Lewis Fanger – Senior Vice President and Chief Financial Officer Daniel Lee – President and Chief Executive Officer.

Jim Marrone – Singular Research.

Good day, and welcome to the Full House Resorts first quarter earnings call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Lewis Fanger, Chief Financial Officer of Full House Resorts. You may begin..

Thank you, and good morning, everyone. Welcome to our first quarter earnings call. As always, before we begin, we remind you that today’s conference call may contain forward-looking statements that we’re making under the safe harbor provision of federal securities laws.

I’d also like to remind you that the company’s actual results could differ materially from the anticipated results from these forward-looking statements. Please see today’s press release under the caption Forward-Looking Statements for the discussion of risks that may affect our results.

Also, we may make reference to non-GAAP measures such as adjusted EBITDA. For a reconciliation of those measures, please see our website as well as today’s press release and the various other press releases that we issued.

And lastly, we’re also broadcasting this conference call at fullhouseresorts.com, where you can find today’s earnings release as well as our SEC filings. And so with that said, we can dig into it. The quarter, as you guys saw in the release, wasn’t a good one by any measure, given the weather issues that you saw throughout the company.

If you start with Lake Tahoe, there was just a tremendous lack of snow in the months of January and February. That all went the other way in March, where we had tremendous snowfall that almost brought things back to normal.

But there wasn’t enough to snow in that last month to fill the ski resorts and to bring in the volumes that we needed to offset what we saw on January and February. Or at Rising Star. More of the same story. We had flooding that closed the casino for several days over there. We had 21 heavy snowfall days as well. A rough quarter there as well.

Silver Slipper. It’s a part of the country where they’re not used to having subfreezing temperature as consistently as they did in the first quarter of this year, and that led to icy roads. There was some snowfall, and again, affected that property for the quarter. Bronco Billy’s.

Looking at that property, tends to rely pretty heavily in this first quarter on a 2-week festival called the Ice Festival. And for the first week of that, there was actually, again, too much ice, of all things. And so if you look at the visitation over that weekend, it was – over that first weekend, it was down by north of 15%.

It’s a festival that literally pulls in north of 100,000 people but – that had some challenging weather, too. Stockman’s actually had a pretty tremendous quarter, and we’re quarter, and we’re excited in part because the naval base there continues to have a lot of activity going on. It still seems like it’s in the throes of expanding.

And quite honestly, we’ve wrapped up our work there, have a brand- new porte-cochere, we have easier to access parking, brand-new marketing sign in front, the landscaping is starting to grow in and it looks night and day versus before. It’s a tremendous change for that property. It looks quite great.

With all that said, the first quarter was a little rough but there were some bright points. If you look at March, as an example, March was a tremendously good month for the company. EBITDA in that month was up 24%. So absent weather issues, I will say that the customer is doing very, very well and is at the property.

If you look at April and May, we continue to see a lot of strength. The good news, too, is we’ve started to roll out some tools at the properties to out manage expenses. The Silver Slipper team, as an example, has done a very good job rolling out some tools so that they can respond to guest volumes in real time.

They’ve taken a very active push at managing their slot leased in participation expense. And so if you look at the most recent month, in April, they saved nearly $30,000 just from the slot expense side versus last year.

So there’s a lot of good that continues to happen at the properties, now that we’re past all that weather but getting through that weather was – it was a little painful..

So I would just add that March was the best month in 10 years at Silver Slipper, as we had, I think. And a little hard to know, when you look at when – like the flooding. We didn’t actually flood our property itself but the roads getting to Rising Sun flooded, so we had to close because people can’t get to us.

The gaming commission actually made us close. Then after the roads reopened, business was good. Some of that may have been people who deferred trips from the flooding period. And so if you look at the discrete periods where we had issues, like flooding or an ice storm, we were down. And if you looked at other periods, we were up.

And of course, some of that might have been deferral of trips rather than cancellation of trips but that was the quarter. We were down 3.3% of revenue and EBITDA was $3 million versus $4.6 million last year. So not a great quarter but maybe we can make up for it here in the second quarter, at least gain some at the back.

But ASC 606, do any of us actually understand this thing?.

Sure, I can get it. I guess the other wrinkle that you’re seeing at every company out there, including ours, is the adoption of ASC 606. That’s basically a revenue recognition standard, a new revenue recognition standard.

The – so we approached ASC 606 using a modified contribution approach, which means that our 2017 results are exactly what you saw last year. The 2018 results reflect the new standard. A couple of big changes there on ASC 606. One is promo allowances. So that promo allowances line goes away.

Previously, we would – if you want in and you had a company with – we would put the value of that comp up in and gross revenues and then deduct it out in promo allowances. What we now do is if you’re a gaming customer and you go in, we would basically deduct the cost of that from the gaming revenue line.

If you – the cost of comps is at retail – there’s other big change there..

Actually, let me check for us a little bit. That used to be that everything was recorded at full retail value, and then that was given away free was the promotional balance so you get to net revenues.

Now when you accumulate points in the loyalty program or – and we figure out the value of those points and then calculate the value of those points take into account breakage and special promos we might have in a hotel and stuff.

But you basically – something loses $1,000 and you look at it and say, well, they get loyalty points worth 50 and maybe some casino host outside of loyalty program bought them lunch, and that’s 20. Well, we would not record $1,000 in casino revenue, we would only record $930 in casino revenue because we had lunch and we got the loyalty points.

When the loyalty points get used, the credit for them goes to the department in which they’re used. If they’re used for free play, it comes back in the casino. If they’re used for food and beverage, it goes to the food and beverage department.

We also used to allocate, all casino companies did, the cost of providing complementary services was transferred from, say, the food and beverage department to the casino department. And so the logic being that you provide complementary services for the casino and casino should pick up those costs. It’s just another way of looking at things.

It’s very different than the industry has looked at for 50 years, and it’s going to take some while of getting used to it. I think, at the end of the day, it’s probably better and – at least from my point of view of trying to run the company because, for example, the food and beverage department now has a relatively clean income statement.

It’s almost like it was a restaurant down the street that just happens to go out of business, sent to it from this casino where the customer is having vouchers. And so the revenues that it gets are the actual revenues but the rest would have that much volume and we expect – because they’re 100% of the expenses of that.

And so I can hold the food and beverage manager responsible for his own P&L statement whereas before, it was a far more distorted P&L statement. And the same thing with the hotel department and things like our courses and so on.

So I think at the end of the day, this is an improvement but we coordinated with other casino companies in talking how should this be done, what should people do. There’s a lot of discussions that went on. And I think like most of those companies, we’re not going back and trying to reinstate the historical numbers for the new accounting policies.

It would, frankly, be much to do about nothing and you wouldn’t gain much from it. It’d be a big effort. And so this year’s results don’t look at all like last year’s results. So if you look at the casino revenue line, it looks like it’s down a lot on our income statement. And I know the weather was bad but it wasn’t that bad.

And the real answer is our net revenues were down 3%. The rest of that decrease is in accounting changed really. And so if you’re looking at any of the individual lines of casino, food and beverage, hotel, even the revenue side or the expanse side, this year’s numbers are not comparable to last year’s numbers.

To have transparency, we did provide a supplemental table that calculates this year’s numbers using last year’s technique. So you can do an apples-to-apples to get to where we are. But for this quarter and for the next 3 quarters, it’s going to be pretty confusing comparing year-over-year.

And if that wasn’t confusing enough, you have the new tax law, which is confusing everybody’s provision of taxes. It doesn’t really matter for us because we don’t pay any taxes. And in fact, we have a reserve against our tax credit. So we not only don’t pay taxes but we don’t actually put taxes.

But there’s a whole lot of really complicated language that as you read it all, it basically says we don’t pay taxes and we don’t taxes currently but we might someday when we become profitable and then new guidance would confuse us all again.

But for the moment, there’s much to do about nothing with both of those but it’s a lot of language that you have to sort through..

There is a provision for taxes, it’s very small though. Actually, Dan, that was the best and simplest summary of ASC 606 that I’ve ever heard. The only thing I would add on to that is if you look at the major classes of item’s net revenue, adjusted EBITDA operating income, net income, the effect was pretty negligible..

That’s – if you’re looking at the numbers, it will matter most to an investor. 606 had very little impact on this. Balance sheet. Lewis did a great job fixing it. Go ahead..

It’s basically a reinvented balance sheet at this point. So we’re quite proud of our new lending group. It is – basically had our first and second lien facilities previously, took those out entirely, refinanced with new senior secured notes. They have a six year term the blended cost before versus today has gone down.

Actually, put an interest rate cap in place just about a month ago to help hedge against the rise in interest rates for half of our debt. And so for $50 million of notional amount, we have a interest rate cap of 3%, and that goes against three month LIBOR. That goes out for three years, sort of expires at the end of March of 2021.

But beyond excited for our new lending group. If you look at the signature pages on our indenture, you can see exactly who those people are. It’s KYMCO, is Sagard, and it’s our friends at Graydown [ph]. So great group. Already started talking to that group about how do we finance the rest of our expansion over in Colorado.

So great group to have and it’s going to be a fun ride with those guys. From an equity point of view, we went out and we did a registered direct equity offering, much cheaper than going out and hiring a traditional bank and paying 5% or 6% or 7% of fees and discounts to your stock, to your trading stock price and everything else.

We went out and issued $11.8 million of stock, it was about 3.9 million shares and expense-wise was a little over $350,000 so..

It’s just depending which days you picked. We did it at a lesser discount of price to announcement than most deals have been done by regular investment banks.

So we priced it at $3, which was about a 10% discount to our stock was when we started the deal, and that’s less than the discount that we recorded by several investment banks for doing the register deal. And of course, I’m – we’re pleased that the stock has done well since then. And I remember, it was a rocky time in the market.

Things were going on and market was up and down and interest rates moving around..

, :.

$1.8 million gross and a little above $11.4 million net..

Right. And that allows us to build the parking garage, exercising land options, refurbish the Imperial Casino and the Imperial Hotel and get all that open, which lays the groundwork to doing the bigger project in Colorado. So that’s pretty impressive.

But then, probably the most exciting stuff in the quarter was we finally are making some good progress on some of these big projects. Most notably, the ferry, which has been a little bit of a point of frustration.

For somebody who might be new to this, the Rising Sun Casino was the first casino to open in the region and was hugely successful 25 years ago and built up a pretty big infrastructure. So it’s got 18-hole golf course, got 300 hotel rooms and parking lots and others.

And then in the interim, other casinos opened, and so it became kind of the oldest and most geographically challenged. We’re right on the Ohio River, 45 minutes from Cincinnati, 1 hour and 15 minutes from Louisville. Directly across the river. In fact, one of the first times I went there, there was a cloud deck.

I looked up and I can see strobe lights and I started trying to figure out what the reflection was, what was making the – I can see the reflection of strobe lights but if the strobe lights – the strobe lights were at the end of the runway of the Cincinnati airport.

The big airport in Cincinnati is actually in Northern Kentucky and not very far from us. There’s growth loss but there’s no bridge where we – there was a ferryboat there starting in the early 1800s, they used horses to walk on treadmills and doing ferry.

And that ferry, there were several generations of ferry but it stopped operating around 1950 when, frankly, it ice and sank. And we haven’t decided not to reopen because there was a bigger ferry at that point, about 10 miles north and another ferry about 10 miles south.

Well, then in the 60’s, bridges opened up 10 miles north and south of each of those ferries and put those ferries out of business, which puts us 20 miles from either bridge. And each of those bridges has a competing casino on the other side.

So to get to us, you have to drive quite aways out of the way and then pass a competing casino and then come back down one river to get to us. When – as the crow flies, we’re 2,000 feet from Boone County, Kentucky, which is one of the – think it is the fastest-growing county in Kentucky. One of the wealthier counties.

It’s got 120,000 people, is basically a prosperous suburb of Cincinnati. And the airport is a big driver of that. If you go around the airport, DHL has a huge facility there as with Toyota and Hertz. While Toyota and Lexus parts land there, and then get DHL to dealers and so on. And then there’s big housing communities.

And they’re not down by the river but you don’t have to go very far from the river when you start running into large populations. And so we’ve set out to try to figure out how to connect to this place 2,000 feet away.

And obviously, a bridge would be very expensive and time-consuming, and there’s commercial traffic on the river, so bridge has to go way up in the air. But we figured we could get a ferryboat on. And so – and in one years, and that’s when I got here, we started working on this.

Well, getting the permits to build a ferry that is interstate, you got two different states to deal with, and then the Corps of Engineers, because you’re building roads and ramps into the river, and the Indiana Department of Environmental Management or whatever it’s called IDEM, and Kentucky has one, and then historical preservation committees on both sides.

I mean, there was just unbelievable bureaucracy. And we slide our way through it. And finally, finally got all the permits several weeks ago and started construction and I was there two days ago, and there’s bulldozers out pushing dirt and it’s starting to come together. It still take some time.

The gating item as we – there’s a puddle in the cornfield and the road goes across the corn field. We own the cornfield. And frankly, there’s a wet spot out there and we thought it was just a puddle. We were going to throw a piece of pipe down, build over it with a road.

And most of the time, that would have been sufficient but somebody determined that this is a tributary. They actually gave it the name, both run tributary of the Ohio River. I walked out there looking for how it connects the hot Ohio River, I can’t find it. But the water in that puddle seems to come up from the ground.

But some environmentalist decided that fish, they come up to this tributary and spawn in this cornfield. And therefore, we have to build a culvert and it cannot be a box culvert. Now a box culvert is something you can buy off the shelf. It arrives in a truck and a crane drops it into place and it looks like a box. It opens on two sides.

We can’t have that because, God forbid, some fish can’t spawn on concrete underneath the thing, so it has to open bottom. And so we have to build a three sided culvert with a heavy bottom so that fish can spawn in this cornfield. And we could have fought all of this.

We could have gone to – there are other ways to appeal these rulings, go to court and everything else. Frankly, it would have cost more time and more struggle, so we just said, okay, what sort of culvert do you want and how do you want it? What do you want? And then somebody else said, we think over here is the wet ones.

We’re like, okay, we have hundreds of acres, so tell us where the wet ones are and we’ll go around it. And then when there was concern about some fruit bat that might be in some certain type of tree and they would nest. We said, well, when do the nest? They said, well, they nest beginning May 1, I think, it was.

So we just checked on the every thing before May 1, so there’s no bats nesting in trees. And which – by the way, we were permitted to do that. It was actually okay but our bat environmentalist that we actually had one. And so we’re – we have worked through all those hurdles. It’s now under construction. The moat itself is in Paducah, Kentucky.

It was built in a shipyard in Florida, worked its way up through a canal I didn’t even know existed, the [indiscernible] kind of parallels the Mississippi. And if you’re going upstream, it’s easier to take the canal and – which was built by the Corps of Engineers with billion of dollars.

So I think they built that sucker faster than they gave us the permit anyway. So we’re under construction. I don’t think we’re going to make Fourth of July but I don’t think we’ll be too far after and going as quickly as possible. The main hurdle has been the river has been high in what is very – but I think the cornfield, frankly, is very muddy.

And I just lost a Hertz rental car on that cornfield the other day. It scared the bejeezus out of the guys with me because I was going 50 miles an hour. So we’ve been stuck in the mud. Anyway, so we – it’s coming along. The ferryboat is on its way up and we will tie in. And at the same time, we have refurbished all the guestroom corridors.

The lobby is being refurbished this week. The pavilion will be refurbished in June. The artificial trees and everything that have been made. They are in route, they arrive around June 1 and we put it. So by the time the ferry boat is operating, the Rising Sun is going to have a much different feel as you arrive.

And I think that should bode well for a good summer and thereafter. So the place is kind of back fighting for market share here in the next few months. And I think that will do well. And it materially changes our geography, in effect. We will be the closest casino to tens of thousands of people to whom we are not the closest casino today.

And it’s hard to know exactly how big an impact it has on us but it’s going to be pretty big. And the cost of the ferry isn’t that much. And then in Colorado. Much easier pressures but still, it has its bureaucracies as well. And I’ll add only one, I’ll use the word, bureaucracy because the city has been pretty good to deal with.

And here, we assembled land that we bought profitability two years ago. We assembled the rights and stuff on land around it to create a site. We’re still trying to design a hotel, realize that to make it work, you really need to vacate some streets, a one block of vacate street and then an alley. It’s all controversial in any location.

It’s also a historical district. We have to design something that fit into this historical district, yet we want something that would qualify as kind of a four-star – four-diamond hotel. We refurbished part of the casino, add a parking garage, et cetera, et cetera. And all of that needed to be – series of approvals.

We had approval about a month ago by the historic preservation committee with their unanimous vote. And we went to city Council and we got a 40 vote there with one objection for vacation of the roads and the approval of the project in general. They have to have multiple readings at multiple city councils for that to be effective.

And they meet every other week, and so we think we will get the final approval in June and then takes 30 days for it to be effective so it will be effective in July. And we hope to start construction of the parking garage right away. And we’re actually planning to close on purchasing Imperial Hotel later this month.

And [my half] hotel itself in use for Memorial Day and casino will be later this year. And that parking garage is pretty important because the hotel, the bigger hotel we’re going to build is on the surface parking that we have today. And we’re not closing the casino so we need a place for our customers to park while the casino continues to operate.

And so we need to complete the parking garage before we move into the surface lots and build a hotel. And meanwhile, that gives us 6 or 8 months it can be debt-financed, probably the largest vendor group and we’ll figure it out from there.

So anything else I missed?.

No. No, you did a good job, Dan. I think the only other thing I’d mention is – that I forgot was a lot of the stuff we built last year is now reopened, and so we’re going to really start to see the benefit of some of that stuff going forward. So we reopened the RV Park in March of this year, and was half full.

So when you were there recently, it’s starting to ramp up nicely. And we’ll have a full year, a full summer season especially at that pool complex at Silver Slipper and a full year at the Oyster Bar, which has been pretty tremendously received..

And I will mention, we – I mean, we’re now running, well, 90% occupancy on the hotel down in Mississippi, which opened two years ago. And we have designed with Brad Friedmutter, the fellow who designed Red Rock, amongst my other casinos, a further expansion of the Silver Slipper and it will be a hotel tower that goes out over the Gulf of Mexico.

There’s an abandoned pier there now that’s been an eyesore and we’ll basically build over that pier and the rooms will have great views up and down but also puts the rooms very convenient to the casino and we’d add meeting room space and entertainment space and one restaurant.

So it’s a pretty significant expansion of the – and then to – if you’re going to expand the hotel and you need more parking and we have quite a bit of land but a lot of it is wetlands. This is under the way of a long-term lease on the land there.

If we get the rate to buy it out in 10 months, we probably will exercise our right to buy it out because the Math works on that.

For $15 million?.

And our rent’s like $1.5 million a year, so it makes sense to buy it out. And – but the – but a lot of that land is wetlands, and so we will seek to fill in some of the wetlands. There’s a process to do that. You have to remediate well in somewhere else and add more surface parking to the property.

This is what the beginning stages of a long process of getting approvals and entitlements to do that, to build over the Gulf of Mexico, while the State of Mississippi owns the land underneath the Gulf of Mexico, believe it or not. So you need the state to do some sort of long-term lease.

We’ve talked to the Secretary of State of the state and he thinks it’s possible. And so again, we’re back to the Corps of Engineers, effectively a different office and different environmental groups. It make take us two or three years to do this but I just wanted you to know that we are constantly thinking of ways we can grow and improve the company.

We think we can get a pretty good return on expanding the Silver Slipper. And so we’ve started the process and it doesn’t take a lot of money to go through the entitlement process but it does take time. So we started it now and it’s something that we might be able to build in two or three years. .

Did we post the renderings on the website? In the shareholder web. The renderings that Friedmutter came up with is pretty nifty looking. So it’s in that shareholder letter. That was the cover letter for the proxy. So there’s a rendering in it. all right.

Any questions?.

[Operator Instruction] We’ll go first to Jim Marrone with Singular Research..

It may have been already touched on but can you perhaps discuss about the impact from rising oil prices on the business as far as gas and travel and the impact on your operations?.

It’s a good question. You have to put it in perspective, like somebody from Cincinnati who might go to Rising Sun, they have a 35-minute drive, so it’s each way. That’s probably roughly 1 or 2 gallons of gas each way, so it’s 4 gallon of gas. It used to cost them $8, it might cost them $10 now.

And we know our average customer loses about $67 while they’re there plus whatever they spend on food, if they actually bought food or a hotel room or a round of golf. And so at the end, they’re looking at spending $80 to $100 per person for a trip to the casino and price of gas going up as it has and as it might, might add 1% or 2% to that.

So – and so I don’t think it’s a huge item. It’s not like people deciding to take a vacation to Yellowstone, where they’re going to drive 500 or 600 miles or drive from the northeast down to Orlando where you’re going to drive 15,000 miles. Our customers don’t drive that far. They’re coming from fairly nearby.

And so – well, I’d say on the flip side, when the price of gas came down, what was it, 4 years ago, I remember it was way higher than it is now, we didn’t get much lift. So when it goes up, I don’t think we get much pain either. So – and in fact, there’s a little bit of an onset down in Louisiana.

Of course, a strong oil business is good for the economy. And so we – it’s hard to know in Mississippi whether its a plus or minus. The North certainly like punch and train a lot of people work for oil companies. It’s where the regional offices are now. And so at our most important property, a higher price of oil might actually be a positive..

Excellent thank you very much..

We’ll go next to [indiscernible]..

Hi Lewis, Dan. .

Hi Beth..

Lewis and I have spoken multiple times about this and I just wanted to get Dan’s perspective on it.

So Dan, as you think about all the capital you’re putting into the business and the renovations you’re doing at the various properties and everything, as you look out three years from now, what type of – what level of EBITDA do you think the business should be generating?.

Okay. Well, just so you know, in my head, I always try to get comfortable that we would get a 15% cash on cash return on the investment. In other words, EBDIT, once it’s normalized. And sometimes, it takes a while to ramp up but I like to feel comfortable that we’re going to get 15% return on it.

Now that’s probably comfortably above our cost of capital. I mean, our cost of debt capital is 8% or maybe 9%. That leaves a margin for error, if I’m wrong in my forecast. It can be an awful lot on what something earns and still get a pretty good return. And there’s plenty of stuff out there we can do that gets at least that higher return.

And so – but if you look backwards, let’s set aside the big expansion at Bronco Billy because that’s kind of a game changer in a way. If you just look at all these smaller projects we’re doing, I think the total investment is about $12 million or $15 million if you add it all up, maybe $14 million.

We’ve raised $5 million of rights offering to fund it, and then we reinvested cash flow. And so if you get a 15% return on $14 million, that’s like $3 million of EBDIT. I think we do better than that. I think our run rate of EBDIT is pretty close to $20 million now, if you back out weather stuff and some of the other stuff.

And someday, we’re going to have a quarter where we have good weather everywhere. And so I think we can get to the mid-20s, $25 million before building the big hotel at Bronco Billy’s and I think that hotel at Bronco Billy’s is $100 million project that produces $15 million EBDIT.

Meaning that almost doubles the company but we got to figure out how to finance the $100 million. But most of it can be debt-financed. And So obviously, that moves the needle. And we didn’t mention Terre Haute. I mean, the – we haven’t given up on Terre Haute, we’re still very interested in going there and we still have gaming capacity in Rising Sun.

And next year, is a full legislature in Indiana. Our nemesis, which has been a very well connected cabin in the right cliff, has now sold his racetracks to Caesars. And so we think we have a decent chance of getting that on.

So if you say in the absence of doing other stuff, we can probably get to the mid-20s just with what we have for the tinkering of what we’re doing.

Lewis actually – one of the things that happened in the last few months is we had some periods of bad weather and I looked at the results and I looked to the properties and said, wait a minute, your revenues were off 5% but you didn’t reduce the payroll, so the bottom line get hurt a lot. You need to react more quickly to this.

And if the weather is slowing down, don’t have people come to work, and let’s pay more attention to what our staffing is. We’ve implemented those – a lot of people don’t know this but that was actually my first job out of Cornell hotel school.

I was an operations analyst for HOPE International and was literally sitting down, figuring out how many covers per waiter in each and every restaurant and measuring that everyday to try to keep the expenses as variable as the revenues.

And then the other thing that was a little bit of an eye-opener is over time, the slot machine companies are our friends and they are also our nemesis. Are friends because they create interesting slot machines that people want to play. They’re our nemesis because every time we turn around, they have their hands in our pocket.

And if you look at the emergence of the slot companies, they’re unconscionably high. It’s a little oligopoly. But over time, if you’re not careful, they will sneak in and you’ll have more and more machines that are participating or rented or wide area progressives and so on. And we’re looking at it.

We were running $110,000 to $120,000 per month in those expenses at each of our three major properties. And then additional money at Tahoe and talent and so that’s like $3.5 million a year, almost $4 million a year that’s going to the slot companies for having Wheel of Fortune, for having games that they won’t sell, they will only lease.

And so we’ve got a concerted effort to say we know we need some of these but we don’t need this many. And literally, like I told one of the slot directors the other day, I said, do you want some new slot machines? Get rid of some of these leased games and I’ll buy you some new slot machines.

But I need to – we need to manage that and we’ll improve the floor by buying some machines rather than leasing them because ultimately, that can be cheaper. Now you need Wheel of Fortunes. They are popular. But maybe you can get away with four instead of eight, and that sort of thing.

And so we’re paying more attention to what’s on the slot, where it is. I think we can probably squeeze 20% out of that number across the board, which is $1 million right there of EBDIT for the company. So there is some stuff we can do.

So that answer your question?.

When does the big spending then start for Bronco Billy’s, this $100 million? When are we going to start to have to worry about financing that?.

Well, the Phase one is about $10 million and that will be July..

$14 million..

I’m sorry, $14 million. So the parking garage is $10 million. And then reopening Imperial and that is another $4 million. And that we have that money to do. And that garage will take about six months to build. We think we will have the final approvals to build it in July. And so it would open in the first quarter of next year.

So let’s say that would position us to start construction on the bigger phase in the second quarter of next year. And look, there’s many ways we can finance this. I mean, we could – the easy one is go issue equity. Of course, that makes everybody nervous about dilution. We could sell the Silver Slipper to a REIT and lease it back.

We could bring a REIT in to help us REIT this. We could bring in a partner to do this. There’s many, many ways we can do it. I don’t think we can 100% debt-finance it on our current balance sheet but I think debt will be a good chunk of it, probably 60%, 70%, 80% of it.

And so – but that’s something we’re evaluating now and we’re going to do what we believe is best for shareholders. And that we may talk to some potential partners, we’ll talk to some potential REITs, and we’ll look at the stock. And at the end of the day, it’s arithmetic, what’s best for our shareholders.

But if we can build something that we think it’s a 15% unlevered return and it’s not hard to see why it would. Look, there’s one million people in Colorado Springs, Pueblo and Canyon City.

Their gambling is way below the national average and the demand is there, it just needs a product that people find worthwhile to drive up on the backside of speak to go to.

And if you go to Cripple Creek and look at it today and go up to Black Hawk and look at that, what we intend to do with Cripple Creek economically what is happened with Black Hawk. Black Hawk, AmeriStar built a nice hotel, it did really well, attracted people up from Denver who didn’t go to Black Hawk before. Now Monarch is expanding.

I pre does well there. Jacobs Entertainment does well there. The total EBDIT of Black Hawk is about $200 million a year, and the total EBDIT of Cripple Creek is about $20 million a year, of which we have bought. And if you look at the relative populations, and say, wow, there’s just all sorts of upside here.

And so you look at it, okay, 15% unlevered, how much of it can you lever. We don’t want to go back to borrowing money and 14% liquid, had two from someone a few years ago. So how much can we borrow before we get to crazy interest rates and then how do we fund the rest of it. And we will figure out what is best for shareholders.

I think, I mean – I know the – there’s a following down that shows Cavelli interest are about 7%, so they’re one of our larger shareholders. But I think I’m still the largest individual shareholder so I’m going to do what’s best to both of our interests..

The only thing I would tag on to that, Dan, is when we actually do start to work on that bigger Phase two, Beth, the cash – the spend is actually – it’s pretty heavily weighted towards the back half. So you can see a good 50% of the spend in the last six months of that project. And the.

But we’re not going to start construction until we know we have the money to finish..

Absolutely right. And the only other point I wanted to make out of all this is, is the nice thing about – if we end up borrowing whatever the number is, it puts us in a different spot when it comes to refinancing this mode of debt because we’ll have gone from $100 million to pick a number but it’s going to be a number greater than $150 million.

And the hurdle that we hear from bankers time and again is you need to clear $150 million of bond size to have a good markable bond security to drive down your interest costs. So there’s more good stuff to come, and this project actually will put us in a unique spot to actually bring down our interest rate..

We’re also on the cusp of $100 million market cap and I know there’s a few funds out there that told us that they would like to own our stock but we need to have $100 million market cap by their rules. And so we’ll see..

Well, hopefully, you’ll get to the stock going up as opposed to issuing equity..

I agree..

Right? I mean, we’re on the same page about that..

Yes, we are..

Okay, good thank you so much very helpful..

Thanks..

[Operator Instructions].

Okay. Thank you very much, everybody..

That does conclude today’s conference call. Thank you for your participation. You may now disconnect..