Full House Resorts, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparative period is Q1 2023. The company operates seven casinos and has contracted sports-wagering licenses (“skins”). Figures below are in U.S. dollars; financial statement amounts are rounded to millions unless otherwise stated.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $69.9 million | $50.1 million |
| Operating income (loss) | $(0.6) million | $(7.0) million |
| Net income (loss) | $(11.3) million | $(11.4) million |
| Adjusted EBITDA (non-GAAP) | $12.4 million | $10.1 million |
| Net cash used in operating activities | $4.4 million | $7.3 million |
| Capital expenditures | $22.6 million | $51.8 million |
- Revenue increased 39.6%; casino revenue rose 43.6%, food and beverage 27.5%, hotel 33.0%, and other operations 30.5%.
- Net loss per basic and diluted share was $0.33 in both periods. Adjusted EBITDA is a company-defined non-GAAP measure and should not be treated as a substitute for GAAP earnings or cash flow.
- Approximate operating margin improved to negative 0.9% from negative 13.9%; Adjusted EBITDA margin was approximately 17.7%, versus 20.2%.
- At March 31, cash and equivalents were $25.7 million and restricted cash was $20.6 million, the latter dedicated to Chamonix construction. Total cash, cash equivalents and restricted cash were $46.3 million. The company estimates $10–$15 million is needed for day-to-day operations.
- Long-term debt, net of issuance costs, was $465.9 million; principal debt was $450.0 million of 8.25% senior secured notes due February 2028 and $27.0 million drawn on a $40.0 million revolving facility due 2026. The company reported compliance with the revolver’s financial covenant. It also had $2.1 million of finance-lease debt and $43.9 million of noncurrent operating-lease obligations.
- Cash used in investing was $22.6 million, primarily for Chamonix. Financing activities used $0.5 million. Cash and restricted cash fell $27.5 million from the start of the quarter.
Material changes and operating trends
- Growth was substantially associated with the full-quarter contribution from American Place, opened in February 2023, and the phased opening of Chamonix, which began in December 2023. American Place generated $25.8 million in segment revenue and $7.4 million in Adjusted Property EBITDA in Q1.
- Midwest & South revenue grew 33.9%, but same-store revenue declined 5.1% and same-store Adjusted Segment EBITDA declined 25.5%, to $5.3 million. Management cited adverse winter weather, lower gaming activity at Silver Slipper and Rising Star, higher Silver Slipper costs including insurance, and competition affecting Rising Star.
- West revenue rose 60.4%, but Adjusted Segment EBITDA was a loss of $0.1 million versus $0.1 million income. Chamonix’s phased opening contributed revenue, while management cited start-up inefficiency, training and marketing expenses, snowfall, and a three-day power outage in Cripple Creek.
- Contracted sports-wagering revenue increased to $2.3 million from $1.2 million, principally reflecting Illinois operations launched in August 2023. Same-store contracted sports-wagering revenue and EBITDA declined 30.1% and 53.0%, respectively. Three skins were idle: two in Indiana and one in Colorado.
- Operating expenses increased 23.5%, below revenue growth. Depreciation and amortization rose to $10.6 million from $5.9 million, reflecting new properties. Preopening costs fell to $1.7 million from $10.5 million.
- Net interest expense increased to $10.3 million from $4.8 million, mainly because less interest was capitalized as construction neared completion, cash balances and interest income were lower, and the prior-year period included only part of a quarter’s interest on additional notes.
Outlook, risks and unusual items
- Management stated that cash balances, available revolver capacity and operating cash flow are expected to be sufficient for the next 12 months. The filing provides no specific earnings or revenue guidance.
- Chamonix’s steakhouse opened in April 2024; its spa and rooftop pool were expected to open in Q2. The company expected to use the $20.6 million restricted construction balance during Q2 and Q3 2024.
- The permanent American Place facility is under design. Meaningful construction spending is expected to be delayed until 2026–2027; the temporary facility is permitted to operate until August 2027. Management expects additional financing will likely be needed, and litigation filed by an unsuccessful license bidder against parties unrelated to Full House could affect financing access or timing.
- American Place carries a contingent Illinois gaming-license reconciliation payment, calculated using a specified trailing 12-month revenue measure and payable in six annual installments beginning in 2026. Its present value was reported at $23.4 million at March 31, 2024; the filing’s estimated undiscounted fee was $33.9 million.
- The Grand Lodge Casino lease expires December 31, 2024. The lessor has an option to purchase the company’s leasehold interest and related operating assets. Full House hopes to extend the lease, but gives no assurance that it will do so.
- Other risks include high debt and interest costs, capital needs for planned developments, weather and seasonality, competitive pressure, gaming hold variability, regulatory conditions, and uncertainty about replacing operators for idle sports skins. The company reported no material change to the risk factors in its 2023 Form 10-K.
- Management said pending ordinary-course legal proceedings are not expected to materially affect the company. It also reported effective disclosure controls and no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether Chamonix’s remaining amenities open as planned and whether its operating efficiency and West segment profitability improve.
- Whether same-store revenue and EBITDA weakness persists at established Midwest & South properties, and the extent of weather, competition and insurance-cost effects.
- Cash conversion, unrestricted liquidity, remaining Chamonix spending, and compliance with debt covenants as construction and operating needs continue.
- Funding requirements, financing availability and construction timing for the permanent American Place facility, including the effect, if any, of the cited litigation.
- The final Illinois reconciliation payment, its installments beginning in 2026, and the associated cash-flow impact.
- Renewal or other outcome of the Grand Lodge lease before its December 2024 expiration, and future arrangements for idle sports-wagering skins.