Casino Hotel in Cripple Creek, Colorado.
• American Place has quickly become one of Illinois' higher-grossing casinos despite being housed in a temporary structure.
• Chamonix aims to offer a luxurious gaming experience in the Rocky Mountain Front Range, featuring 300 guestrooms and suites.
• The Silver Slipper in Mississippi had its third-best year in its 17-year history, while Rising Star performed well despite new competition.
• The company funded the construction of Chamonix through the issuance of $450 million in high-yield bonds with an 8.25% interest rate, maturing in 2028.
• Full House Resorts expects to generate significant free cash flow in the coming years and aims to refinance its bonds prior to maturity.
• The company anticipates that its Illinois operations alone will nearly cover its entire interest expense in 2024.
• The temporary American Place casino earned $18.4 million of Adjusted Property EBITDA in its 10-1/2 months of operation in 2023.
• The company has secured an extension to operate the temporary American Place casino until August 2027, with plans to begin construction of the permanent casino approximately two years in advance.
• The estimated cost to build the permanent casino is $325 million, with the company expecting to fund up to half of the cost from internally generated cash flows.

Sentiment

Score: 8

Explanation: The document presents a positive outlook for Full House Resorts, highlighting strong EBITDA growth, successful casino openings, and strategic expansion plans. While acknowledging some challenges, the overall tone is optimistic and confident in the company's future prospects.

Positives

• Significant growth in Adjusted EBITDA, reaching $48.6 million in 2023.
• Successful opening of two new casinos, American Place and Chamonix Casino Hotel.
• Strong performance of American Place in Illinois.
• Positive contributions from legacy casinos like Silver Slipper.
• Anticipated generation of significant free cash flow in the coming years.
• Potential for Illinois operations to cover the company's entire interest expense in 2024.
• Extension secured to operate the temporary American Place casino until August 2027.

Negatives

• Decline in results from the two small casinos in Northern Nevada due to the late return of seasonal residents.
• Construction of Chamonix affected operations at the neighboring Bronco Billy's casino.
• Decrease in stock price from its peak about two years ago, although the company believes this is unwarranted.
• Construction delays at Chamonix due to supply-chain issues and workforce challenges.

Risks

• Construction delays and cost overruns at Chamonix.
• Competition from other casinos in the Illinois and Colorado markets.
• Dependence on internally generated cash flows to fund the construction of the permanent American Place casino.
• Potential impact of legal proceedings related to the Waukegan casino license.
• Uncertainty regarding the maturation and ramp-up of new properties.
• Impact of economic conditions on consumer spending and gaming revenue.

Future Outlook

Full House Resorts anticipates significant free cash flow generation in the coming years, aiming to refinance its bonds and fund the construction of the permanent American Place casino. The company expects its new properties to mature and contribute more significantly to earnings.

Management Comments

• We think about this company every day and try hard to make more good decisions than bad ones.
• Given what we have in the pipeline, we believe the decrease in our stock price from that high was unwarranted.
• We believe that as Chamonix matures, it will become a strong asset for our company for many years.
• We work hard on your behalf and hope to continue to meet and exceed everyone's expectations.

Industry Context

The announcement highlights Full House Resorts' expansion in the regional gaming market, particularly in Illinois and Colorado. The company is positioning itself to compete with larger operators by offering unique experiences and amenities in underserved markets. The legalization of online sports betting in several states presents additional opportunities for revenue growth.

Comparison to Industry Standards

• The company compares the American Place location to local casinos in Las Vegas, such as Red Rock Casino, Green Valley Ranch, or the new Durango Casino.
• Chamonix is positioned as a mini version of the Las Vegas Strip experience, with views of the Rocky Mountains, amidst a genuinely historic town.
• The company notes that gaming tax rates in Colorado are lower than most regional, non-tribal gaming destinations.
• The company's strategy of partnering with experienced online sports wagering companies mirrors the approach of other regional casino operators.
• The company's focus on ESG initiatives aligns with growing investor and stakeholder expectations for corporate responsibility.

Management Changes

Legal Proceedings

• One of the unsuccessful bidders for the Waukegan license filed a lawsuit asking the State to reverse the IGBs licensing decision.

Stakeholder Impact

• Shareholders: Positive impact due to increased profitability and potential for stock price appreciation.
• Employees: Potential for job creation and career advancement opportunities.
• Customers: Access to new and improved gaming and entertainment experiences.
• Communities: Increased tax revenue and economic development.

Next Steps

• Complete the opening of Chamonix Casino Hotel, including the spa, jewelry store, and Italian restaurant.
• Improve midweek occupancy and day-trip business at Chamonix.
• Begin construction of the permanent American Place casino approximately two years in advance of the August 2027 deadline.
• Refinance the company's bonds prior to their maturity.
• Continue to seek other players that might want to enter the Indiana and Colorado online sports betting markets.

Key Dates

Keywords

casino, EBITDA, American Place, Chamonix, Full House Resorts, gaming, casino hotel, stock price, construction, Illinois, Colorado