Full House Resorts, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023; filed August 8, 2023. Amounts below are in millions except per-share data. The company operates six casinos, opened The Temporary by American Place in February 2023, and is developing Chamonix and permanent American Place.
Key financial metrics
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $59.4 | $44.4 | $109.5 | $85.8 |
| Operating income (loss) | $0.6 | $8.2 | $(6.4) | $13.5 |
| Net income (loss) | $(5.6) | $(4.4) | $(17.0) | $(4.2) |
| Loss per diluted share | $(0.16) | $(0.13) | $(0.49) | $(0.12) |
| Adjusted EBITDA | $10.5 | $12.1 | $20.6 | $20.5 |
| Cash from operations | Not stated by quarter | $1.7 | $4.2 | |
| Cash used in investing | Not stated by quarter | $(139.2) | $(65.0) |
- Q2 revenue rose 33.8%, principally from The Temporary, which contributed $20.3 million. Casino revenue increased 53.8%; food and beverage increased 25.1%. Other operations revenue fell 46.0%, partly reflecting sports-wagering and free-play timing.
- For the first half, revenue increased 27.6%, including $30.7 million from The Temporary. However, operating expenses grew 60.3%, reflecting the new property, higher depreciation and amortization, and $11.6 million of preopening costs. The company moved from operating income to an operating loss.
- Adjusted EBITDA fell 13.1% in Q2 and was nearly flat for the first half. Midwest & South same-store revenue declined 10.2% in Q2 and 4.6% in the first half; same-store Adjusted Segment EBITDA declined 42.5% and 23.8%, respectively. Management cited weaker casino results at existing properties, insurance costs, construction impacts, and free-play revenue timing.
- At June 30, cash and equivalents were $35.5 million and restricted cash was $78.1 million, for $113.6 million combined. Restricted funds are dedicated to Chamonix construction. Current assets were $127.5 million and current liabilities $66.4 million.
- Operating cash flow was $1.7 million versus $4.2 million in the prior-year half. Investing outflows included $89.3 million of capital expenditures and the $50.3 million Illinois gaming-license payment. Financing provided $59.9 million, including $40 million of additional notes and net $27 million of revolving borrowings.
- Debt included $450 million principal of 8.25% secured notes due 2028 and $27 million drawn on a $40 million revolving facility due 2026. Long-term debt, net of issuance costs, was $463.7 million. The company reported compliance with the revolver’s financial covenant.
Changes, outlook, and risks
- The Temporary’s opening boosted reported revenue, but it was not yet at full capacity. Management cited regulatory operating restrictions and dealer and other staffing constraints; it expected to expand table-game and restaurant operations as staffing allowed. A third restaurant and sportsbook were expected in the second half of 2023.
- Chamonix was scheduled to open December 26, 2023. The company expected to invest about $115 million in 2023 from construction funds and the remaining balance in 2024, excluding preopening costs and capitalized interest. Construction disruptions and adverse weather reduced West segment results.
- For American Place, the company expected approximately $75 million of 2023 investment, excluding preopening costs and capitalized interest, and said additional financing would likely be needed to complete the permanent facility. It believed available cash, revolver capacity, and operating cash flow would meet needs for the next 12 months, including construction; this is management’s assessment, not a guarantee.
- The Illinois sports-wagering agreement provides for payments beginning August 2023, irrespective of launch, with an annual minimum of $5 million, subject to contract terms. Launch remains contingent on customary regulatory approvals. A third Indiana skin is idle, and replacement or self-operation is uncertain.
- Potential Illinois gaming-license reconciliation payments are contingent: the amount is calculated three years after gaming begins based on 75% of adjusted gross receipts for the most lucrative trailing 12-month period, offset by fees already paid, and may be payable over six years.
- Litigation over the Waukegan casino licensing remains a risk. Although the IGB issued the owner’s license in June 2023, the Illinois Appellate Court on July 28, 2023 reversed dismissal of a related State Action. The company warned litigation could affect financing, licensing, or the permanent casino timeline and could contribute to a gap between The Temporary’s permitted operation and American Place opening.
- Other risks include construction delays, regulatory constraints, labor and supply-chain issues, competition, seasonality, and significant debt and capital requirements. Management provided no specific earnings guidance in the supplied filing text.
Important facts for investors to verify
- Progress, remaining cost, funding plan, and opening schedule for Chamonix and permanent American Place; assess the risk of further financing needs or delays.
- Whether The Temporary can expand capacity and staffing as planned, and whether new operations improve profitability.
- Performance at existing properties: same-store declines, West construction disruption, and competitive pressure at Rising Star.
- Unrestricted liquidity and construction-reserve availability, revolver headroom and covenant compliance, and the company’s ability to service debt.
- Developments in the Waukegan litigation, Illinois gaming approvals and possible reconciliation payment, and commencement and economics of contracted sports wagering.