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Gaming Guru

Howard Stutz

Full House reports wider net loss, decline in revenue

19 March 2015

LAS VEGAS -- Full House Resorts, Inc.’s first quarterly earnings report under new management saw an increased net loss and a decline in revenue, but officials with the Las Vegas-based company said it will take much of 2015 to change the casino operator’s direction.

CEO Dan Lee, who has been on the job since December after leading a proxy challenge for control of the regional gaming company, told investors Tuesday that refinancing debt and boosting Full House’s stock price are the primary concerns.

“We may be a tiny company and we may have a debt coming due shortly (but) we are actually financially relatively strong for a small company,” Lee said on a conference call with analysts and investors to discuss fourth-quarter and year-end results.

“We want to refinance the debt. We want to fix operations,” Lee said of the company that owns three casinos in Fallon, Mississippi, and Indiana and manages a Lake Tahoe resort.

For the quarter ended Dec. 31, Full House lost $10.5 million, or 56 cents per share. A year earlier, the company lost $2.3 million or 13 cents a share. The recent quarter included numerous expenses associated with the management change, including $2.7 million in board and executive transition costs.

Revenue in the quarter fell 15 percent to $26.7 million, which the company blamed on the opening of new casinos near its Indiana property.

For the year, Full House lost $20.8 million and had net revenue of $121.4 million.

Lee said that “even in a poor year,” Full House still had $10 million in cash flow.

Macquarie Securities gaming analyst Chad Beynon said Full House’s top casino, the Rising Star Casino Resort in Indiana, had cash flow of $2.2 million, compared with $9.9 million back in 2012.

“New management has been given a fresh start, however, the current cash flow puts the company’s back up against the wall,” Beynon said. “We would be more constructive should the company begin to improve operations and cash flow at Rising Star.”

Lee, the former CEO of Pinnacle Entertainment, Inc. and a longtime executive with Steve Wynn’s Mirage Resorts, said the fourth quarter was “a transition period” for the company and 2014 was a “tough year.”

On the conference call, Lee said he was optimistic about the potential of the company’s three wholly owned casinos.

In Fallon, where the company owns Stockman’s Casino, Lee said he believed the casino’s quarterly cash flow could be three to five times more than its $1 million current figure based on improvements the company plans to make to the operation.

“We’ve had focus groups with our customers,” Lee said. “I think we can improve it significantly from where it was last year. The good news is not very big, so it doesn’t take very much money to change the curve.”

Lee said construction of Tesla Motors’ $5 billion Gigafactory, roughly 40 miles east of the casino, was good for the region, but he wasn’t sure if it would be significant for Stockman’s.

Lee said the Indiana casino needs adjustments, such as adding new dining outlets and a ferry to bring customers across the river from neighboring Ohio.

Full House was for sale when Lee and his team took over. He said, as a public company, the business is always for sale. However, refinancing the company’s $60.6 million of debt is the primary focus.