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US – Silver Slipper reports best ever year but Full House focus remains on health

By - 22 March 2020

Having shut its Rising Star Casino Resort by order of the Indiana Gaming Commission due to the COVID-19 outbreak, Full House Resorts fourth quarter and full year results remained focused on health despite Silver Slipper’s enjoying its best ever year in Mississippi.

The company has also temporarily paused construction of its new parking garage at Bronco Billy’s Casino & Hotel in Cripple Creek, Colorado, which is still early in the construction phase.

“These are challenging times. Our primary concern has always been the health and well-being of our guests and employees,” said Daniel R. Lee, President and Chief Executive Officer of Full House Resorts. “We know of no instances of COVID-19 at any of our resorts. However, we understand the magnitude of this public health emergency and the necessity to take certain actions. We look forward to welcoming back all of our guests and employees as soon as possible.”

Mr. Lee added: “As of December 31, 2019, the company had $29.9m in cash and equivalents. Approximately $15m of this amount was designated for construction of the parking garage and approximately $10m is used in daily operations. In these uncertain times, the company chose to pause construction of its parking garage out of an abundance of caution. We intend to resume construction if and when conditions warrant.”

Net revenues in the fourth quarter of 2019 decreased 4.1 per cent to $39m from $40.7m in the prior-year period, reflecting casino downtime during the installation of new slot systems at Bronco Billy’s and Rising Star, as well as a temporary increase in marketing expenses at Rising Star. On December 30, 2019, one of the company’s three permitted mobile “skins” commenced operations in Indiana, thereby beginning the annual revenue guarantee related to that particular skin.

For the full year, net revenues increased 0.9 per cent to $165.4m, reflecting incremental costs related to operating the Christmas Casino at Bronco Billy’s, in addition to the items mentioned above. Silver Slipper’s operations continued to improve to its best year ever.

“Late in the fourth quarter, the first of the sports wagering ‘skins’ associated with our Rising Star gaming license commenced operations in Indiana,” said Daniel R. Lee, President and Chief Executive Officer of Full House Resorts. “With that launch, the first of our annual revenue guarantees also began, though it contributed to earnings for only the last two days of the quarter. We expect the annual revenue guarantees for our two other permitted sports wagering ‘skins’ to commence operations in Indiana in the second quarter of 2020.

“Additionally, the State of Colorado continues to progress swiftly with their pending launch of sports betting. Similar to Indiana, we are permitted three sports wagering ‘skins’ in Colorado, one ‘skin’ for each of the three Colorado gaming licenses that we hold. When all of our sports wagering ‘skins’ in both Indiana and Colorado have commenced operations – which we believe will be by the third quarter of this year – our sports wagering revenue guarantees should total at least $7.0 million per year. As we have previously noted, our sports wagering contracts have ten-year minimum terms, and all three of the contracting companies are significant operators in the gaming and/or sports book industry. We believe that our sports wagering agreements are transformational for our company.”

Mr. Lee added: “Regarding existing operations, the Silver Slipper achieved new record financial results despite adverse hold in the fourth quarter. Net revenues for 2019 increased 5.6 per cent to a record $73.2m and Adjusted Property EBITDA rose to $13.2m, reflecting investments over the past several years and the launch of on-site sports wagering in 2018. Our Northern Nevada operations were also affected by adverse hold in the fourth quarter, as well as a temporary decline in visitor activity at the nearby Naval base.

“At both our Bronco Billy’s and Rising Star properties, our efforts to upgrade those properties temporarily affected results. We installed new slot systems at both these properties during the fourth quarter, resulting in downtime at both casinos. The downtime was significantly longer at Rising Star, with nearly half of the property’s slot machines offline for several weeks in November. With the new slot systems now in place, we believe that we will be able to compete and market more effectively. At Bronco Billy’s, we launched the Christmas Casino in late 2018 in a building located near – but not adjoining – the existing Bronco Billy’s facility. We did this as part of a strategic decision to control an important corner in Cripple Creek. The opening of the Christmas Casino, however, resulted in more than $1 million of incremental expenses during the year without a sufficient increase in revenues to offset it. We are in the process of evaluating ways to reduce the cost of our Christmas Casino operations while preserving our strategic goals, including the possibility of using the space for other Christmas-related concepts. In total, those events at Bronco Billy’s and Rising Star – along with a temporary mass marketing campaign at Rising Star – adversely affected Adjusted EBITDA by an estimated $3m in 2019.

“Lastly,” concluded Mr. Lee, “during the fourth quarter, we advanced our proposal for a new gaming resort destination in Waukegan, Illinois, located north of Chicago. Our American Place proposal was one of three proposals advanced by the City of Waukegan to the Illinois Gaming Board. Over the coming months, we expect that the Illinois Gaming Board will evaluate each of the three proposals and schedule public presentations. We look forward to presenting what we believe is the most unique and beneficial casino destination for both the City of Waukegan and the State of Illinois.”

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