Executive Summary / Key Takeaways

• American Place Drives the Thesis: The temporary facility in Illinois is on track to generate a $50 million EBITDA run rate by 2027, with the permanent facility poised to double that to $100 million, representing a potential tripling of consolidated EBITDA from current levels.

• Chamonix Turnaround Gains Traction: New management has slashed costs by $5 million annually while growing table games revenue 53% year-over-year, positioning the property to flip from negative $4.8 million trailing EBITDA to positive $10-20 million, a $15-25 million swing for the entire company.

• High Leverage Creates Asymmetric Risk/Reward: With $450 million in debt against a $111 million market cap, equity holders face significant dilution risk if operations falter, but successful execution could drive equity value multiples higher as debt becomes comfortably covered by growing EBITDA.

• Financing Hurdle for Permanent Facility: The $302 million permanent American Place project requires external financing that management plans to secure in debt markets; any delay or unfavorable terms could compress the equity upside timeline and increase interest expense burden.

• Multiple Operational Levers in Play: Beyond American Place and Chamonix, Silver Slipper is targeting mid-teens EBITDA (up from $12 million) through cost savings, while Rising Star's potential license relocation to Indianapolis or Fort Wayne represents a free option on a major value creation event.

Setting the Scene: A Regional Casino Operator in Transformation

Full House Resorts, founded in 1987 as a Delaware corporation, operates a portfolio of six casinos across Mississippi, Indiana, Illinois, Colorado, and Nevada. Unlike national operators that compete head-to-head in saturated markets, FLL has carved out a niche in underserved geographies where it often holds dominant local positions. The company generates revenue through slot machines, table games, hotel accommodations, food and beverage, and contracted sports wagering licenses.

The current investment narrative centers on a multi-year transformation that began in earnest in 2021 with major financing initiatives. The company issued $310 million in 8.25% Senior Secured Notes to fund construction of the Chamonix Casino Hotel in Cripple Creek, Colorado, and later added $100 million for the temporary American Place facility in Waukegan, Illinois. These capital-intensive projects have created a highly leveraged balance sheet, but they also represent the foundation for potential EBITDA growth that could fundamentally re-rate the equity.

American Place opened in February 2023 as a temporary facility, and Chamonix completed its phased opening in October 2024. The company has simultaneously been pruning non-core assets, completing the sale of Stockman's Casino in April 2025. This portfolio refinement, combined with significant management changes across properties in 2025, signals a strategic focus on operational excellence and revenue optimization at the assets that matter most.

Strategic Differentiation: Local Monopolies and Operational Turnaround Capability

Full House Resorts' competitive moat rests on two pillars: regulatory-protected local monopolies and a demonstrated ability to execute operational turnarounds. In Lake County, Illinois, American Place serves as the only full-service casino for over 700,000 residents, with the closest competitor located in Rockford serving a smaller, less affluent population base. This geographic exclusivity provides pricing power and customer loyalty that larger operators cannot easily replicate in their fragmented urban markets.

The Chamonix property exemplifies the turnaround capability. When the new management team arrived in April 2025, they inherited a property losing $4.8 million on a trailing twelve-month basis. By Q3 2025, they had reduced full-time equivalent staff by 13% (from 373 to 325) while growing revenues over 7%. Table games revenue surged 53% year-over-year, and the property achieved positive Adjusted Property EBITDA of $2.1 million in Q3. This $2.8 million improvement from the prior-year period demonstrates that management can rapidly extract value from underperforming assets through disciplined cost control and targeted revenue initiatives.

The sports wagering segment, while declining due to industry consolidation around DraftKings and FanDuel , provides stable contracted revenue with minimal capital requirements. The Indiana skin agreement extension through December 2031, with a $1.5 million prepayment, ensures a $5.6 million annual run rate that covers a meaningful portion of corporate overhead. This segment functions as a cash-generating annuity that requires no reinvestment, freeing capital for higher-return projects like American Place and Chamonix.

Financial Performance: Evidence of Operational Gains

Consolidated revenues for the nine months ended September 30, 2025, grew 3.6% to $227.9 million, a modest headline figure that masks significant underlying momentum. The Midwest South segment, which includes American Place, Silver Slipper, and Rising Star, delivered 5.3% revenue growth and 6.3% Adjusted Segment EBITDA growth. More importantly, American Place alone achieved 14% revenue growth in Q3 2025, reaching a record $32 million quarterly revenue run rate.

The West segment's 167.9% Adjusted Segment EBITDA growth in Q3 2025 to $3.2 million provides the clearest evidence of the Chamonix turnaround. This occurred despite a 7.2% revenue decline for the segment, driven by the Stockman's sale and Grand Lodge renovation disruptions. The cost reduction program at Chamonix delivered $1.2 million in sequential expense savings from Q1 to Q2 2025, implying nearly $5 million in annual synergies. Management has identified additional savings from unifying the TITO system across Cripple Creek licenses and consolidating casino cages, expected to save approximately $700,000 annually.

Corporate expenses decreased $0.5 million year-to-date through disciplined cost management, while interest expense remained flat at $11.1 million quarterly despite the high debt load. The company maintains $30.9 million in cash and estimates day-to-day operations require $10-15 million, providing adequate liquidity for near-term needs. However, the $53.5 million interest-free reconciliation payment to the Illinois Gaming Board, payable over six years with a discounted present value of $44.6 million, represents a future cash obligation that must be factored into financing plans.

Outlook and Management Guidance: Path to $100 Million EBITDA

Management has provided unusually specific and confident guidance that frames the investment opportunity. For American Place, they expect 20% revenue growth for full-year 2025, with July 2025 revenues up approximately 30%. The temporary facility is tracking toward a $50 million EBITDA run rate by the time the permanent facility opens, with the permanent facility projected to generate $100 million in EBITDA based on its larger footprint (40% more slots, 90% more table games) and superior location.

The Illinois Supreme Court's early 2025 ruling in favor of the gaming commission removed the final legal obstacle to the permanent facility. Waukegan City Council's unanimous site approval and the refined $302 million budget (down from $325 million) demonstrate project maturity. Management intends to break ground in the second half of 2025 for an August 2027 opening, with financing through debt markets. Daniel Lee emphasized that while August 2027 is the practical deadline, extensions are obtainable through legislative process, reducing execution risk.

At Chamonix, management expects comfortable profitability in 2026, with the third quarter historically representing 40-50% of annual earnings due to seasonal patterns. The property's trailing twelve-month EBITDA was negative $4.8 million, but management believes flipping this to positive $10-20 million represents a $15-25 million swing for the company. This would add 50-80% to current consolidated EBITDA levels. The comparison to Monarch Casino (MCRI), which generates over $300 million annually from a similar facility, suggests the long-term potential could exceed $20 million by 2030.

Silver Slipper is targeting mid-teens EBITDA for 2025, up from $12 million in 2024, through over $2 million in annualized cost savings and improved promotional efficiency. While not a major growth driver, this represents incremental EBITDA improvement that compounds the impact from larger properties.

Risks and Asymmetries: What Could Break the Thesis

The most material risk is execution failure at American Place. If the permanent facility's $302 million construction budget escalates or financing costs prove prohibitive, the project could be delayed beyond August 2027, requiring legislative extensions that create uncertainty. Management's confidence in securing extensions is based on the company's $25 million annual state tax payments and 500+ employees, but political risk remains. Any delay would push back the $100 million EBITDA target and extend the period of elevated leverage.

The debt burden itself presents asymmetric risk. With $450 million in 8.25% notes and $30 million drawn on the credit facility, annual interest expense exceeds $40 million. While American Place's operations alone currently cover this interest expense, as management stated, any operational setback at the property would quickly strain cash flows. The debt-to-equity ratio reflects a highly leveraged capital structure with minimal equity cushion, meaning equity holders face near-total wipeout risk in a downside scenario but leveraged upside in success.

Chamonix's turnaround, while promising, remains early-stage. The property achieved positive EBITDA in Q3 2025, but management acknowledges the fourth and first quarters are seasonally weak. If the property reverts to losses in Q4 2025 and Q1 2026, it would dampen the expected $15-25 million EBITDA swing. The competitive environment in Cripple Creek also bears watching—while management claims negligible impact on competitors, Century Casinos closed its table games, suggesting market share gains may be harder to sustain.

Rising Star's potential license relocation represents a free option, but the timeline is uncertain. The state legislature passed a study bill in early 2025, but actual relocation would require additional legislative action and local approvals. Daniel Lee noted the economics of relocating far exceed the current sale value, but this remains a speculative upside rather than a base case driver.

Competitive Context: Small Operator in Large Markets

Full House Resorts competes against significantly larger regional operators. Boyd Gaming generates over $3.7 billion annually with mid-20s EBITDA margins and $800+ million in operating cash flow, while Penn Entertainment operates 43 properties with $500-600 million in annual cash flow. These competitors benefit from scale advantages in marketing, player loyalty programs, and supplier negotiations that FLL cannot replicate.

However, FLL's niche strategy turns this scale disadvantage into localized strength. In Lake County, Illinois, American Place faces no direct competitor within a 30-minute drive of 900,000 residents, compared to Hard Rock Rockford serving 400,000 people. The median household income in American Place's catchment area is 52% higher than Rockford's, supporting superior revenue per customer. This local monopoly allows FLL to achieve 30% EBITDA margins at the temporary facility, matching or exceeding larger competitors' margins despite its small scale.

In Colorado, Chamonix competes directly with Century Casinos (CNTY) and Bronco Billy's, but its positioning as the first high-quality gaming product in Cripple Creek creates differentiation. Management estimates only 12-15% of Colorado Springs residents visited Cripple Creek casinos in the past year, indicating massive untapped market penetration potential. The Denver market contributes 30% of guests, suggesting geographic expansion opportunities that larger operators have overlooked.

The sports wagering segment faces industry-wide consolidation around DraftKings (DKNG) and FanDuel (PDYPY), but FLL's partnership with Circa provides a stable niche revenue stream. While PENN and BALY (BALY) invest heavily in omnichannel integration, FLL's asset-light approach generates 94.5% EBITDA margins from this segment with minimal capital requirements, demonstrating capital efficiency where it matters most.

Valuation Context: Leveraged Equity at an Inflection Point

Trading at $3.09 per share with a $111.25 million market capitalization, Full House Resorts presents a leveraged equity opportunity where small changes in EBITDA drive large equity value swings. The enterprise value of $612.53 million reflects $450 million in debt and $30 million in credit facility borrowings against $30.9 million in cash.

Valuation metrics must be interpreted through the lens of transformation. The EV/Revenue multiple of 2.04 and Price/Sales ratio of 0.37 appear low relative to regional gaming peers, but this reflects the company's negative 13.38% profit margin and negative 121.54% return on equity. These metrics will remain depressed until American Place and Chamonix deliver sustained profitability.

The EV/EBITDA ratio of 13.47 is more meaningful, though current EBITDA is suppressed by Chamonix's ramp-up and corporate overhead. If management executes on its $100 million American Place target and achieves $10-20 million at Chamonix, consolidated EBITDA could reach $80-90 million, implying an EV/EBITDA multiple of 7-8x on a forward basis—well below Boyd Gaming's (BYD) 7.38x and Penn Entertainment's (PENN) 18.92x, suggesting potential re-rating.

The balance sheet presents both risk and opportunity. The current ratio of 0.68 and quick ratio of 0.58 indicate tight liquidity, though management believes $10-15 million is sufficient for operations. Debt-to-equity reflects the leveraged capital structure, but most debt is fixed-rate, protecting against rate hikes. The key variable is whether growing EBITDA can service the $40+ million annual interest burden while funding the $302 million permanent facility.

Management's conviction is evident in Daniel Lee's comment that the stock at $3.09 is "astounding" and his internal model suggesting $20-45 per share under conservative assumptions. While such statements require skepticism, they align with the operational momentum visible in Q3 2025 results. The company has explicitly ruled out equity issuance at current prices, forcing it to execute operationally rather than dilute shareholders.

Conclusion: Execution at Scale Determines Outcome

Full House Resorts sits at an inflection point where operational improvements at Chamonix and ramping momentum at American Place could generate $50-70 million in incremental EBITDA over the next two years. This would transform a highly leveraged, marginally profitable company into a cash-generating regional operator with a clear path to deleveraging and equity value creation.

The investment thesis hinges on three execution milestones: securing favorable financing for the $302 million permanent American Place facility, sustaining Chamonix's profitability through seasonally weak quarters, and maintaining Silver Slipper's cost discipline. Success on these fronts would validate management's $100 million American Place EBITDA target and support debt refinancing at lower rates in 2028.

The asymmetric risk/reward profile is stark. Downside scenarios include construction delays, financing difficulties, or operational setbacks that could strain liquidity and force distressed asset sales. Upside scenarios see the permanent American Place opening on time, Chamonix reaching $20+ million EBITDA, and Rising Star's license relocation creating additional value. In this outcome, equity holders could see 3-5x returns as leverage works in their favor.

For investors, the critical monitoring points are American Place's Q4 2025 and Q1 2026 performance for evidence of sustained momentum, Chamonix's ability to remain profitable through winter months, and management's progress on permanent facility financing. The next 12 months will determine whether this leveraged transformation story delivers on its potential or succumbs to the weight of its debt burden.