Full House Resorts (NASDAQ:FLL) Q1 2020 Earnings Call

0:01 Good day and welcome to the Full House Resorts, Inc. 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.

0:15 Thank you and good afternoon, 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 State Harbor Provision of Federal Security Laws. I would also like to remind you that the company's actual results could differ materially from the anticipated results in these forward-looking statements. Please see today's press release under the captioned forward-looking statement for the discussion of risks that may affect our results. Also, we may make reference to non-GAAP measures such as adjusted EBITDA or reconciliation of those measures. Please see our website as well as the various press releases that we issued. and lastly, we're also broadcasting this conference call at poolhouseresorts.com where you can find today's earnings release as well as all of our SEC filings.

1:09 And with that said, you ready, Dan?

1:10 Yeah. First quarter seems like a long time ago now. I mean, just addressing where we were in the first quarter, Silver Slipper was doing quite well. The Northern Nevada was doing okay. Rising Star and Colorado were doing better than they had in the second half of last year and trending positively. And then everything shut down in the middle of March. So the quarter is obviously very distorted by all of that. And I think the question now is getting stuff reopened. It's almost like having a development company where you've got a handful of employees and you're getting ready to opened five casinos and put a lot of people back to work.

2:04 I guess very important, at the end of March, we had $24 million of cash and equivalents. Now, a good chunk of that is normally used in operations, and most of the rest came by stopping construction on the parking garage that we had underway in Colorado, and that is being used as kind of a cushion. In the first month that we were closed, which would have been from mid-March to mid-April, we've probably burned through about $5 million. A lot of that is severance as we've reduced the payroll. And our burn rate after that period is about $3 million a month, of which about $1 million is debt service on our debt, and most of the rest is actually stuff like real estate taxes and and so on. Payroll is about 20% of the $3 million.

3:03 We've gotten payroll down pretty small at this point. We did just receive a $5.6 million loan under the CARES Act. It's a two-year loan at 1% interest that has incentives in it for us to hire back employees and we'll be helpful at getting Colorado and Indiana up and running. Those are the two properties we have that have less than 500 employees and a very specific provision that was in that CARES Act that allows subsidiaries like that to not look at the total parent in terms of number of employees. Silver Slipper has more than 500 employees but those two have less and they have hotels associated with them and so we qualified and frankly There's all this language about possible forgiveness. Those rules aren't really spelled out yet exactly how it works.

4:01 It's possible that some of that loan would qualify for forgiveness, depending on what our payroll is over the next eight weeks, which in turn depends on when we're actually able to open. We have brought quite a few employees back to work already, trying to put them to work to get ready to open at those properties. In terms of actual opening, the first one to open, we think, is going to be the Silver Slipper, and that may be next week. The State Gaming Commission has said in advance of Memorial Day weekend, so that's coming up. We're not sure exactly which day. Some of this stuff has been a little strange. Again, Nevada suddenly said we could open restaurants, but not casinos.

4:47 Well, we have a restaurant in Fallon. We had like 36 hours notice. We don't even think we can get food that fast. But we're now looking at getting that open now. It's just a coffee shop. It won't make a lot of money, but it might make a little money and gender some customer goodwill and get a handful of our employees back to work. But that also will make it easier when we open our casino because we're not trying to open both the restaurant and the casino on the same day. So that's coming in fallon. at Tahoe. The Hyatt, which our casino is in, is now saying they don't anticipate opening until early June. It's possible we could open the casino before the Hyatt, but that gets a little complicated.

5:36 But I think we're in the time frame sometime between now and early June that we could be opening at Tahoe. In Colorado, the governor has indicated he did not expect the casinos to open in May. A lot of people interpreting that as being early June, but it might actually be mid-June. It's hard to say. And then in Indiana, they specifically did say June 14th should be the date that we count on. So in the next few weeks, we think we'll be opening all of our operations. And frankly, Red House is pretty busy trying to figure out exactly how to do it. We've done the marketing plans in both Colorado and at Rising Sun, which is a lot of work. where we have the CARES Act loans. We've got employees back to polish and buff the place and fix it up and get ready. Down at the Silver Slip Bird, they're doing some of that as well, getting ready for next week. We're installing like plexiglass panels between some slot machines that can slide in and out. So if you want to be separated from the person next to you, you can pull that panel out and we're hoping that that will allow us on some of the popular banks to keep all the machines going instead of having to turn off every other machine.

6:57 It's not clear yet. It varies from state to state on what the different rules are going to be. We're trying to figure out how to make table games safer and so a lot of those rules we're trying to work out with the different gaming regulators and internal. So the first question is when do we open? The second question is under what rules? And we're still trying to figure that out. And I guess the third is whether customers are really going to show up. We've heard anecdotally that there's about a half a dozen tribal casinos that have opened in different places where they are allowed to do so. And so far they all seem to be doing pretty well.

7:42 And I think Golden Gaming at their earnings call indicated that They have pubs up in Montana that have slot machines in them, some sort of a route operation. And they've opened and seem to be back to pre-pandemic business levels pretty quickly. So there's not a lot of data out there, but what data there is, it seems to indicate that business will recover pretty quickly. My guess is some of that is pent-up demand, and then maybe a few weeks later, the reality of the 15% unemployment rate might start to sink in. but there's a lot of different moving pieces in this. A lot of our customers are retired. If you're retired, you can't really be laid off and you've still got a $1,200 stimulus check.

8:27 We have some of that going on as well. Now we are planning to open carefully. In most cases, we will not open all the restaurants. We will not open all the table games and we're going to trying to make sure that we have more customers than employees, if you will. So we're trying to open kind of on the lean side, and we can always build from there because we just want to be cautious just in case customers don't show up. So we hope they do, but we're planning for a more conservative scenario. Meanwhile, the mobile sports wagering is coming along.

9:13 all three of our partners in Colorado have been licensed. They're awaiting approval of their apps. Smarkets has indicated they expect to be open this month, actually, in the next 10 days. And Raymond Churchill we think will be up and going sometime this summer, but we don't control or know exactly when that is. professional sports does seem to be trying to find ways to come back and of course that will help the sports betting. I think people want to get up and running with these sports skins anyway because they want to get market share and get people signed up on your stuff so I don't think anybody's dragging their feet waiting for professional sports but there's a lot of work that our partners have to do to get their apps approved by the different regulatory agencies and get licensed themselves and but they are licensed now in Colorado and Churchill, as it mentions in the release, has been up and running in Indiana and the other two are still seeking approval in Indiana and that's probably not very far off either. When all six are up and running, and we think that prior to the end of the third quarter and maybe even the end of the second quarter, when all six are up and running, Our minimum guarantees are about $7 million a year, or exactly $7 million a year. And there's no expenses.

10:45 There are very few expenses related to that, so that's almost all income, and there's no maintenance capex or anything. So it's a pretty substantial thing for our company, and it's coming down soon, shortly.

11:01 What else is there?

11:02 I guess...

11:04 The only other thing I was going to mention, Dan, was we are very fortunate to have a good group of lenders. And so in April, we effectively amended our indenture to delete the debt to EBITDA requirement for the first quarter. But, I mean, that group is a good group. Back in mid-March, within days of the closures, our lender group came to us with a plan for amending Pretty much a full year's worth of covenants, and it didn't make sense yet to figure out exactly how those should look, given we didn't know when we were going to reopen. But now that we have some potential dates in sight, we'll inch a bit closer to getting those future covenants all worked out.

11:52 We should mention we do anticipate that we will need covenant relief on the June quarter, which that 10-Q will be filed in mid-August. and we just decided to leave that to be dealt with in August with our lenders on a handshake because by then we'll have stuff open and we'll know more about sports betting and we'll be in a better position to figure out what the covenant should be going forward from there. But at the moment we have a covenant at the end of June that we think is pretty unlikely that we're going to make. and we haven't tested it technically. Technically, we haven't tested it. Then, you know, while Keegan is still out there, we were one of three bidders to clear the city's process.

12:41 The state gaming commission still intends to choose somebody. Before the shutdown, we were in discussions with three different parties to partner with it and we would anticipate and a number of other people. Those opportunities don't come around every day, so we had put in a proposal.

13:29 We made the first hurdle, and we're still in the game. I guess that's it. I'm happy to take any questions. I think we're doing fine under the circumstances and eager to get stuff reopened. Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. And once you're using the speakerphone, please make sure your function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. And we'll pause just a moment so that everyone has an opportunity to signal for questions.

14:14 I was just going to say while we're waiting for people to queue up for questions, I write kind of a detailed shareholder letter that went out with the proxy that kind of replaces the old glossy annual reports. And in there, I made the comment that in the regional gaming markets, they tended to recover faster than, say, Las Vegas or destination gaming markets, and did so after 9-11 and did so in 2008 with the recession. We actually went back and pulled those numbers, and that's absolutely true. We can happen to summon anybody we want. But if you look at what happened after 9-11 when air service was disrupted and people were afraid to fly, regional gaming bounced back pretty quickly and much faster than any destination that required people to fly to. And very few people fly to our casino, so I think that same phenomenon will happen again.

15:15 And then in the recession, and the regional came and did better because, after all, it's less expensive entertainment. It's not very expensive to get in your car and drive from Cincinnati to Rising Star or Colorado Springs to Cripple Creek. And so we think we'll do relatively well. That doesn't mean we're going to be up 20%. It just means we'll do better than, say, Las Vegas or Atlantic City. And I think we'll do fine. We've never had a situation quite like this before, and so it's hard to say. Any questions? We'll go to our first question from David Bain, Ross Capital.

16:00 Great, thank you. Hi, David. Yeah, I was just going to ask first, you know, on the impact or the impact from COVID, has that caused you to relook and maybe analyze sort of the entire cost structure in a way that you believe could impact or not impact longer-term revenue generation and maybe allow for stronger flow-through in the portfolio?

16:26 Yeah, we have looked at it pretty carefully. It's actually reminiscent of when I was at Pinnacle, we had opened – and Luke Charles. It had been open about five months when Hurricane Rita hit us and we had to close for, as I recall, five or six weeks. And it had a lot of revenue and not a lot of income in the first five months of operation. And while we were closed, we reexamined everything pretty carefully. And once it reopened, it was quite profitable and has been ever since. Now, it may have gotten there anyway. It's just maturing. But the hurricane actually gave us a chance to do that. and the same thing here. We've been going through everything, looking at what makes sense. For example, we will not operate table games 24 hours a day at several markets.

17:16 We won't operate all the restaurants as we had before. Under some of the new rules on table games, we'll end up having higher table game minimums in order to keep them profitable, which means operating fewer of them. even on the slot machines, we're trying to be smarter. The frequent player program in Rising Sun was pretty antiquated and we've done a complete rethink of it. Now that we have better information coming from the Konami system, we know with much better detail which customers are most important to us and we've tailored the program to to reward those who are important to us and to reduce some of the giveaways to people who are less important to us.

18:08 The old program, I think there were people who we were not making money on. And so by having this opportunity to rethink it and reimagine it and reinvent it and frankly now We brought our casino hosts back to work out of their homes and called people up and explained the new system to them. And for our most important customers, it's actually a better system. And so we have the time to explain that and the resources. So, yes, I think and hope we can open smarter and better than we were before. And we're rethinking really everything in the company.

18:53 right down from like the menu at the coffee shop in Fallon is a much more simple menu now than it was before. And all the way down to, you know, we won't operate the Mexican restaurant at Bronco Billy's until we get into due demand periods and when it's really proven that it's needed. So across the board, we're trying to figure out how to be smarter. Okay, great. I know it's kind of a hyper-local market, which I agree definitely should recover faster than the other markets and locations significant. But do you envision a more promotional environment when the lights turn back on? It sounds like you've already done some pre-marketing strategies that you're implementing even during these times.

19:44 Or is it more like you turn the lights back on, everyone knows that the casino is there, it's in town, and many are just looking to go back to gaming activities? Well, like in Rising Star and actually in Bronco Billy's, if anything, it might be a little less promotional because we figured out that to certain groups of customers we were probably giving them more comps than they really deserved. We actually ran the math on one of the categories at Rising Star and I'm paraphrasing numbers because I don't remember exactly what they were, but it was a customer who might be worth $5,000 a year in gaming win based on their play and if they took advantage of everything we gave them it might cost us $5,000 a year and that would make the customer not really profitable and so we said let's change that parameter hopefully keep the customer but make them a profitable customer.

20:47 We had some customers who were clearly gaming the system and you start looking at everything they were getting, the free buffets and the free hotel rooms and everything else and they were almost carefully gauging their place so that they could live off us for free. And so in some ways we're going to be less promotional. On the other hand, some of our most important customers and by most important I mean most profitable because we will try to make sure that they deserve it. I'll give you a simple example. It's a five-tiered program at Rising Sun now, and historically we would have some sweepstake, like a hot soup price or something, and it might be $100.

21:35 And so for a low-end customer, that would be a great price. For a high-end customer, that would be a small price. Well, under the new program, it says, well, if you're a Two-star customers, $200. If you're a three-star customer, it's $300. If you're a five-star customer, you can win $700. And so the size of the prize is related to where you are in the tier program. So if you're one of the VIP customers, you're actually getting rewarded better. But in order to be in that high-end category, you know, your expected win per year is enough bigger that we don't mind paying the $700 if you happen to win it. and so we're trying to be more thoughtful about this stuff and make sure we're rewarding the people who we make money with and not just giving away free food to people we don't make money with.

22:29 And the player development host coming back, that's a little bit of an unusual anomaly in those two markets. you know these small business administration loans in fact the name of the program is the Paycheck Protection Plan and the idea is rather than have these people be on unemployment with no medical plan try to incentivize companies to keep them on the payroll with a medical plan. And so by bringing them back we may, there's no certainty, but we may qualify for forgiveness under the plan. all of the rules are kind of vague at this point but at least on the rules that they've given we should qualify for forgiveness so it's kind of like at those two markets we have an opportunity to call our development people and our hosts and say hey we want you to come back to work we'll put you on the payroll and we'll pay for your medical plan all of which is essentially paid for by the Small Business Association but we're trying to do it in ways where we can put people to work that we will get benefit from and in some cases, we're literally bringing back bartenders and giving them a paintbrush and say, if you help us paint, we'll put you back on the payroll because the program kind of incentivizes us to do that.

23:49 So we are kind of prime candidates for the program and we're using it the way it's intended to try to put people back to work. But like at Rising Star, we are the largest employer and largest taxpayer in the community of Rising Sun, Indiana. And now we have about 400 employees there. We got down to about 20 employees. We're now trying to get back about 100. And then when we're able to open, which we think is in mid-June, we'll be back to 400. But that program, the way it is set now, it looks at your first eight weeks from when the loans got funded. We were funded last Friday. So if we can put people back to work now, It's kind of subsidized.

24:38 And so when you look at building that casino host just to call up people and say, hey, how are you doing? Can I drop by some toilet paper or something you might really appreciate these days? And maybe you wouldn't ordinarily do that, but given that it's kind of subsidized and that's what the program intends for us to do, we're doing it. Great. Does that make this more promotional? I don't know. I think it makes us maybe thoughtful. And I think everybody's just both, you know, it's easy to, you know, when you think of how difficult it is to open these places, and that's why, I mean, our places are relatively small, but we're still going from, you know, five management employees to, to, you know, 500 employees.

25:30 Like, there's several sectors that go from five or six management employees to 550 employees in a very short period of time and get the doors open. That is no small task. But that's why companies like Wynn and Las Vegas Sands kept paying their employees because they'll have 10,000 employees at a place like Bellagio. And if they all scattered to the Wynn, just recruiting and training 10,000 people will cost you millions and millions of dollars. We have these much smaller properties. It's certainly a lot easier for us, but it's still not easy. It takes a lot of effort and a lot of work to get these things reopened.

26:10 Now, I think you're going to be down in our markets for what it's worth, Dave. Right. Marketing. Sorry. Okay. Okay.

26:19 Okay. Let's see where the world is before we go to the next stage. At least from the tribal casinos, and there's a few reports of it now, people showed up and stood in lines to get in. There's one tribal casino in Idaho that opened 20 years, and when they opened, they only had half their slot machines turned on. They limited the number of people coming in, and they still had the highest number were handled in their 20-year history on the day they reopened. I'm not forecasting that we will be as fortuitous as they've been, but that was a pretty nice data point to look at.

27:07 Right on. And I'm just going to go over one question, if that's okay. I know you discussed sports wagering in the prepared remarks, and I was kind of hoping you could also touch on the iGaming opportunity. I mean, obviously you There's a few more political hurdles for approvals.

27:22 It seems to be a quicker way, at least to us, for state governments to build their coffers quicker than building a new casino and some other things. Any thoughts on iGaming for Full House?

27:37 Yeah, thanks for reminding me, actually. It's not just iGaming. I think there's also some states that have considered casino gaming, and this may put some emphasis on them. places like Virginia and Georgia and so on that they will have fiscal issues that will encourage them to consider casino gaming because it does produce a lot of tax revenues. And then on the iGaming, that's going to be a very big business in New Jersey, twice as big as mobile sports betting. iGaming is where somebody can play a slot machine on their iPad. And it could be somebody in a nursing home or somebody who just lives a long ways away from Atlantic City or or maybe they're just bored for a minute and they pull out their iPhone and play a casino game.

28:25 And the interesting thing is in Atlantic City, in the state of New Jersey, you can only be in those businesses if you're tied in with a brick and mortar casino. And that's been the case elsewhere in the country as well. And the brick and mortar casinos in Atlantic City have had growing revenues the last four or five years. Not high growth, but you have a very big base, $2.5 billion a year, and they have been up. And while they have been growing, eye wagering is now a half a billion dollar a year business, and mobile sports betting is a quarter billion dollar a year business. And so these businesses have come on and not hurt the brick and mortar. Well, at least so far, the iGaming looks to be a bigger business than mobile sports betting.

29:21 iGaming is not yet legal in Indiana or Colorado or Mississippi, where we operate, but I think there's a good chance it will be in the not-too-distant future. It's a pretty easy transition to make once you already have brick-and-mortar casinos and then you have mobile sports betting. and then the state realizes that they can get more tax revenues by allowing iGaming and allowing the brick and mortar operators to do it. We chose to do the sports betting in partnership with people who are in that business in part because it's a small number of independent statistical events like the Super Bowl and you can end up with a large number of bets on one game and you could end up with an unbalanced book.

30:12 And like we were in Colorado, so if the Broncos were in the Super Bowl and they were up against the Patriots, we'd have lots of people trying to bet on the Broncos and nobody on the Patriots. And we like to think we're in the gaming business but we don't gamble. That would be gambling. And so we don't take any of that risk in our mobile sports betting operation. We do have a little bit of that risk at the little sports book down in Mississippi and even there we managed to lose $300,000 when LSU won the NCAA championship and LSU is an hour and a half away from us but it was kind of a good taste of how bad it could be if you had the Super Bowl on a statewide mobile gaming platform and so we're leaving that for the big guys who specialize in that stuff and they do have operations in different places so they can be hedged and now when you go to iGaming We don't have that same issue. Somebody's playing on a slot machine on their iPad.

31:15 It's, you know, millions of independent statistical events that have a very predictable outcome. That's our normal business. And so we would probably have to license or purchase the technology and probably hire the right people. And look, it may make sense if somebody makes us a good enough offer to still do even that in partnership with somebody else. but it is a business we could probably do on our own, and I think it would be a big and positive business somewhere down the road. And the pressure on state finances is probably just going to help that happen.

31:51 Our agreements with our three, I guess our six agreements for both states for the sports betting does not prevent us from doing the online casino. We could always do an online casino with any of those partners for what it's more like, When we first started talking sports betting, not a surprise, they all wanted a casino too. But this is kind of carved up outside of that. And so if any of them wanted to do the online casino, you would see our guarantees go up.

32:21 Right on. Okay, awesome. Thanks, Dan and Lewis. Excited for everything to be open before 3Q.

32:29 Yeah, so we're looking forward to it. Thank you. and we'll go to our next question from Chad Zangis of Macquarie. Hi. Afternoon, Dan Lewis. Thanks for taking my question. Thanks, Chad. Some of your competitors have helped us with not only the cash burn but some break-even EBITDA levels. I think across the board, most of your competitors have talked about, you know, if you got back to – 25% to 40% of normalized revenues that would kind of get you to a break-even EBITDA point. But I understand that your margins are starting from a lower point than theirs. Is that still kind of how you're thinking about a break-even point?

33:17 Or I guess maybe just asking the question, I mean, have you done the work in terms of what you need to see from a demand standpoint to get the EBITDA break-even across your portfolio? Thanks.

33:28 Well, yeah, we have done that math, and I think it might depend on how you consider EBITDA. Each of our properties has a significant, in any casino, has a significant fixed number, like utilities, which will run, it's $40,000 in Colorado and $110,000, so it was different. insurance is a pretty big number property insurance in some cases you have fixed gaming taxes that are based on number of machines and so on and if our revenues in order to have break even EBITDA after all of that stuff we probably need to get revenues of maybe 50 or 60% of what they were in 2019.

34:30 I don't think that's a margin issue compared to these other people. I think because you look at that and say, well, I'm paying all that stuff anyway. Even when it's closed, we're paying all that stuff. And so what sort of revenue levels do you need to be able to contribute towards paying those utility costs and so on, that would be like 25%. But you've got a pretty big hurdle to get over. So you're happy to be open even if you're only doing 35% of last year's revenues because at least it's helping to pay the utilities and real estate taxes. But that's still not going to get you the EBIT before your debt service.

35:17 and then, you know, you've got to get to the point where you earn dead certs. So, no, I'd be astounded if we don't do at least 50% to 60% of what we did last year. There isn't any new competition. You know, most of our customers are either retired or still employed. And we think, you know, and frankly, I get a little frustrated because I think Our customers understand that our casinos can be a safe place even in pandemic times. You can come into the building pretty easily. We are going to take people's temperatures. They don't arrive in crowds and so on. Very few of our customers even arrive on buses or anything.

36:06 And then you can go find your own slot machine and be socially distant from other people. Now, craft table is a little more complicated, but craft is a very small part of our business. So I think people view us as being people who know the experience would not feel unsafe driving their car to us and finding a slot machine to enjoy their entertainment. But if you look at some of the reopening rules that are coming out, we're being lumped together with with state fairs and stuff like this where it might be harder to be socially distant. I find that a little frustrating. But because I think our customers do understand it, that when we are allowed to open, I think our customers will show back up. But, you know, our big even point before, you know, at the point where we start to produce income to pay debt service is more like 50% to 60%.

37:10 of what the revenues were in 2019, to answer your question. No, that's perfect, thanks. And by the way, I think that's true of virtually any regional casino. I'd be astounded if there was anybody who had a break-even point that was 25% of their revenues last year. I think they're probably saying...

37:29 The casino by itself.

37:30 Yeah, if you're saying the open and cover incremental employees... would be 25%. But you've got a lot of costs that you've got to pay whether the casino is open or closed. Right. Yeah, that certainly makes sense. And then during your tenure at Full House, you've been on the offensive, you've been on the defensive, you've talked about looking at other businesses, you've bought other properties, you've had other companies look at you. I think you've mentioned that on prior calls. So I guess just given what's happened in the past couple of months, Just from an equity impairment standpoint and kind of where your stock is, where other stocks are, and kind of how you look out, what is the best path for shareholders? Has anything really changed in your view in terms of the strategy, the best path forward to create value, or is this just something that, you know, you guys have talked about some of the steps that you've taken to improve shareholder value, but is there anything else that is now on the table given the current environment?

38:36 No, I think the pandemic kind of changed everything. It changed very fast. I mean, our stock was $3.50 a share, and we were trying to figure out how to fill a block again. And we were working on improving our operations. We had two properties that, like, we opened this little Christmas casino in Colorado. It was pretty small. It rose our revenues by 7%, but that wasn't enough to offset the increased cost. and so we have moved to close that. If you back that out, the Colorado results were almost flat. And in Rising Sun, we had a number of issues in the second half of last year and ended up with a pretty disappointing second half of last year. Whereas the Silver Slipper had the best year in its history and that's our most important property last year. But we saw opportunities to improve our results just by not making the same mistakes at Rising Star and being more focused on getting it to better profitability, and the same sort of thing in Cripple Creek. And so, yeah, and we were starting to build this parking garage which was the first phase of an expansion in Cripple Creek.

39:55 Then all of a sudden it was like, wow, you have to close? And it was like, boom, boom, boom, boom, everything's closed. And You don't know how long. You don't know how you're going to be able to open. You don't know what the world will be like when you do reopen. And so immediately you start focusing on surviving. I mean, literally surviving. And because you knew immediately that we would be in default with our debt covenants, which allows your lenders to shove you into bankruptcy if they chose to. and others. We have good relationships with our lenders. We started talking to them immediately because we have fiduciary obligations to them as well. We wanted them to understand that we were working to make sure that their interests were guarded, that they were taken care of and we talked to them a couple of times a week and I think they are reasonably happy with what we've done to safeguard their interests.

40:58 and representative of that. They did waive the covenants for March, as Lewis mentioned. Now we're getting to where we can see the light at the end of the tunnel. We're going to be able to open stuff. I think we're going to be back to producing cash flow to pay the lenders here in the next few months. I think that'll happen pretty quickly, especially when the sports betting stuff starts coming online. And by later this year. Maybe be back operationally to where we were like the fourth quarter this year. Hopefully it's better than the fourth quarter last year. Third quarter might even be better than the third quarter last year. And by this time a year from now, maybe they found a vaccine and we're back to normal a little bit. You know, and just to put in perspective, fortunately most of our play is stock machines. But I've been trying to figure out how you keep something as simple as a blackjack table safe.

42:04 And you can, and we have in some markets purchased these big plexiglass things that sit on the blackjack table that separate the customers from each other and from the blackjack dealer. It's a little weird that you're kind of gambling a little phone booth, but it's possible. But then How do you deal with the chips and the cards and the money? And I happen to have a cousin who's a epidemiologist, and I called her and we were talking about it. She said, well, you probably need two dealers. One dealer has clean hands, the other one has contaminated hands. So when you buy chips, the guy with the clean hands gives you the chips. When you lose a bet, the guy with the contaminated hands takes those chips away from you because you have contaminated them. And you don't want those to be then given to a different player, right? So then the contaminated chips have to literally go through a dishwasher or something to keep them clean.

42:58 And by the time you start running the math on having two dealers and three players, it's like you can't make money on a blackboard table. Why not? Now, Scientific Games does have a table, I'm trying to find if we can get a couple of them, that have built into them iPads that you don't need chips. And it was an idea that and all of that stuff. It's probably a table game that they couldn't sell before, and now they probably can't make them fast enough. But, you know, you're starting to focus on this, and, you know, we're a long ways from starting to figure out, do we acquire somebody?

44:05 Because if you did look at somebody, like there was a casino we looked at not too long ago that was for sale, and I think it's probably still for sale. It hasn't been sold, but I know of. But, It's closed. I don't know when it's going to be able to reopen. I don't know what rules it's going to be able to reopen under. I don't know how well it's going to do once it does reopen. So I wouldn't know how to even put together a proposal to buy it, even if I had the money to buy it. And so it's kind of, you know, we can revisit that sort of thing down the road, but right now we've got plenty in our place to get open what we have and then figure out where we go from there.

44:48 We're still pretty fortunate too, Chad. If you think about the growth pipeline just with what we have, 2021 should still be a very good year relative to any other year in recent history because of those sports betting agreements. I kind of gloss over it sometimes, and I don't mean to, but the nice thing about those sports betting agreements is you have minimums. It's a $7 million minimum with essentially no expenses attached. and so you effectively have $7 million a year of guaranteed EBITDA year in, year out. And so when you start thinking about going forward, you kind of eliminated a big swath of downside variability. You still have the existing operations, which we think we can improve further from here. And so that all puts you on a very nice trajectory here going forward once those sports betting agreements launch.

45:44 Now, you know, we had talked in the past about trying to go out and refinance our debt under the guise of those sports betting agreements, and that's still certainly going to be an option, but we've got a little bit of a blip between here and there because of the pandemic, and so sometime down the line you can look back at all sorts of things, whether it be the growth we have or growth otherwise, but we're, you know, there's The bigger picture is still there.

46:15 And frankly, we had EBDIT last year of 15 and change, which is kind of a disappointing number for us. But when you really backed into it, the Christmas Casino was a pretty good, like $2 million, a little under $2 million of that. And then the problems we had at Rising Star was a pretty good shot. If you back those out, it was probably an $18 or $19 million year. And so the goal is to try to get our normal business back to about $20 million a year, plus the sports betting stuff. Then you're 27, you have $108 million of debt, then you're only levered four times. You can probably refinance the debt at a much lower interest rate than it is now.

47:01 And, you know, that's our goal at the moment. We can be there in a year. then we're in pretty good shape. And then that opens up the door to figure out, okay, now what do we do? But we need to walk before we can run and we're focusing on walking. Opening the door.

47:24 Get those doors open. That's great. Thanks, guys. I really appreciate it. Best of luck. Thanks, Chad.

47:32 We probably have time for one last question here. and so we'll go to a question from Steven Bresbetter of ABR Investments. Good afternoon, gentlemen. Just to reiterate, the online, I guess, casino games and online poker, are those, would you be getting like skins for those or if the states approve it, how do you think that would go forward if any of the states approved it?

47:57 Well, there's two states that I'm aware of that have, New Jersey's had it for a while and Pennsylvania's just approved it and it has to be related to a brick and mortar casino or in New Jersey racetracks. And so it would probably be similar to the sports betting, which is if you want to offer online sports betting in Indiana, it has to be done in affiliation with a brick and mortar casino. Now, our casino is the smallest one in the state. We're in the southeast end of the state. and yet you'll be able to be in a suburb of Chicago and make bets online and if it's with one of our partners we get a percentage of the revenue on that bet.

48:44 Now if it's online wagering that might be directly with the website that we run but the legislation hasn't happened yet so I don't know if it's you get three skins per license like that with mobile sports betting or is it one skin per license like it is in In Colorado, it's one skin for a license, but we happen to have three licenses. And so, you know, that legislation is not out there. There is some discussion of it within the legislature that we're aware of. And, you know, I do think it's likely to happen, but it's not imminent. It's probably still a year or two away. Okay, great, and I hope you have a great opening of the casinos coming up, and good luck in the future. Thank you, guys.

49:34 Okay, thanks, Steve. Thank you. Call back to Stan Lee for any additional or closing remarks.

49:42 Okay, I think we're done. We're here working hard. I'm kind of used to rambling around this office on and around, but gradually we're getting some of the other people back to work. That is kind of gradually opening, and hopefully this continues to go smoothly. So I hope everybody is staying healthy, and hopefully there's better days ahead. Thanks. And again, that does conclude the call. We would like to thank everyone for your participation. You may now disconnect.