Full House Resorts (NASDAQ:FLL), the operator of five casinos in four states, said its cash burn rate is slowing following staff furloughs and that it has the liquidity to survive several more months if gaming properties remain closed because of the coronavirus.
As a result of the COVID-19 pandemic that grips the domestic gaming industry, Full House halted a construction project at its Casino and Hotel in Cripple Creek, Colo., reduced its headcount tally to 30 from 1,600 and management at four of the company’s five venues are deferring up to a third of their salaries until those venues reopen.
The firm didn’t identify all four of those casinos, but did note the Silver Slipper in Bay St. Louis, Miss. is one of the quartet.
As of April 17, 2020, this amount was approximately $21.4 million, reflecting the payment of wages (such as accrued vacation pay) and employee benefits for short periods beyond closure. Such extended payments have now largely ended,” said Full House in a statement.
That cash tally is down from $29.9 million at the end of last year.
Feeling Less of a Burn
Full House’s cash position dwindled because it was paying out furloughed workers immediately following temporary closures, but that program is over, enabling the operator to reduce its monthly cash burn rate.
“Looking forward, we estimate our ‘burn rate’ of minimal expenses with operations closed is in the neighborhood of $3 million per month, including debt service,” according to the company. “Based on this, we believe the Company has sufficient liquidity to endure this temporary shutdown for several months.”
Like a slew of other gaming companies, Full House was able to get some financial breathing room when its lenders relaxed some of the firm’s debt covenants.
“We believe that we have excellent relationships with our lenders,” said the company. “They recently agreed to waive the relevant March 31 covenants in our loan agreements in recognition of the circumstances. We expect to have that agreement executed imminently. We have also been discussing amended covenant levels for quarters beyond the first quarter.”
Full House gave investors reason for optimism, noting it expects its income stream to significantly diverse with addition of sports betting in Colorado and Indiana. The Centennial State is forging ahead with plans to launch sports wagering on May 1 although offerings for gamblers are currently slim because of the coronavirus. The Hoosier State is already one of the fastest-growing sports betting markets in the country.
Full House said it has six sports betting pacts with partners in both states.
“Contractually, these six sports betting agreements in Colorado and Indiana should result in a combined minimum of $7 million per year in revenues for us after their launch of operations, with minimal expected related costs,” according to the company.