Full House's income boosted by new marketing programs, expanded sports betting operations

Full House Resorts on Monday reported $3.5 million in net income in the fourth quarter of 2020, up from a net loss of $4.1 million reported in the same period the previous year. On a consolidated basis, revenues in Q4 were $38.3 million, versus $39.0 million in the prior-year period. 

The Las Vegas-based company operates properties in Northern Nevada and three other states. Adjusted EBITDA in the 2020 fourth quarter was $9.8 million, a significant YoY increase from $2.3 million. The company attributed this to new marketing programs and staffing improvements enacted in late 2019 and early 2020 at its properties.

Results for the fourth quarter of 2020 also include $0.6 million of revenue related to a full quarter of operations for two of the company’s six permitted sports wagering websites and approximately one week of operations from a third sports wagering website. The three sports wagering websites operating in Colorado and Indiana represent a minimum of $3.5 million of annualized contractual revenue. Full House expects the other three websites to begin operations shortly. When all six skins are in operation, the company estimates a contractual minimum of $7 million per year of sports gaming revenues.

For the full year, total revenues declined to $125.6 million in 2020 from $165.4 million in the prior year, reflecting approximately three months of pandemic-related closures for all of the company’s properties last spring. Net income for 2020 was $0.1 million, compared to a net loss of $5.8 million in the prior year. Despite several months of closure, Adjusted EBITDA in 2020 rose 23.3% to $19.7 million from $15.9 million in 2019.

“Much like our third quarter, we had a phenomenal fourth quarter,” said Daniel R. Lee, President and CEO of Full House Resorts. “The fourth quarter tends to be seasonally weaker than the third quarter, but our properties continued to perform extremely well adjusted for the seasonality. Adjusted EBITDA for the second half of 2020 was more than the total for all of 2019. We now have approximately eight months of successful ‘reset operations’ behind us. While capacity restrictions remain, as well as some additional costs related to the pandemic, so do the structural changes that we have made regarding our marketing and the ways we operate. We continue to believe that these results of the past several months are sustainable.”

“Many of the changes to our business operations were in the implementation process prior to the pandemic. For example, at both Bronco Billy’s and Rising Star, we replaced antiquated slot marketing systems late in 2019. With the improved systems, we are now able to provide a better customer experience, while the improved analytics of those systems have allowed us to eliminate unprofitable marketing offerings that cost us more than the incremental revenue they created.

Lewis Fanger, CFO of Full House Resorts stated: “We made significant strides with our balance sheet in recent weeks. In February 2021, we issued $310 million of new 8.25% senior secured notes, marking our debut with the high-yield debt markets." He added that the company's "new debt issuance included $180 million of proceeds dedicated to the construction of our Cripple Creek project, enabling us to now build that luxury casino hotel all at once, rather than in phases.”

In November, Colorado voters eliminated betting limits and permitted new table games. "To address this larger opportunity, we increased the size of our Cripple Creek hotel by 67% to 300 guest rooms, leaving other aspects of the project largely unchanged," Lee explained. "It is not an expansion of our existing Bronco Billy’s casino; it is an entirely new casino hotel, with its own unique name and personality, that happens to be located adjacent to, and behind, Bronco Billy’s. We look forward to disclosing that name and personality at a future date. With funding complete, we recently restarted construction of the project and plan to welcome guests to our new casino hotel beginning in the fourth quarter of 2022. Bronco Billy’s will remain open during construction and points earned in the Bronco Billy’s loyalty program will be redeemable at the new property, which will be connected to Bronco Billy’s.”

Furthermore, Fanger said in an earnings call that Full House has lost business from the 55-and-older crowd, but its absence has been “more than made up for” by younger customers in their 30s and 40s. He expects business to improve as vaccines roll out and more customers feel comfortable returning to casinos, and he said there are already positive signs of growth in early 2021.

Full House is also eyeing potential growth opportunities in Illinois and is one of three bidders for the opportunity to build a new casino in Waukegan, an area between Chicago and Milwaukee. The operator has proposed operating a temporary casino that would quickly generate tax revenues and jobs while accumulating funding for a permanent casino on the same site, American Place.

As for future opportunities in Nevada, Fanger said the company wasn’t interested in operating a casino in the Southern Nevada market. The company views the Strip as a difficult operating environment and believes the Las Vegas locals region would be too competitive with major players like Red Rock Resorts in the market.