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

Greetings, and welcome to the Full House Resorts Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lewis Fanger, Chief Financial Officer of Full House Resorts. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to our third quarter 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 provisions 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. We're also broadcasting this conference call at fullhouseresorts.com, where you can find today's earnings release as well as all of our SEC filings. And then lastly, we do have some slides that we uploaded as well for you. If you go to investors.fullhouseresorts.com in the middle of the page, you'll see a banner with Link, click on company info and then presentations, and you'll see a link to the third quarter slides that we'll reference here. So with all that said, we'll get to your questions relatively quickly today because I know MGM is on deck in about 30 minutes. But with all that said, we had a very strong third quarter. Revenues increased 73% to $71.5 million. That rise was helped out by the Temporary, which opened back in February of this year, and it continues to ramp up. Compared to the second quarter of this year, the Temporary showed pretty meaningful sequential improvement. Revenues at the Temporary improved about 18% from $20 million in the second quarter of 2023 to almost $24 million in this third quarter. Adjusted property EBITDA rose 64% from $4.1 million to $6.8 million. Circuit did open their on-site sports book after Temporary in the third quarter, but really the meaningful addition that we're waiting for is the high-end restaurant, which is on-site and going through its final paces. The hiring process has already begun, and we expect to have that open at the end of this year. Also at the company, we had $5.8 million of accelerated revenues from the termination of 2 of our sports skin agreements. Even adjusting for that, though, we had a good quarter that exceeded consensus. Flipping forward in the slides to Slide 5. You can see our usual renderings of Chamonix. We're very excited for this opening. If you know the history of gaming, then you know that the business model that has worked time and again is to find an underpenetrated gaming market without any differentiated product. And we think we found that in Cripple Creek. In our case, we have roughly 1 million people in the broader Colorado Springs area and the gaming spend per capita is about $170 per person per year. For casinos that are within an hour, their feed of market, you tend to see a per capita number that is double or even higher than that versus what you see currently in Cripple Creek's casinos. The national average, which includes many states where casinos aren't convenient, like Hawaii and Alaska and Utah is two-thirds higher than what we already see out of Cripple Creek as well. And so that stand-alone is what gets us very excited for our upcoming opening. But on top of all that, we've built a destination that really is unlike any other casino in the state, let alone in Cripple Creek. It is just beautiful on the inside. We think it will offer a compelling reason for Colorado residents to experience and in many cases, Cripple Creek to for the very first time, and then they continue to visit again and again. On Slide 6, just a quick reminder of what we're building. It's a $250 million project. It's a beautiful new casino. There's a hotel with the first 4-star product in the market. We're going to have a great steakhouse called 980 Prime, which is being run by the people behind Barry's downtown, Prime at [ Circuit ] and N9NE Steakhouse in Las Vegas. There will be a rooftop pool, a spa and integrated parking garage. It will be pretty grand. Our opening date remains December 26, which is just 7 weeks away. We did create a fun ad campaign. It meant to generate excitement in the area while also giving a quick sneak peek into the building. And at the very bottom of that slide, you'll see YouTube link, which you can click on to get to the 60-second ad. On TV in Colorado, we'll break it up in the short or 15-second spots, but we'll also air the full thing digitally. Slide 7, you can see the Valet Arrival experience in the middle of the Valet drop-off with the hotel rooms just above. On the left of that page is the jewelry store and then in the front of the building and also to the right, will be casino space. Slide 8 is a sneak peek at our table games pit. By the way, these photos are taken about 1.5 weeks ago, but they're already pretty stale. But nonetheless, in this photo, you can see the chandeliers being installed. Slide 9 is just me and us trying to show off the casino a little bit without ruining the surprise for you, but you can see some of the ceiling detail here. It really is very different than what you'll see anywhere else in the market today. Slide 10 is a view from our ballroom. The chandeliers are now installed. The carpets done, that we've got them covered for protection up until opening day. This is where we've been storing and testing all of our slot machines all of which, by the way, have arrived on site slot basis or a few days away from being installed, and we'll follow that very shortly by the slot machines themselves in their actual locations throughout the casino. Slides 11 and 12 are photos that we showed you last time just giving you a sneak peek at some of the room products. Those are being shut off one by one as our furniture gets installed. And then Slide 13 shows some of the beautiful nature views that you get from many of our guestrooms. Outside of that, a quick look at liquidity. Our liquidity remains in a good spot. At the end of the quarter, we had $84 million of cash, including $58 million of cash that by design is reserved to complete Chamonix. Normal cage cash tends to hover around $10 million or a little bit lower, something that most people don't think about is our sports skins and how those are prepaid. And so in this fourth quarter, we're due to receive about $10 million in cash related to our skins. That includes $3.6 million already received in October from the terminated sports agreements and then there's another $5 million due from Circuit in December, which is prepayment for their mobile operations in Illinois for all of 2024. We also have $13 million available under our credit facility, all of which is available for us to draw and that provides us even more cushion as we prepare what's going to be a pretty big in Momentous opening for this company at the end of December. So with all that said, Dan, do I miss anything? Or do you want to continue?

No, I think we'll take some questions, and we'll stay here as long as possible, but we are trying to make it easy for people to go to the MGM because we know many of you will want to do that. But it was a great quarter. I'd be happy to talk about it for 2 hours, so we're happy to take questions.

Thank you, we will now be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation [indiscernible] will indicate your lines in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. First question comes from Ryan Sigdahl with Craig-Hallum Capital Group, please go ahead.

Hey, good afternoon guys, just if you could break down what you get a little bit more nice sequential revenue growth and margin uplift. But we're really seeing the efficiencies flow through and then any directional help for Q4 relative to Q3 based on what you've seen thus far in the quarter?

Let me take it. Just as we started this call, the numbers came out from Illinois for October. And we haven't been opened before October is normally seasonally a little weaker than September. And in fact, I think it was down about $3 million from September to October. And of course, [indiscernible] open and did about 8, they did a little better than we did. They have a lot more people around them. And we were off a little bit from September to October, not very much. We were still $7.3 million. And I think part of that seasonality, part of it is also we had a pretty big advertising campaign when we first opened. That had kind of petered out and we have another one about to start, which is kind of emphasizes the excitement of the inside of the tent. So I think it's a fourth quarter, this is not a highly seasonal market, and we have some like [indiscernible] that is highly seasonal. But I think the fourth quarter might be a little weaker than the third quarter in terms of revenues. Now we'll see there's a new advertising campaign build revenues. I hope it does. It's part of the reason we're doing it. We continue to build our mailing list, which helps our slot play. We're trying to get our steakhouse open. It's probably going to be late in the quarter, but we're trying to get it open. And we know that, that's pretty important, especially if your table game play and high rollers. And hopefully, it's open late in December and helps us drive New Year's Eve, New Year's Eve is really important in December, which then makes it important for the quarter. But the property continues to mature, and it's doing just fine.

Good. Continuing on the trend of all performance to the West segment, it has been revenue down each Q1, Q2 EBITDA has been roughly 0 in each of those quarters with the construction at Bronco Billy's and this quarter showed a nice improvement on revenue. And on the bottom line, I guess, can you comment on what's specifically going on in which properties within that segment are doing better?

Well, part of what we had done at one point, we had renovated the middle part of the Bronco Billy's casino. So a year ago, like the heart of it was actually closed. It's been open now since early this year, if I recall correctly. So it's still heavily disrupted but a lot less disrupted than it was a year ago at this time. But the interim results at a Bronco Billy's are minor compared to what Chamonix likely to do for that segment. I mean, it's not unlike what Monarch did in Black Hawk. They bought the old Riviera and renovated the casino and added the hotel tower and the tore down parking grade, built the new partner grade, et cetera, et cetera. They never actually closed their casino. But the old Riviera didn't make much compared to what Monarch is making now. And it's kind of the same sort of thing we're doing. And like them, we will open, but it will be kind of a soft opening. We're not planning a grand opening party on December 26 or anything like that. Because frankly, we're scrambling to get open and we're hiring people now. We have, of course, already have 250 employees. We're trying to pick up another 100. And we won't have everything open on December 26, that we will have 300 guestrooms, all big guestrooms. We'll have the casino, all the casino. We'll have the high-end restaurant. We'll have the parking garage. We'll have the surface customer lot. There's an Italian restaurant that won't be ready for several months after this. The spa will not be ready. There's like a speak-easy bar that will not be ready, but it's to speak easy, so nobody will know it's there anyway. And you end up in a situation like all the key drivers that will make this successful will be ready by December 26. So you wouldn't want me to wait 2 months until the spas done. I mean we'll go ahead and open. And so we'll open on December 26 and then as quickly as we can finish the other stuff. And that other stuff, it's like the finishing work in the spa. So it's not anything that would be disruptive to a customer's experience. And so we're excited about being open. And then we'll have a grand opening party in the spring, which is very much the same as Monarch did. And I know Durango Station postponed their opening, but I think they figured they couldn't get the publicity they wanted with Formula One in town. And I think that may have been a factor of that as well. So we're a little different. We're much more similar to Monarch. We're going to get the doors open, get some revenue coming in and then build from there.

And apologies if this wasn't what you're asking to, Ryan, but if you're looking sequentially from 2Q to this third quarter, Grand Lodge actually benefited pretty nicely. What you had in the second quarter of this year was, we had a very bad winter, to be quite honest and a lot of snow. And that's now lingered for the longest time. So usually, what would happen in our second quarter around Memorial weekend is the locals would come back and start gambling again. And this year, because there was so much snow that was sitting around, they didn't come back in the second quarter. They didn't really come back until 4th of July weekend. And so sequentially, we got a pretty nice bump from Grand Lodge, just having the locals back in town.

Great, I'll turn [indiscernible] thanks Dan.

Next question, Chad Beynon with Macquarie, please go ahead.

[indiscernible] guys, nice quarter.

Thank you.

Wanted to start just kind of honing in on some of the OpEx items. It's obviously been a topic on other operator calls this quarter just in terms of labor, utilities, some different contracts, understanding that probably most of your costs on the labor side are going to be coming temporary and then Chamonix. I guess you were kind enough to break out the Midwest and South, and it looks like margins were down a little bit, probably roughly in line with revenues. But can you just talk about kind of where we are on the inflation journey on the expense side. If you feel like things are under control, if you're going to see additional creep in the back half of '23 and beyond or if things are kind of status quo there?

Well, obviously, at Chamonix, we have to hire people, and we're in an isolated location up in the mountains. And so in some job categories, we have to pay up to attract people. On the other hand, the tip positions, if you visit the town, it's pretty obvious, we're going to be the center of action. And if you're a tipped employee, you're going to make more money with us than you are anywhere else in town. So I think there will be okay. If talking about like normal inflationary pressure, six months ago, I was getting a lot of pushback. And it was kind of like the press would say inflation year-over-year was up 7%. And so it seemed like every employee went at a 7% raise. And I'd point out that our revenues at most properties were not up 7%. And that in the inflation index, there are things like cost of houses or cost of a new car. And if you didn't buy a new car, if you didn't buy a new house, your cost of living didn't change, and you push back. I think now that you've had lower or at least press articles of lesser inflation and things like that. A little bit of that pressure has gone away. The last employment statistic actually showed unemployment up a little bit. Now Colorado Springs is still a very tight labor market. But one of the things we're doing in Colorado Springs that takes a lot of pressure off us is we've taken a page from the Hyatt Tahoe, Hyatt Tahoe outsources their housekeeping to a third party, a number of hotels are doing that these days. And so we've chosen to do the same thing. Well, the company that is going to do our housekeeping does the housekeeping for the hospital in Woodland Park, which is the second largest employer in the county, and they also do the housekeeping for the 5 hospitals down in Colorado Springs. And so Woodland Park is 18 miles from us and then [indiscernible] is about 20 miles from Colorado Springs. So it's easy for them to transfer housekeepers from Woodman Park to us or to our property and then replace them with people from Colorado Springs. And so they can move people around. They've already got a workforce and so on. And after negotiating with them, and we looked at what we would pay them by the hour and what it was going to cost us by the hour, it was kind of a wash and they have more resources than we do to move people around and supervise people and so on. So that's about 1/3 of the employees we need to hire. We're resolved with that contract. And so that helps us a lot. Then about 1/3 of the other employees are tipped employees, and that's going to be relatively easy. And then the last part, we're working on. So I think we'll be okay up in Waukegan. We continue to hire people. It's a little more of a challenge there because every employee down of the dishwasher has to go through gaming licensing. And somebody who might be applying for a dishwashing job, that's a pretty big hurdle when they can go to the Amazon warehouse next door and not have to fill out a 30-page form. We've been working through that, and we have a pretty stable employee base now, but it's been a little bit of a struggle. Anyway, that's the bottom line. We get asked all the time, do you see signs of a recession. So sometimes I think there might be, but particularly in Mississippi, which is where the economy seems to be a little weak. And then all of a sudden, we'll have a good weekend and then say, well, no, maybe there isn't a recession. And then people ask, are you feeling inflation. It's like, well, on the revenue side, no, I wish our revenues are growing 7% at the older properties. And I think yes, it's one of those things. When the press [indiscernible] talk about inflation and everybody serves looking for a raise, and if the press would just shut up about it, maybe we wouldn't have as much inflation. Some of you may not, in an earlier life, I lived in Brazil and the Brazilian government at one point, had to admit that they lied and that was because the Sao Paulo newspaper did an analysis of a bunch of prices from 1 year to the next, and they concluded that inflation was 100% when the government was saying, was 70%. I mean the inflation rates were nuts. And the Ministry of Finance in Brazil said, well, actually, as a tool of combating inflation, we understate what inflation is [indiscernible].

And then, Dan, a lot of times when we're talking to investors, it's always the what's next after Chamonix. Lewis, you kind of laid out the spend per head in the market and the opportunity there. And I think everyone is on board with the returns that could come out of this. But after that's open, you'll have 2 new properties, 1 property down in the south, that's a good cash cow, the sports businesses and then a few other smaller properties. But just in terms of kind of the 3-year portfolio or how you're thinking about what to do with the cash, whether it's pay down the debt, buy back stock at these levels or look to grow the business, can you kind of give us a little peek into '24, '25 kind of the what's next after you open up Chamonix right after Christmas?

Well, we get Chamonix open and it will take a while to mature just like it's taken American Place a little while. And just as it did Bellagio [indiscernible] so on, I mean, the second year is almost always better than the first, the third year is better than the second and usually about that time is kind of mature. And now at some point, the city of Waukegan and the State Gaming Commission will probably get that lawsuit resolved from the [indiscernible] tribe. And when they do, then it's hard for us to go arrange financing for the permanent casino when you have a lawsuit out there arguing that you should restart the licensing process. It's kind of an absurd lawsuit, but it's out there. And when that's resolved, I would expect and it might be a year to 18 months. And when that happens by then, frankly, we're going to be one of the least leveraged casino companies out there. And hopefully, the bond market is in better shape, and we will go raise the money to build the permanent casino in Waukegan. Our obligation is to invest, I think the number is about $325 million going forward. It was $500 million less what we've invested to date. And a lot of what we've invested to date is parking lots and land acquisition, and so on, that's really for the permanent and the license fee itself. And the permanent will be much more obvious and nicer casino than the tent we're operating in now. So we still have that ahead of us. It's a pretty big task. It's not immediate because the lawsuit has a kind of on hold for now. We hope they resolve the lawsuit pretty quickly, but the courts are pretty backed up these days. So in the meantime, we'll continue to grow the business and improve the balance sheet. Somewhere down the road, we do have the entitlements to build a hotel tower at the Silver Slipper, and it would make sense to do it. We've just been a little busy with other stuff that we think has a higher ROI than that. But at some point, if we're generating excess cash and looking for something to do, that's a growth opportunity that exists for us. in a 3-year time frame, that's kind of what we have in mind. I mean we don't see any other markets to go into. I think the markets we're in are pretty good. Even Chamonix is designed to be able to be expanded at some point, and we own a piece of land to do that on, but let's get it open first.

Thanks guys, I appreciate it.

Thank you Chad.

Next question, Jordan Bender with JMP Securities, please go ahead.

Thanks for taking my question. It looks like reservations in Chamonix, the hotel did open the other day. I was wondering if you could just share maybe like what you're seeing in terms of bookings, whether you want to talk about ADR. And just given some of that demand, could that be kind of a forward-leading indicator into some of the demand for that project?

Well, we haven't publicized yet that in a big way that the reservations are open. And in fact, I was a little chagrinned when I saw it because for the first several days, it really should be held for our casino customers. And so we're fixing that. We have a mailing list there over 100,000 names now. some of those people are probably dead because it's been built over 25 years that Bronco Billy's has operated. But there's 20,000 regular people who we see all the time. And of course, we want to make sure we accommodate them early on. And so the bookings we have it's only been a few days, so I wouldn't expect it to be at all material. But people will want to see it. The ad campaign is just starting. It's a really acute series of ads and they'll be pretty prominent in Colorado Springs and in Denver, and that will build. And it's 300 guestrooms on any given night is around 500 people in the property. We only have 800 slot machines. And we will continue to get a lot of day-trip customers as well. And so the revenue will be there. Will it be there on December 26, I don't know, the day after Christmas, will probably be pretty busy. Actually there's a side of me that hopes were not completely slammed because our employees will still be learning the building and learning their jobs and you gradually build up. And so like stations is actually concerned, stations, casinos, and they're good operators. They're going to open to [indiscernible] stations, the first new locals casino that's opened here in a while. And there's 2 million people living in this town. We all drive past [indiscernible], and they will be swamped with people, and they will be on the day they opened. So they said we want to make sure they have all their employees trained and everything else. We're 45 minutes up in the mountains and I think people will find us. I remember when we opened [indiscernible], which was 2 hours from Houston, I wondered whether people would show up. We had so many people show up on the first day that they were threatened to close down the freeway interchange, which was a mile from the property because the traffic was backing up under the freeway. And so sometimes it builds slowly, sometimes it builds more quickly. I expect this to build somewhat slowly just because of where it is and because most people in Colorado Springs have been to Cripple Creek at some point in the past. And if you went there before, it looked kind of like if you've ever been to Virginia City, Nevada, like a little historic town with little itty-bitty casinos and you go there and you look at it. And our task is to tell them that, no, this isn't the Colorado. This isn't the Cripple Creek you knew. This is a different Cripple Creek. This is kind of like when the Mirage opened in Las Vegas in 1989, all the marketing in Las Vegas up until that was cheap buffets and cheap hotel rooms and Lone singers. And the Mirage introduced a whole different type of casino and it changed the market. And that's a little bit of what we're doing in Colorado Springs on a smaller scale.

Yes. Our TV ads haven't yet started [indiscernible] that's literally happening this week, Jordan. So it's a good question, but ask me again in a week or 2 is probably the better thing to tell you. I will tell you this, though, it is it is beautiful. And I know I keep saying that whenever I meet with people, but when you walk into that building for the first time, your jaw will drop because it is truly a special place that is unlike anything else in that state.

Quite it's wind quality, and that's not surprising because the designers are people who work on the wind product.

Yes, that's right.

So and the hotel itself is for season's quality, and it's the designers. The design firm we used for the hotel is the same design firm that we used at the Four Seasons in St. Louis who did the Four Seasons in Jackson all who did a number of Montage properties, and that's the quality of what it is. And to do that in Cripple Creek is a little stunning. There are some local people in town, I think I'm nuts. But I think it will work because I've seen it work before.

Great. And then just kind of led into my follow-up question here. I think the original benchmark for Colorado was about $50 million of EBITDA. Is that still kind of the right way to think about the project return with where you guys sit now about 1.5 months out?

Yes, I think so, but don't expect us to do $6 million in January. I mean, it takes a while to get there. I mean Monarch is doing north of $100 million. In fact, I said that to somebody who was a big shareholder there who said, "No, no, they're doing like 120 now. And so that's great news. They are 500 rooms, we are 300 rooms, and the casinos aren't much different in size. So if we could do 50, I'd be pretty happy and that's less than half of what they're doing. And they're the principal competitor. Our ads quite clearly say we're the best casino in the state, they're pretty good, too. I mean I think we're better because we have a better footprint. Their footprint, they had to be very long and narrow, but the actual quality of the experience is pretty similar between the 2 of us and everyone else fails in the state.

And by the way, no comparison in Cripple Creek?

Oh, yes, zero comparison at Cripple Creek. Ameristar is very successful. It's gotten old. They need to refurbish it. It's not a bad property. And the next best property is a pilot debris. It's got the Caesars name on it, but it's built by [indiscernible], who we used to jokingly refer to it as a pilot debris.

And if you think about when we first bought that property, that was my gosh, down 2015, I think when we bought Bronco Billy's, and that's when we first started looking at the expansion. But since that time and certainly since we put a shovel on the ground there, the town of Colorado Springs has continued to grow pretty massively. We always talk about there being 1 million people in our broader feeder market. That's really Colorado Springs divide, what am I missing, Dan, Woodwind Park, Pueblo. But what it doesn't include is all of the suburbs to the south of Denver, so kind of Castle Rock and going to the south. And if you were to try and drive from Castle Rock to Black Hawk, on a Friday or Saturday, the traffic is so bad that it will be quicker for you to make it to us instead. And so that whole area is above and beyond the 1 million people that we talk about, and we will market to those people.

And we will grow the market. I mean we talked about Colorado Springs being an underserved market. Denver itself is also an underserved market. And so I don't think we'll have a negative impact on Monarch or Black Hawk at all. I think we will grow the market but it will happen over time. And $50 million is not an aggressive number on this property. Just don't expect it to get there overnight.

Yes, and my point was only that the feeder market is a lot bigger than what it was 4 years ago when we started this whole process.

Yes, also eliminated table [indiscernible] that we're bidding limits, are we up to a half hour?

We are, but we have a few more people in the queue.

All right. I'll try to base a second. Go ahead.

Next question, John DeCree with CBRE, please go ahead.

Hi, this is Max Marsh on for John DeCree. Congrats on a great quarter guys. Looking at the strong results out of Waukegan, I'm curious if you have any updated view on elevated marketing in that environment, whether you're still sticking to that elevated marketing or maybe you're seeing the ROI here and giving you an opportunity to back off?

Well, I mean we're still being pretty aggressive with the free play. We were a little quiet with the advertising in October. We're about to go back up. And a little bit of the experimentation is like does advertising drive business at this location. Every market is a little different. And so we'll see. We're still learning, and we are still spending quite. Between the free play and the reboot of the advertising. I mean if you were to look at it on a quarterly basis, you wouldn't see it. But behind the scenes, we watch it week-to-week, and it's like, well, what did we spend advertising this week? What were our revenues this week and you try to figure out do you target it differently. The new ads have a little different look and feel to them. And we'll see, it's just part of fine-tuning.

Yes. You should expect more of that though, throughout the fourth quarter, Max.

Okay. Understood. Thank you. And then just one quick follow-up on the opening of the Circuit Sports Book. Any commentary on that? And if you're maybe seeing some elevated play on heavy sports days? Or any additional color there would be great?

It's clearly a positive. It's not a big positive, but it does bring people into the property. Of course, from Circuit's point of view, most of their revenue comes from the app, which is because they can access everybody in the state of Illinois. You can be down in ES. Louis and place back with Circuit. And so the $5 million a year, well, the percentage of revenue with a $4 million or $5 million a year is based on the statewide ability to operate sports betting. And does it bring people into our property? Yes, it does, but it's not a huge number. And by the way, that's true in Las Vegas as well. I mean the sports books have always been relatively modest amenity to the casino, except at Circuit itself, who made a big deal out of it. And in our permanent casino and American Place, we have a bigger sports book similar to what they have at Circuit downtown.

Good, appreciate it guys, congrats on the good quarter.

Okay, thank you. By the way, the steakhouse will probably have a bigger impact because right now, we don't have a fine dining amenity and all of our competition does.

Next question comes from Ricardo Chinchilla with Deutsche Bank, please go ahead.

Hey guys, thank you so much for taking my question. I was wondering if you could comment a little bit on deleveraging expectation for the business. What's like, let's say, the 2-year target for you guys where you would feel comfortable with the balance sheet before moving to some of the other opportunities that you have talked to about in the call and that could provide strong returns on investment?

Well, it's actually hard to look at our leverage because as kind of the way we've been developing this, we borrowed all the money up in advance to build both American Place and Chamonix. And so now we're about to open all that. And so if you were to look at trailing 12-month earnings compared to debt, it looks like we're over levered. And if you look ahead and say, well, what are earnings likely to be in, say, 2025 versus our leverage, we're probably under levered. And I think as we grow in our scale here, you won't see as big a swings on that. Our obligation to build the permanent American Place will not be as big a jump because the company is bigger as we did last time, I mean, when we went, let's say, we built what to be about the $500 million worth of stuff on the backs of casinos that we're doing $40 million of EBDIT. Now we're going to be doing [indiscernible] American Place in Chamonix and comparing it to the traditional casinos. And if you look at now with Chamonix and the temporary and the other places and the sports books and you look at building the permanent American Place would be less levered. And by the way, Louis and I have been doing this a long time. And at Mirage Resorts, when I got there was pretty heavily levered. We had the Mirage, and we levered, we borrowed more money built Treasury. It was successful. Then we borrowed more money, built Bellagio and Boreas, and they were successful. And along the way, we became investment grade. It was the industry's first investment-grade company. But we grew our way into it. And at Pinnacle, we did the same thing. I mean the properties we inherited at Pinnacle, we were able to double their results just by big better managers. And then we built [indiscernible] and then we've built the 2 properties in St. Louis. And each time we borrow the money, build something, get good returns on investment and that would reduce the leverage. And so when we get to this company 8, 9 years ago, I mean, it was pretty levered, and we've already reduced the leverage. And when this stuff when Chamonix gets open and so on, if you do it right, it's a win-win. In other words, shareholders are getting good returns, employees are getting good growth opportunities. But bondholders also do well because you end up getting upgraded, you end up calling the bonds before the maturity and nobody loses. And I can plan it that way. Legally, I guess, management and the Board is only obligated to shareholders. But in my mind, we have all these constituencies and the lenders are certainly a big part of that, and we've always taken care on every aspect.

Yes. I think what a lot of people forget sometimes is we borrowed a big chunk of this debt to build 2 properties, one that's already opened in the temporary and one that's about to open in 7 weeks in Colorado. And when you pro forma in run rate for those properties, depending on your estimates, you're probably between 3 and 3.5x gross levered. So to Dan's point, it's actually a pretty manageable balance sheet. And then we'll have cash flows that all that generates that we can use to contribute towards funding the permanent casino in Waukegan, there will likely be some sort of incremental slug of debt there. But between now and then, we've got a split rating between S&P and Moody's. I would expect the lower part of that equation to get upgraded just on the sheer fact that you've got an interest expense that's around $35 million a year and a company with pro forma for those 2 openings, that's making 3, 4x that amount. So it's doing all the things that we intended.

Actually, it's interesting to look at the 9-month numbers, our EBDIT for 9 months exceeds our annual interest expense. And our debt during those 9 months included all the money needed to finish M&E. So without Chamonix earning anything and with American Place just ramping up after opening in February, we still earned enough in the 9 months to cover our annual interest expense. So obviously, we have leverage. But in some ways, you look at it, how lever it are we really. We're not all that levered.

It's essentially take leverage since it's for something that isn't yet in those trailing numbers, yes.

Got it. Thank you so much for taking my question.

Thank you, I think we have time for one last question, Dan.

Yeah.

We have a follow-up from Ryan Sigdahl with Craig-Hallum, please go ahead.

Hi guys, just quickly, which sports books do you still have licenses for in your skin? And then what should we expect for Q4 from a licensing line of revenue with the [indiscernible] termination?

Yes. So on a go-forward basis, we have on skin in Illinois, 1 skin that's live in Indiana and 2 skins that are live in Colorado, and that some total of that is $8 million per year. What we have idle is we've got 2 skins idle in Indiana, one skin idle in Colorado.

Any onetime impacts in Q4, Lewis?

No.

Thank you.

I know it gets a little confusing with all that movement there.

I would like to turn the [indiscernible] comment.

I was going to say the Illinois one is far more important than the others and Circuit knows that business better than anyone else. So we're pretty happy with what they're doing. So we don't know what the results are, but we know that they are very good at promoting a sports book and good at operating it, and it's fun to watch. And on that, I'd like to thank everybody for your support, and we'll get Chamonix open. And next time, we'll be talking about how it's been doing. So thank you very much.

Thank you guys.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.