Business Overview and History
Full House Resorts Inc (FLL) is a diversified gaming and hospitality company that owns, leases, operates, develops, and invests in casino, hospitality, and entertainment facilities across the United States. The company's portfolio includes properties in Illinois, Indiana, Colorado, Nevada, and Mississippi, catering to a wide range of customer preferences and regional markets.
Full House Resorts was founded in 1987 as a Delaware corporation and has since grown to become a respected player in the gaming and hospitality industry. The company currently 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 located across the Midwest, South, and West regions of the United States.
A significant milestone in the company's history occurred in 2004 when its subsidiary, Silver Slipper Casino Venture, LLC, entered into a land lease for approximately 31 acres of marshlands and a seven-acre parcel on which the Silver Slipper Casino and Hotel is situated. This move provided Full House Resorts with a long-term foothold in the Mississippi Gulf Coast market.
In 2021, the company made a strategic financial move by issuing $310 million of 8.25% Senior Secured Notes due 2028. This initiative allowed Full House Resorts to refinance its prior notes and repurchase all of its outstanding warrants, providing the company with increased financial flexibility to undertake new development projects.
The company has faced its share of challenges over the years. In 2020, the Silver Slipper Casino suffered damage from a hurricane, requiring the company to navigate the complex insurance claim process. Additionally, the COVID-19 pandemic in 2020 and 2021 significantly disrupted operations across the company's entire portfolio of properties, testing its resilience and adaptability.
Despite these setbacks, Full House Resorts has demonstrated a strong commitment to growth and expansion. The company has undertaken major development projects, such as the construction of the Chamonix Casino Hotel in Colorado, which began its phased opening in late 2023. This project represents a significant investment in expanding the company's presence in the Colorado market.
Financial Performance and Ratios
Full House Resorts' financial performance has been a mix of growth and operational challenges in recent quarters. While the company has reported impressive revenue growth, driven primarily by the ramp-up of its American Place facility, it has also faced headwinds that have impacted its bottom line.
As of the most recent 10-Q filing in November 2024, Full House Resorts reported quarterly revenues of $75.69 million, a 5.8% increase from the prior-year period. However, the company also recorded a net loss of $8.47 million for the quarter, highlighting the operational challenges it has encountered. The increases in revenue were primarily due to a full nine months of operations at the American Place casino, which opened in February 2023. The declines in net income, operating cash flow (OCF), and free cash flow (FCF) were primarily due to higher operating expenses related to the openings of American Place and Chamonix Casino Hotel.
Key financial ratios for Full House Resorts paint a complex picture. The company's current ratio stands at 0.69, indicating a relatively low level of liquidity, while its quick ratio of 0.66 suggests potential difficulties in meeting short-term obligations. The company's debt-to-equity ratio of 10.18 reflects a highly leveraged capital structure, which could pose risks if not managed prudently.
Liquidity
Full House Resorts' liquidity position remains a concern, as evidenced by its low current and quick ratios. The company's ability to meet short-term obligations and fund ongoing operations may be constrained, potentially limiting its flexibility in responding to market challenges or pursuing growth opportunities. Management will need to carefully manage cash flow and explore options to improve liquidity in the coming quarters.
As of September 30, 2024, the company had $25.94 million in cash and equivalents. Additionally, Full House Resorts has a $40 million senior secured revolving credit facility, of which $27 million was outstanding as of the same date. This available credit line provides some additional financial flexibility, but the company will need to monitor its use of leverage carefully.
Operational Highlights and Challenges
The opening and ramp-up of the American Place facility in Waukegan, Illinois, has been a significant operational highlight for Full House Resorts. The property has consistently reported strong revenue growth, with a 27.5% increase in the fourth quarter of 2024 and a 42.4% rise for the full year. This performance has been driven by the property's growing customer base and the company's efforts to optimize its marketing and operational strategies.
However, the company's Chamonix Casino Hotel in Cripple Creek, Colorado, has faced operational challenges, with the property reporting a loss in the fourth quarter of 2024. Full House Resorts has attributed these challenges to a need for improved staffing, operational efficiency, and marketing initiatives. To address these issues, the company has made significant management changes, including the appointment of a new general manager with extensive experience in the Colorado gaming market.
Additionally, the company's Rising Star Casino Resort in Indiana has continued to face headwinds, with the property's revenues and profitability declining over the years due to increased competition from neighboring states. Full House Resorts has been actively pursuing legislative efforts to relocate the Rising Star license to a more favorable market, such as the city of Indianapolis, which could potentially revitalize the property's performance.
Segment Performance
Full House Resorts operates through four reportable segments: Midwest, South, West, and Contracted Sports Wagering.
The Midwest segment, which includes the Silver Slipper Casino and Hotel, Rising Star Casino Resort, and American Place, generated $54.51 million in total revenues for the three months ended September 30, 2024, up 3.7% from the prior-year period. Adjusted Segment EBITDA was $10.25 million, down 12.8% year-over-year. The increase in revenues was primarily due to the continued ramp-up of operations at American Place.
The South segment, consisting of the Silver Slipper Casino and Hotel, reported total revenues of $19.39 million for the same period, up 74.9% compared to the prior-year period. Adjusted Segment EBITDA was $1.20 million, down 48.1% year-over-year. The increase in revenues was primarily driven by the phased opening of the new Chamonix Casino Hotel.
The West segment, which includes Bronco Billy's Casino, Chamonix Casino Hotel, Grand Lodge Casino, and Stockmans Casino, generated $19.39 million in total revenues, a 74.9% increase from the prior-year period. Adjusted Segment EBITDA was $1.20 million, down 48.1% year-over-year. The revenue growth was primarily driven by the phased opening of Chamonix.
The Contracted Sports Wagering segment generated $1.79 million in total revenues, a 77.4% decrease from the prior-year period. Adjusted Segment EBITDA was $2.04 million, down 74.1% year-over-year. The decline was primarily due to the acceleration of deferred revenues in the prior-year period.
Guidance and Outlook
Full House Resorts has not provided specific financial guidance for the upcoming fiscal year. However, the company has expressed confidence in its ability to navigate the operational challenges it has faced and continue its growth trajectory, particularly at the American Place facility.
For American Place, the company expects to continue growing revenues, with an expectation of reaching $200 million in revenue and close to $100 million in EBITDA once the permanent facility is opened. The company plans to start construction on the permanent American Place facility later this year, with a target opening date of August 2027. The permanent facility is expected to cost around $325 million, which the company hopes to finance entirely through debt without issuing new equity.
Regarding Chamonix, Full House Resorts is targeting to reach $10-15 million in EBITDA this year, as they make various operational improvements and changes to the management team. The company is actively working to address the issues at the Chamonix Casino Hotel, including the implementation of new strategies and the integration of experienced personnel, with the goal of improving the property's performance in the coming quarters.
For the Rising Star Casino Resort, Full House Resorts remains optimistic about the potential for legislative approval to relocate the property to a more favorable market, such as Indianapolis. If successful, this move could unlock significant growth opportunities and enhance the company's overall financial performance.
Industry Outlook
The gambling industry is expected to grow at a compound annual growth rate (CAGR) of 8.1% from 2021 to 2025, reaching $618.69 billion globally in 2025. This growth trajectory bodes well for Full House Resorts as it continues to expand and optimize its portfolio of properties. Additionally, the travel and tourism industry is projected to grow at a CAGR of 3.9% over the same period, which could positively impact visitation to the company's casino and hospitality facilities.
Conclusion
Full House Resorts Inc (FLL) is a multi-faceted gaming and hospitality company that has navigated a mix of growth and operational challenges in recent quarters. The successful ramp-up of the American Place facility in Illinois has been a significant highlight, while the company's Chamonix Casino Hotel and Rising Star Casino Resort have faced headwinds that require strategic interventions.
As Full House Resorts continues to execute on its growth initiatives and address operational issues, investors will be closely monitoring the company's ability to capitalize on its diversified portfolio and deliver consistent financial performance. The company's management has expressed confidence in its ability to overcome the current challenges and position the business for long-term success in the dynamic gaming and hospitality industry.
With ambitious plans for the permanent American Place facility, ongoing improvements at Chamonix, and potential legislative developments for Rising Star, Full House Resorts is poised for potential growth in the coming years. However, the company will need to carefully manage its liquidity and leverage while navigating the operational challenges inherent in expanding and optimizing its portfolio of properties.