Golden Entertainment, Inc. (NASDAQ:GDEN) Q1 2024 Earnings Call Transcript May 8, 2024
Golden Entertainment, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good afternoon, ladies and gentlemen. Thank you for standing by, welcome to the Golden Entertainment First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note that this call is being recorded today. Now I would like to turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead, sir.
Joe Jaffoni: Thank you very much, operator, and good afternoon, everyone. On the call today is Blake Sartini, the company’s Founder, Chairman and Chief Executive Officer; and Charles Protell, the company’s President and Chief Financial Officer. On this call, we will make forward-looking statements under the Safe Harbor provision of the federal securities laws. Actual results may differ materially from those contemplated in these statements. Additional information concerning factors that could cause actual results to materially differ from these forward-looking statements is contained in today’s press release and our filings with the SEC. Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise.
During today’s call, we will also discuss non-GAAP financial measures in talking about our performance. You can find the reconciliation of GAAP financial measures in our press release, which is available on our website. We’ll start the call with Charles Protell, reviewing the details of the first quarter results and a business update. Following that, Blake and Charles will take your questions. With that, it’s my pleasure to turn the call over to Charles Protell. Charles, please go ahead.
Charles Protell: Thanks, Joe. We started the quarter by completing the sale of our Nevada distributed business, the last of three non-core businesses that we divested over the past nine months. The proceeds from these transactions were used primarily to repay over $0.5 billion of debt including the redemption of our bonds in April that were outstanding at the end of the quarter. The financial flexibility recreated by reducing leverage and maintaining liquidity has allowed us to establish a recurring dividend at an attractive yield and positions us to fully utilize our current $91 million share repurchase authorization. Turning to our financial results. We generated revenue of $174 million and EBITDA of $41 million in the first quarter, which excludes the prior year operations from our divested Maryland casino and distributed gaming businesses in Nevada and Montana.
Comparing the results of the continuing operations in the first quarter, total revenue was down less than 1% but EBITDA was down over 15%, primarily due to increased labor costs in our Nevada Casino Resorts, as well as weaker revenues from our higher-margin Nevada Locals casinos. At the STRAT, total occupancy improved almost 8% to 78% for the quarter with over 6% of improvement in midweek occupancy. Unfortunately in March, Las Vegas missed several large drivers of visitation compared to last year including CONEXPO, which is one of the city’s largest conventions, the hosting of NCAA tournament basketball games as well as a few sold-out concerts at Allegiant Stadium. Despite a successful Super Bowl weekend in February, our ADR was down about 8% for the quarter.
Weekend occupancy at STRAT was 96% for the quarter but we were still missing over 12% of occupancy during the week compared to 2019, although that gap is narrowing with each passing quarter. We view improving midweek occupancy as a key component to growing EBITDA at the STRAT and we continue to believe that our recent capital investments and the growth in Las Vegas visitation will increasingly improve our business throughout the year. In addition Atomic Golf opened at the end of March, which is expected to drive additional visitors and locals to the STRAT for this new entertainment experience. On the expense front, the STRAT experienced higher labor costs, primarily driven by our new union contract that increased [indiscernible] by about 11% year-over-year.
This will anniversary after Q2. We also had about $500000 of additional advertising expenses in the quarter to enhance our media campaigns for the STRAT in order to build consumer awareness and drive future visitation. In Laughlin, we grew revenue slightly in the quarter, supported by our new bingo room in Edgewater that is driving more local customers as well as having 8000 seats filled for a concert at our Laughlin Event Center. Our rated gaming revenue and database activity in Laughlin remains healthy, with improved visitation spend across all tiers of players in the market. Margins in Laughlin were impacted by higher labor costs, as we compete for employees out of the limited pool of labor, primarily residing in Arizona. We also experienced higher entertainment expenses related to the concert that increased comp activity as well as advertising expense.
For our Nevada Locals Casinos, revenue declined 5% and EBITDA declined 13%, primarily due to decreased visitation spend in our low- and mid-tier rated players. Our largest revenue and EBITDA declines were in our Arizona Charlie’s Boulder property, which we view as the most value-oriented casino in the portfolio. In addition, we have been impacted by road construction, affecting the entry to our Arizona Charlie’s Decatur property as well as seeing some increased promotional activity in the market. These trends have continued in April, but we see improvement in May. First quarter Nevada tavern revenue was up 1% over last year supported by the purchase of four new taverns in November, bringing our total locations to 69 at the end of March. On a same-store basis, total revenue declined 4%, driven by declines in food and beverage revenue, partially offset by a slight increase in same-store gaming revenue.
We attribute lower same-store revenue to declining retail demand as well as less frequent visitation from our lower tier-rated players. As a result, EBITDA for the Nevada taverns declined 11%. In April, we purchased two additional taverns, growing our tavern portfolio to 71 locations, with 68 of them in the Las Vegas Valley. We anticipate opening our 72nd tavern by the end of Q2, and we still target growing the portfolio to over 90 locations within the next few years. Now, let me provide an update on our balance sheet. Outstanding debt at the end of the quarter consisted primarily of a $397 million term loan and $276 million of unsecured notes, with cash on hand of approximately $400 million due to proceeds received from the sale of our distributed gaming business.
In April, we used $287 million of cash to repay the outstanding notes and accrued interest as well as another $15 million for initial dividend and the purchase of two taverns. This leaves us with about $100 million of cash and access to $240 million of additional liquidity from our unfunded revolver. Our current net leverage of less than two times, and strong liquidity profile provides us with the flexibility to continue to invest in our own assets, return capital to shareholders and evaluate potential strategic opportunities. While we continue to review actionable strategic opportunities, the current market environment and macro backdrop has made it less conducive to M&A for us. At this time, it’s difficult to find an opportunity to acquire Nevada-based casinos with owned real estate, which would be more accretive than acquiring our own stock, which we intend to do over the remainder of the year with our current repurchase authorization.
That concludes our prepared remarks. Blake and I are now available for questions.
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