Full House Resorts, Inc. (FLL) Earnings Call Transcript & Summary

Good morning, everybody. This is the Full House Resorts Annual Meeting of Stockholders. And I'm Daniel Lee, the President and Chief Executive Officer of the company, and Director -- member of the Board. At this time, we'll come to order with the annual meeting. Before attending the formal business at hand, I just want to take this opportunity to introduce the Board of Directors, who, I believe, are all present on the phone today. Joining me virtually are Ken Adams, who has been on the Board for many years and publishes a newsletter about the casino industry and has been involved in casino operations in the past; Carl Braunlich, who's our Chairman of the Board, and he's a tenured professor at the Harrah's Hotel School at UNLV, and unlike me, he's a graduate of Cornell Hotel School. And unlike me, he went on and got a PhD from a university in San Diego; Lewis Fanger, who is also our CFO, and has been with us 5 or 6 years now; Eric Green, who joined our Board last year. He's the Chief Investment Officer of Penn Capital in Philadelphia. And his history, went to Yale and MBA from -- no, MBA from Yale...

MBA from Yale.

And Georgetown undergrad. And then Eric actually worked for the SEC at one point quite some time ago; Mike Hartmeier also joined our Board in the past year, who recently retired from Barclays Bank. And before that, he headed up the lodging and gaming practice and similar role at Lehman Brothers and oversaw many billions of dollars of capital raising; Kathleen Marshall, who's been on our board for a number of years. She is the Chief Financial Officer of the New Jersey Casino Redevelopment Authority in Atlantic City; and Mike Shaunnessy who joined our Board this past year, who was previously President of Nevada Gold. Before that, ran a division of smaller casinos at MGM. Also was involved in operations at Monarch Casinos at one point, and way, way back was actually an executive at Full House when it was quite a different company than it is today. So in addition to Mr. Fanger and myself, we also have Elaine Guidroz, on the phone, who's our Vice President, Secretary and General Counsel. Representatives from Deloitte & Touche, our independent auditors, are also on our call. And Ms. Guidroz, the company's Secretary, will act as secretary of today's meetings. On your webcast screen, you'll see a detailed agenda for today's meeting. It's our intention to conduct this meeting in accordance with this agenda. You'll also see the procedural rules governing today's meeting. And Ms. Guidroz will now address the formalities of the meeting, and we'll take questions after we adjourn the formal part of the meeting. Elaine?

Thanks, Dan. Good morning or afternoon, everyone, depending on where you are. This meeting has been called in accordance with the provisions of Delaware General Corporation Law and the bylaws of Full House Resorts, Inc. April 1, 2021 was fixed as the record date for the determination of stockholders entitled to notice of and to vote at this meeting. Broadridge Financial Solutions has provided us an affidavit of the meeting -- excuse me, as the mailing of the notice of the meeting, which affidavit states that on April 1, 2021, the notice of the meeting, together with the proxy and formal proxy were mailed by Broadridge to all stockholders of record as of the record date at their respective addresses as shown on the company records maintained by American Stock Transfer. This affidavit is available if any stockholder wishes to examine it and will be filed with the minutes of this meeting. I also have a certified true and complete list of stockholders entitled to vote at this meeting, showing the address and number of shares registered in the name of each stockholder. This list is dated as of the record date for this meeting. The list is then kept at the company's offices subject to inspection by any stockholder during normal business hours for at least the past 10 days. It is also available throughout the course of the meeting via the live webcast screening for inspection by any stockholder during this meeting. As of the record date on April 1, 2021, there were 34,075,350 shares of the company's common stock outstanding and entitled to vote at this annual meeting. Mr. Fanger has been designated as the inspector of elections of this meeting. Mr. Fanger, can you confirm that a quorum is present and declare this meeting is duly qualified to transact business.

Yes, Elaine, I can confirm that a quorum is present and that this meeting is duly qualified to transact business. And with that said, we will open the polls, and Elaine will describe the proposals.

Great. Thank you. There are 4 matters that are scheduled to be voted on at this meeting, and the polls are now open to vote on the following proposals. The first is the election of 8 directors to hold office until their term shall expire or until their successors are duly elected and qualified. The second matter is approval of an amendment to increase the number of shares available for issuance under the 2015 equity incentive plan. The third matter is ratification of the appointment of Deloitte & Touche as our independent auditors for 2021. And the fourth matter is an advisory vote to approve the compensation paid to our named executive officers for 2020 as disclosed in the proxy statement. If anyone has not voted or would like to change his or her vote, you may do so before the polls close, if you're appropriately logged into the webcast with your control number. If you've already submitted your proxy card and do not wish to change your vote, you do not need to do anything at this point in time. Okay. I will continue describing the proposals. The meeting has been called to vote on the following matters. First proposal, the company's Board of Directors has fixed the number of directors that will constitute the Board for the next year at 8 persons. The following persons have been nominated by the Board of Directors to serve as directors until their term shall expire or until their successors are duly elected and qualified. Kenneth R. Adams; Carl G. Braunlich; Lewis A. Fanger; Eric J. Green; Michael A. Hartmeier; Daniel R. Lee; Kathleen M. Marshall; and Michael P. Shaunnessy. The Board of Directors recommends a vote for each of these persons to be elected as a director. Proposal 2. The Board of Directors recommends a vote for approval of an amendment to increase the number of shares available for issuance under the 2015 equity incentive plan. Proposal 3, the Audit Committee of the Board of Directors has appointed Deloitte & Touche to serve as our independent auditors for 2021. The Board of Directors recommends a vote for ratifying their appointment. In addition, representatives from Deloitte are available today via telephone to answer any questions that you might have. And Proposal 4. The Board of Directors recommends an advisory vote for the 2020 compensation paid to the company's named executive officers as disclosed in the proxy statement. Please be aware that the polls are now closing. If you've not already done so, please vote via your webcast screen. [Voting]

All stockholders present in person or by proxy have now had a chance to vote, and the polls are now declared closed. As inspector of elections, Mr. Fanger will now report the voting results.

Okay. Hold on just a second, Elaine. I'm just waiting for this to refresh. All right. Well, Mr. Lee and Ms. Guidroz, I hereby certify the following results of the voting of the stockholders of Full House Resorts, Inc. The following persons have been elected as directors of the company to serve until their terms shall expire or until their successors are duly elected and qualified: Kenneth R. Adams; Carl G. Braunlich; me, Lewis A. Fanger; Eric J. Green; Michael A. Hartmeier; Daniel R. Lee; Kathleen M. Marshall; and Michael P. Shaunnessy. The stockholders have voted in favor of and approved an amendment to increase the number of shares available for issuance under the 2015 equity incentive plan. The firm of Deloitte & Touche has been approved to serve as our independent auditors for 2021. And with respect to the advisory vote, the stockholders voted in favor of the 2020 compensation paid to the company's named executive officers as disclosed in the proxy statement.

Thank you, Mr. Fanger and Ms. Guidroz. There is no further business to come before the meeting. I now declare the formal part of the Annual Meeting of the Stockholders of Full House Resorts closed. Now at this time, happy to take any questions that any shareholder might have. But prior to taking those questions, Elaine will read the kind of advised legal and procedural announcements so that we can speak freely in answering the questions. Go ahead, Elaine.

Okay. Thank you, Dan. The statements which follow are not an offering of securities nor solicitation for the sale or purchase of securities, which can only be made by a formal prospectus. The following statements made by the Board and company officers are made pursuant to the safe harbor and forward-looking statements described in the Private Securities Litigation Reform Act of 1995. We may make certain statements that are forward-looking such as statements regarding Full House's future results and plans and anticipated trends in industry and economies in which Full House operates. These forward-looking statements are the company's current expectations, and the company will make no effort to update these expectations based on subsequent events or knowledge. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including that our revenues may differ from that projected; economic trends and conditions may change; governmental and court approvals may not be forthcoming or may be delayed; our growth strategies may not be realized; development, construction or potential acquisition of facilities may not occur; trends in the gaming industry may be negative; and we may not have access to capital, including ability to finance future business operations or acquisitions; and there may be adverse changes in federal state or local involves and regulations, including tax, environmental and gaming life legislate -- gaming license legislation and regulations or other risks detailed in our documents filed with the SEC. Should one or more of these risks or uncertainties materialize, or should our underlying assumptions prove incorrect, actual results may differ significantly from results expressed or implied in any forward-looking statements made by the company in these communications. As mentioned before on our webcast is a summary of the procedures will follow. We have established these to provide everyone an opportunity to ask questions in an orderly fashion. If you wish to ask a question, you may do so via the webcast screen. Only shareholders of record date that are logged into the webcast with their control numbers are permitted to ask questions. If you have any additional questions that cannot be addressed during the question-and-answer session, a company representative will be happy to talk to you after the meeting by phone. I will now turn it over to Mr. Lee. Dan?

I don't think we have any questions, but...

We don't, Dan.

I'll just address a few things. We reported our first quarter recently, which was stellar. When we did that, we indicated that the first part of April was also continuing that strong trend. And we haven't completely closed the books for April yet, but it looks like April will be a pretty good month as well. So hopefully, this continues. The construction in Cripple Creek, it's underway. On the Bronco Billy's Casino website, there's a button you can click that says live, and we now have 2 cameras up that show the site pretty well. You'll see we have demolished 2 buildings that we needed to get out of the way for the new hotel. There's a third one, and if it's not gone, it's going to be gone imminently. And we've been relocating utilities, dorm sewers, sanitary sewers, telephone lines, electric lines, everything. Because we closed -- we got the city's permission to close a couple of streets, a lot of times, utilities run under the streets. You don't want a sewer line going underneath a building because if you had some problem, you can't get at it. So we had to relocate all of these preparing for the foundations, and those will start imminently. So you can see there's quite a bit of work going on there now to be open right around year-end next year. And then we made a few -- we also, at the moment, have no parking, and -- because the construction people have basically taken all the parking. We're offering valet parking at our front door for our customers, and we park them at lots we control that are somewhere distant from the casino. And we're seeking city approval to offer self parking at a large parking lot that we've leased coming into town, and we expect to have that up and running imminently also. So we've actually done somewhat surprisingly well considering that we have no parking at the moment. The -- we've made a few personnel changes. There was a press release. I mentioned the GM we had in Indiana opted to take a job with an Indian tribe in Omaha. We wish him well. He did a good job for us. And we opted to promote Angie, if I say her name right, Truebner-Webb...

Got it.

And Angie grew up in Germany, has worked for us about 10 years down at the Silver Slipper, is a pretty important part of that team. And 2 years ago, moved up to Indiana as our EVP of Finance and Administration. Very smart, works very hard and is optimistic about where we can go with Rising Sun. And we also promoted Jim McCracken who started out at the property 25 years ago as a deck hand, worked his way up to the casino to be their casino manager, and he's now the Assistant GM of the property. And they have skills that balance each other because he knows the ins and outs of casino operations probably better than Angie does, but she knows the numbers and the finance and how to handle the administrative details of the property better than he would. So I think, as a team, it's great. We also promoted Cyndy...

Cyndy Carter.

Carter, right, in Northern Nevada to be the Assistant GM overseeing the 2 properties there, and we're happy to have her in that role. So by the way, Angie earned the right totally to be the GM, but she is our first woman GM, and we're pretty proud of that. So I guess that's it. If anybody has any other questions, we're here. Or you're always welcome to call us at any time.

We do have one, Dan. Hold on, it's coming right now. I'll just read it, Dan. It's probably easier that way. Thank you to the Board and management team for your leadership during Mr. Lee's tenure, very different circumstances today versus when Mr. Lee took over. What efforts are being made to accumulate customers when Chamonix does open?

Thank you for the kind comments. And we've worked hard to turn this company around and put it in a good place, and I think we're there now. Chamonix is, I think, our -- my 11th major casino project. And so we're pretty accustomed to how you build up a marketing base and so on. But for example, we are about to sign a lease for space in downtown Colorado Springs to create an information center about Chamonix. For construction, it's always a good idea to build a model room, so that you can walk into the room and look at it and see what it feels like. And then you can show all the subcontractors, this is the room, this is what we're building. And sometimes you learn some mistakes. You'll find out that the room design fails to have a plug near the bedside table or something, right? So there's a lot of little things that you tweak with the model room when you build a significant hotel. Well, as we did at L'Auberge and Lake Charles, we decided to build the model room in a place where people can walk in and look at it and say, "Oh, this is cool." You can't stay there. We're not going to have the plumbing hooked up or anything, but you can walk into a real model room. It will be in downtown Colorado Springs, And that will be done later this year. So for at least a year, you'll be able to walk in and see what the rooms at Chamonix will look like. And we're also planning to have golf hats and T-shirts and stuff that you can buy. But if you sign up for our Chamonix frequent player program, we'll give you some of those little freebies. And of course, we have boards and videos being prepared about the new hotel and also about all the activities that you can do in the area. I mean people don't realize there's a turquoise mine, like 3 blocks from us. There's great mountain biking, of course. There's a huge gold mine about 1/4 mile from us, and there's hiking and all this stuff. So it's about advertising Chamonix but also advertising the region a little bit. Now we already -- unlike some markets where -- like when we went into Lake Charles, for example, we have a mailing base now for Colorado Springs. Bronco Billy's has been in business for 25 years. And so we have a strong mailing base there. But we do intend to reach out and try to get more customers from Denver, which is 4 million people. Now of course, Blackhawk is closer to Denver than we are, but we're going to be different. And in a lot of ways, we're going to be better than the casinos in Black Hawk. And if we can get 5% or 10% of the business out of Denver, it's a huge number for us. So we have a strong second market, if you will, which would be Denver. And we're starting to think about where else we can reach out to. Now that there's no maximum bet in Colorado, we can actually consider getting high rollers out of, say, Texas. I mean there's nonstop flights from Texas to Colorado Springs, people fly in to play golf at The Broadmoor down in Colorado experience. Well, maybe we should have a host or 2 who focuses on markets like that, especially in the summer when it's so hot in a place like Houston, the idea for a gambler. I mean, it's hot in Las Vegas too. Well, I invite that gambler to fly to Colorado Springs, come up to 10,000 feet, enjoy the mountain air. So there's some other segments here that we're looking at that would be a, I'd call it, tertiary segment. So we're -- and then we will also, in the next few months, hire meeting and convention salespeople because we have pretty significant meeting room space in the new hotel. And that stuff gets booked quite aways in advance, and it helps us fill the hotel midweek. And so you start that pretty soon, and they will spend time down in that leased space in Colorado Springs, where they can meet with people who might ordinarily have conferences somewhere else in the State of Colorado, and try to persuade them to give Cripple Creek a try 2 years out. So do we have any other questions?

We don't, Dan.

Okay. Well, and just kind of taking from what you just said is now we've got the company in pretty good shape. I mean every one of our properties is a good physical shape and doing well. And so Chamonix is our next project. But frankly, we're working on the proposal for Waukegan, trying to flush it out, so that when the Gaming Commission in Illinois gets around to choosing who can build in Waukegan, we can show them more detail than we had previously. And so we're pretty excited there. I think with the improvements we've made to our balance sheet in the last 6 months, we're in a much better position to compete for that license than we were previously. And the city's consultant rated us as the best proposal on really every criteria, except for our balance sheet, and we think we fixed the balance sheet issue at this point. So I think we have a running chance at that license, and it's a big opportunity for us. And we've also made some very good progress in Mississippi on the possibility of expanding the Silver Slipper with about 150 rooms. It has 129 rooms now and really no meeting room space at all, which makes it a little bit challenging with those 129 rooms midweek. But we've gotten a good return on that hotel tower, which has opened about 5 years ago. And we've figured out a way to build a new hotel tower out over the water on a pier. We're kind of landlocked and -- but you can build out over the Gulf of Mexico if you meet all the different criteria. And so we're working to satisfy all those entitlements, add not only hotel rooms, but meeting room space and a spa, an additional restaurant. And then to accommodate the people who would stay in that expanded hotel, we'll add more surface parking, which we have to fill in some wetlands to do, which is another complicated process. But we're working our way through all of that. And hopefully, that expansion is not very far down the road.

The only other thing I have to add, Dan, is apologies to Eric Green, he went to the other school in D.C., American University.

Not Georgetown. Okay.

But that's all we got, Dan.

Yes, I had the right city.

Yes, you did.

All right. Well, they're both great colleges. Okay. Thank you, everybody.

Thank you, guys.