Full House Resorts, Inc. (FLL) is a diversified gaming and hospitality company that owns, develops, and operates casino and related facilities across the United States. The company's portfolio includes properties in various regions, including the Midwest, South, and West, as well as contracted sports wagering operations. With a focus on strategic investments and a commitment to providing exceptional guest experiences, Full House Resorts has established itself as a player to watch in the dynamic casino industry.
Business Overview and History Incorporated in Delaware in 1987, Full House Resorts has a rich history of navigating the evolving gaming landscape. The company owns, leases, operates, develops, manages, and invests in casinos and related hospitality and entertainment facilities. Currently, Full House operates seven casinos - six on real estate that it owns or leases, and one located within a hotel owned by a third party. These properties are strategically positioned across the Midwest, South, and West regions of the United States.
In 2004, the company's subsidiary, Silver Slipper Casino Venture, LLC, entered into a land lease for the property on which the Silver Slipper Casino and Hotel is situated in Hancock County, Mississippi. This property has since become one of Full House's core casino assets, contributing significantly to the company's revenue stream.
Full House Resorts has faced various challenges throughout its history, including the impact of the COVID-19 pandemic in 2020, which forced temporary closures of its casino properties. However, the company demonstrated resilience by successfully navigating this difficult period and resuming operations as restrictions eased.
In 2021, Full House undertook a significant refinancing initiative, issuing $310 million in senior secured notes to refinance its prior debt and repurchase outstanding warrants. This strategic financial move provided the company with additional capital to fund growth initiatives, including the construction of new casino properties.
Over its 35-year history, Full House has achieved notable milestones, including the successful development and opening of new casino properties. The company's diverse portfolio of casino operations across multiple regions has provided it with a level of diversification and resilience in the face of market fluctuations and regional economic challenges.
One of the company's flagship properties is the Silver Slipper Casino and Hotel, located in Hancock County, Mississippi, near New Orleans. Acquired in 2012, the Silver Slipper has undergone significant renovations and expansions, transforming it into a premier gaming and hospitality destination. In 2023, the company opened the temporary American Place facility in Waukegan, Illinois, which has since become a significant revenue contributor, generating $7.7 million in EBITDA during the third quarter of 2024, a 13.3% increase over the prior year period.
In addition to its casino operations, Full House Resorts has also invested in contracted sports wagering, with active skins in Colorado, Indiana, and Illinois. These partnerships have provided the company with diversified revenue streams and exposure to the rapidly growing sports betting market.
Financial Performance and Ratios Full House Resorts' financial performance has been mixed in recent years, with the company experiencing both successes and challenges. For the fiscal year 2023, the company reported revenues of $241.06 million, with a net loss of $24.90 million. Operating cash flow for 2023 stood at $22.34 million, while free cash flow was negative at $176.77 million, reflecting significant capital expenditures related to ongoing development projects.
As of the third quarter of 2024, the company reported revenues of $75.7 million, representing a 5.8% increase compared to the prior-year period. However, net loss for the quarter stood at $8.5 million, reflecting the ongoing investments and ramp-up of new properties. Operating cash flow for Q3 2024 was negative $6.72 million, with free cash flow at negative $17.40 million.
The company's financial ratios provide further insight into its performance. As of the latest reporting period, Full House Resorts had a current ratio of 0.69 and a quick ratio of 0.66, indicating a moderately healthy liquidity position. The debt-to-equity ratio stood at 10.18, suggesting a relatively high level of leverage, which the company has been actively managing through debt refinancing and strategic capital allocation.
Liquidity and Solvency Full House Resorts has maintained a focus on managing its liquidity and solvency, particularly as it undertakes major development projects. As of September 30, 2024, the company had $33.6 million in cash and equivalents, including $7.7 million in restricted cash dedicated to the completion of the Chamonix Casino Hotel project. The company also has access to a $40 million senior secured revolving credit facility, of which $27 million was outstanding as of September 30, 2024.
The company's long-term debt, primarily consisting of the $450 million in 8.25% Senior Secured Notes due 2028, has been a key focus area. Full House Resorts has been proactive in managing its debt obligations, including refinancing and amending its revolving credit facility to support its growth initiatives.
Operational Highlights and Challenges Full House Resorts operates in three primary business segments: Midwest/South, West, and Contracted Sports Wagering. The Midwest/South segment, which includes the Silver Slipper Casino and Hotel, Rising Star Casino Resort, and the temporary American Place facility, contributed $54.51 million in revenues and $10.25 million in Adjusted Segment EBITDA for the third quarter of 2024. The opening of the temporary American Place facility in early 2023 was a key driver of year-over-year revenue and EBITDA increases in this segment.
The West segment, which includes Bronco Billy's Casino, the newly opened Chamonix Casino Hotel, Grand Lodge Casino, and Stockmans Casino, saw a 74.9% increase in revenues for Q3 2024, primarily due to the phased opening of Chamonix throughout the first quarter of 2024. However, Adjusted Segment EBITDA declined by $1.1 million as the new Chamonix resort ramps up operations and incurs elevated expenses related to training staff and increased marketing.
The Contracted Sports Wagering segment experienced a decline in revenues and Adjusted Segment EBITDA, primarily due to the termination of certain sports wagering agreements in the prior year periods. However, the third quarter of 2024 benefited from the reversal of certain credit loss provisions related to settlement payments from a contracted sports wagering operator.
The third quarter of 2024 was a mixed bag for Full House Resorts, with both successes and challenges across its portfolio. The company's American Place property in Waukegan, Illinois, continued to perform well, with a 17.6% increase in revenues and a 13.3% improvement in EBITDA compared to the prior-year period. This was driven by the ongoing ramp-up of operations and the property's strong market positioning.
However, the company's Colorado operations faced some headwinds during the quarter. The EBITDA for the West segment declined from $2.2 million in the third quarter of 2023 to $1.8 million in the third quarter of 2024. This was partly due to the ongoing ramp-up of Chamonix, as well as weather-related challenges and disruptions to the Grand Lodge Casino's group and meeting business.
The Silver Slipper Casino and Hotel in Mississippi also experienced a decline in EBITDA, from $3.6 million in the third quarter of 2023 to $2.6 million in the third quarter of 2024. The company attributed this to an active hurricane season in the region, which impacted customer visitation.
Amid these challenges, Full House Resorts has taken proactive steps to strengthen its operations, including the appointment of new leadership at the Rising Star Casino Resort in Indiana and the Silver Slipper Casino and Hotel. The company is also exploring the potential relocation of the Rising Star Casino Resort to the Fort Wayne, Indiana area, which it believes could significantly enhance the property's financial performance.
Outlook and Growth Initiatives Looking ahead, Full House Resorts remains focused on its strategic growth initiatives, which include the completion and ramp-up of the Chamonix Casino Hotel, the ongoing development of the permanent American Place facility, and the potential relocation of the Rising Star Casino Resort.
The company's management is confident in the long-term potential of the Chamonix Casino Hotel, noting that the property's high-end amenities and integrated design with the existing Bronco Billy's Casino should drive increased visitation and market share in the Colorado Springs region. The company is expecting steady revenue growth for the next 2-3 years at Chamonix that exceeds expense growth, which should result in higher margins. Specifically, management hopes to reach EBITDA of around $50 million on $150 million in revenue at Chamonix, which would be about a 33% EBITDA margin.
For the Rising Star property, the company is hoping to relocate it to Fort Wayne, Indiana, which could result in the casino making $30-40 million per year in EBITDA, up from the current $4-5 million. This potential relocation represents a significant opportunity for Full House Resorts to improve the property's financial performance by tapping into a larger and more accessible population center.
The permanent American Place facility is expected to further strengthen the company's presence in the Waukegan, Illinois market, building on the success of the temporary facility. While no specific guidance was provided for the company's other properties like Silver Slipper and Grand Lodge, management expects continued stable performance from these legacy assets.
Risks and Challenges While Full House Resorts has demonstrated its ability to navigate the competitive casino industry, the company is not without its risks and challenges. The ongoing development and ramp-up of new properties, such as Chamonix and the permanent American Place facility, require substantial capital investments and present execution risks.
Furthermore, the company's reliance on regional markets, where it faces competition from larger, well-established players, could impact its ability to maintain market share and profitability. The potential relocation of the Rising Star Casino Resort also carries regulatory and legislative risks, as it requires approval from the state of Indiana.
The casino and gaming industry as a whole is also subject to various macroeconomic and regulatory factors, such as changes in consumer spending patterns, the legalization of sports betting, and evolving gaming regulations. Full House Resorts must continue to adapt and innovate to stay ahead of these industry shifts.
Conclusion Full House Resorts has demonstrated its ability to navigate the complex and competitive casino industry, leveraging strategic investments and a focus on guest experiences to drive growth. While the company has faced some challenges in recent quarters, its diversified portfolio, commitment to operational excellence, and exploration of new growth opportunities position it well for the future.
As Full House Resorts continues to execute on its strategic initiatives, investors will be closely watching the company's ability to successfully ramp up new properties, manage its debt obligations, and capitalize on emerging industry trends. The company's focus on expanding its presence in key markets, such as Waukegan, Illinois, and potentially Fort Wayne, Indiana, could provide significant growth opportunities in the coming years.
With a strong track record of innovation and a proven management team, Full House Resorts remains a compelling investment opportunity in the dynamic gaming and hospitality sector. However, investors should carefully consider the company's high debt levels, ongoing capital expenditures, and the competitive nature of the regional casino market when evaluating the stock. As Full House Resorts continues to execute its growth strategy and optimize its operations, it has the potential to deliver long-term value for shareholders in the evolving casino and gaming industry.