Earnings call transcript Q1 2023

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Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Golden Entertainment First Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode, a question-and-answer session will follow the formal remarks. Please note that this call is being recorded today.

turn over to Investor Joe like Relations. I'd the to conference Jaffoni, Now sir. go Please ahead,

Joe Jaffoni

very you and Thank operator, much, good afternoon, everyone.

today Chief Charles call Founder, and the is Blake, Officer. Sartini On the Chief Chairman Financial and the Executive Protell, and Officer; company's President Blake company's

of differ call, provisions materially contemplated these will statements. from safe we laws. securities today's forward-looking statements those federal On the Actual under make harbor the results may in

is differ factors SEC. concerning actual could in from and these release that information statements by Except law, the materially information Additional we obligation results our forward-looking as statements or undertake of cause these a contained required with new press today's otherwise. no to filings update result to as

measures performance. in talking During we the call, about financial will non-GAAP also our discuss

measures the the press business results We'll start update. You reconciliation our is on reviewing financial Charles first of with GAAP of the our in available find details quarter the website. which release, the can and call

and Blake that, questions. Charles your Following will take

With that, go to over call ahead. Charles, the Charles turn Protell. to please it's my pleasure

Charles Protell

Joe. Thanks,

of pressures $XXX well ready quarter, last year. undertaking for but of with Vegas later cost generated Las impacted revenue calendar revenue EBITDA be STRAT the year, this room and ongoing renovations For the we by $XX first up of disruption we over as from to million EBITDA million, as are the strong

announced M&A acquire improved the resort. into we Commission a updates At Before our have activity. operations, Gap the previously of few Rocky getting to Maryland April, a end Casinos Century Lottery the on

to we We announced of June. then the lease Maryland, J&J we of to In still in anticipate will gaming and operator as distributed by of businesses close partner and by in largest country look with our closing. Montana state year-end, after more March, taverns. close, forward one largest in having in become we step VICI's have approval distributed the the which and Illinois, confident sale Gaming, J&J both we which We will our Nevada the be Nevada able end the remain distributed operator will the to transactions our the

these transactions owned gaming divesting noncore leaving of Collectively, and goal these businesses the casino portfolio us both at footprint valuations, assets a with accomplished in opportunities. effectively the us of Nevada largest Importantly, attractive $XXX invest tavern state. of our will reposition transactions generate million shareholders proceeds, assets, net to will over core return our sheet, balance evaluate which capital strategic more in and allow our to

increased X.X%. about are renovations rose having given expect revenue rooms less Nevada having resorts the QX similar in for results, and STRAT and $X quarter completed. the segment from in the Revenue EBITDA million cost our us at X% X% Casinos EBITDA Disruption ongoing renovations. declined EBITDA, disruption rooms Within X%, before during despite the we available increased while off-line XX% about

is We we able to construction of July citywide open expect development to event year. and our in accelerate rooms throughout willing now finished the of by the end to to disruption amenity partner initially a of golf pull new with renovations plan Atomic progressing also Xth and renovate fall construction advance the these before and XXX were rooms get nicely, the little to year, the are but calendar. we this live and

quarter. X% last XX% down increased in one attendees Laughlin from Laughlin this less Laughlin had had was revenue and X,XXX We EBITDA down was than as labor this we event comp Center more a year. in less challenging year, and resulting Event XX% as utilities concert,

event have the we a QX, For over in Laughlin, increased months. is which calendar expected stronger visitation drive to coming

our revenue for outpaced the of a too. our higher Las and strong where Pahrump quarter with our maintained has Within casino Vegas Locals properties, local Nevada EBITDA. performance increased rated few Our guests, year-over-year segment,

were compared margins sequentially Casino last Nevada from QX. QX Our but to of QX overall year, and up down

year. calls, last we QX in recent of to said cost on began increases moderate As

expect So be the our to going forward, casino roughly this margins we in quarter. range of

At for quarter year. last costs to EBITDA Rocky the were but up, impacted compared higher Gap, payroll revenues

As papalize on property expect very after started, will higher Casinos summer for closing. the Rocky gets visitation, season Gap we the Century well perform and to

operations, and For tavern first and Nevada tavern last EBITDA the quarter same-store one from was down reflecting revenue. portfolio in less revenue year, lower

year. other down was result wage partially the labor revenue expenses demand impacted on XX% our and tavern the over increased Total due margins were employees back-of-the-house operating for by of labor with strip. inflation last meaningfully This up that primarily to X% is

and demographic growth tavern margin Las Vegas revenue long-term to current expect pressures, trends strategy. our in the we Despite support

With leading tavern distributed for our contract locations focus now that our to of expanding be third-party have we our businesses, market acquired sites. turning six to under agreements we the development sale two And to end, and future share. are

our expectations. opened we in and newest tavern is with line our addition, In which performing up ramping in April, well

of signed at will million annual year or XXXX, end the approval to they $X expect regulatory that EBITDA acquisitions results. the our on anticipate to close about and tavern the We depending of add early

while similar we in saw weakness tavern development premier own performance decreased tavern third-party was in add XX%. compared acquisition distributed Las about sites continue EBITDA to across some represents XX% Our the Nevada was Nevada pipeline which flat Vegas third-party for our the Valley. revenue our will unit growth, We and quarter. to last partners, Total to year,

remains grew market. Knights run spend. improved are tavern and in as and accounts helped Golden with playoff new visitation in we leader performance the has Montana, our addition We of seeing and EBITDA April In the the revenue May business a and

Moving to sheet. our balance

approximately ended of million cash and million, the outstanding cash and Our total equivalents. $XXX we with $XXX quarter debt is

X.X net and remains leverage intend maintain below forward. times we at our Our X going net times, to leverage

to times to loan, proceeds sale QX. after use $XXX plan lien reduce X.X approximately We we from of of a Gap basis, Rocky the in our will forma million leverage first our will the Rocky be term pro of which refinance the On sale Gap.

pro have significant pursue of our moves room to more sale or assets, business, X our shareholders. closing investing net pursuing times. leverage down whether in will Looking we own our leverage than of to forma capital a acquisitions less after structure forward, value-creating in capital to X.X of times, With net target the aggressively our initiatives, distributed returning the

we our in modest will primarily the announced our near closing said, core on leverage That on in focused term, reinvestment maintaining profile. executing be our businesses previously and transactions, low

will distributed remain Las regulatory the being we strip from will the as growth of environment and in focused Rocky and to have Vegas, transformed company also leading as most which own These in casinos benefit Gap the the After our businesses, Nevada Las Vegas assets the competitive and population platform. XXX% on with stable gaming continue to the tavern long-term local sale of will country. visitor well

our Regardless potential take establish will us in of our acquisition one opportunities outlook, of advantage most the a markets regular of in to we and future economic to have pristine to of balance shareholders. more the industry, enabling our core sheets capital return

That I concludes are available remarks. prepared now questions. for and Blake our

Operator

Instructions] will Your B. question from Riley. first ahead. [Operator come Please David with go Bain

David Brian

ingress value casino separate of I'm on you. high it up, terms since get signage of driver question the has the to little the more to its how cross completion to Hi, detail pollination look opportunity you was coming but I I the potential coupons maximize around Charles. Blake Thank in a to casino? awards, trying margin, My a your hoping with it's Atomic understand casino. promotion, or bit very golf that's around, strategies first understand anything strategic or to around and

Blake Sartini

facility, a on all two ownership of that answer is David. potential originally mean have But to regularly. I combine believe contemplated. beyond we folks we willing cross-marketing those with the even side touring short the the group after opportunities we Yes, what We significant meet very the properties. there's above. had And

think will to facility. past, said told we've I XXX,XXX be that by roughly potentially at in XXX,XXX looking we've driven that visitors -- we're the

the to golf, let's And within consider through have transition the get here there is we thing Atomic is those parking is the of have property there our people say, garage, to facility. rideshare our to the to a plenty capacity and main them, majority of parking I anticipation is adjacent to which some drop-off, current think

efforts intend one-off, can of -- marketing we and But offers into there's kinds things primarily, But program. detail, kinds primarily without property all will. we our we We combine there's granular there. property, do getting intended of rewards to can -- make that with player can can to all we if our integrate that you

particularly, pretty can confident we're as you to in those we Casino. the we renovated casino, South the we've call know, what people But stick get that

gaming on will casino and As north that that we we offerings and go renovate traffic. food which with beverage more we additional to capitalize anticipate forward, foot end

very before focused the after are facility ensuring reasons our the golf. above, the getting said, to into detail, those granular we focused, many of or people all Atomic without with as So while are done Atomic properties that you golf they -- have visit they within on

David Brian

Perfect. tavern guess second a Or then broader on focus PT's outside kind and still with that would the Gold strategy. one is the only in Sierra Las Vegas be Las And focus the of Laughlin? of on expansion? expansion Okay. my I include brand a Nevada, Could Vegas Reno,

Blake Sartini

but distributed great continue third-party ability within question, we states, other forgo we Charles brick-and-mortar only what as say outperformed business David. environment. our are or of, in not a our the divesting does not non-core platform, to we operate by assets Nevada, mentioned, That's route would control I non-core, the -- believe with we our where to

may states as brick-and-mortar open who the there versus opportunities footprint. could There potentially is side on potentially participate of and we our brick-and-mortar be broadening third-party -- as So side. being J&J, route the other a lot other their there markets partner, synergies in up, we is with

David Brian

Thanks, Charles. much. Thanks, so you Thank Blake.

Operator

Katz ahead. with comes Please next go Your David question from Jefferies.

David Katz

Hi, line afternoon to wanted little follow everyone. that bit. a I taking my just on questions. Thanks for

kind share about kinds qualitatively take back size, you issues other just Thank to of talk up located? those it's in to would be willing leverage you. Just terms that of parameters of where than any where might

Charles Protell

Yes.

From hey, I said existing -- Like pretty structure. a a X think the We're capital Charles. the perspective, lot within call, of capacity been on going that's net David, clear. I leverage to leverage our below we've from a times. it's keep

future. transactions to think the on leverage closing I low, think up keeping the our spent in time may sheet that balance we this on year come opportunities needs be these about those should focusing can

to and around of about our the it's in are percent new have our to. recent all we ROI tavern respect openings, specifics builds. the those ROIs taverns, investor on deck, a we XX-plus where data With track is And tracking remodels

to tavern So ROI find that pursue. something still that of we opportunity to opportunities is the in bill the quantum we when in new portfolio. But be small probably should They're the means it's sites quite us, terms just frankly, most EBITDA. that, attractive or of premier acquisition doing

David Katz

a just in area and for Then is may you available. us what in you this at attention Vegas point Las way? Can after of know terms this land Perfect. and that's remind available follow-up, excess activating and I in of it some you all an have whether

Blake Sartini

actually Yes. very question. That's clear, great

the our up here we property If to you in Nevada in owned contiguous on current of to property. add take that and/or and develop, sit addition adjacent each already our core assets wholly assets the have that

XX which which If of in a blank River frontage. feet approximately is river you include the Colorado canvas some Colorado with Belle, X,XXX is acres,

whatever. existing additional ancillary acres third-party whether XX rooms, properties, that investments, properties amenities them hotel add additional our those all between or high-density approximately have provide benefit to to if develop would they're casino up We space you

Colorado answer your to it's question, about include the So you XX if Belle, acres.

generate the those for properties estate to we to perspective, between would you of have XX invest the Colorado Charlie's, real just Pahrump at Arizona acres facilities. additional additional STRAT, Laughlin exclude about and to that our it's returns in If Belle

David Katz

Thank much. you very

Operator

ROTH Your go Edward Engel ahead. next comes question from with MKM. Please

Edward Engel

there my Hi, investments thanks Stratosphere us Thanks. what fit projects the year? room taking of renovations, than the this in the please first the are half you just on maybe terms maybe of some other in guess, other question. for also at being I of remind Could going completed

Blake Sartini

Yes.

which level, mezzanine completed you embarked which rooms, we We know, HX January have as pool, by about, course, should the is began on for also property. our Memorial the Of talked pool main Day. our that main the in we be

facility, Asian moment. We extremely also our at well is the have Chi open doing new restaurant, which in which

Those are that are the currently. on things going

our the or and we But I and the north prior at amenities We opened this on food primary my other time. comments, in mentioned rooms facility later. as have plans, coming casino, pool, investments the that just in point

Edward Engel

longer floor, that term. And the within year's the related a guess Thanks. on I future that, projects to budget? is casino of that more Or this is

Charles Protell

things and all made. that that we mean, we've I we look I those performing, we we're growth No, well, at things do. property showing that say, Those doing the return on think we are the we're look, if that investment are and could think is

look we're now get at premium we'll rooms. currently renovated think you QX, seeing right to going over I where those have the end the of if half a we're in we be of ADR $XX when routes to where

We have of all up space. will touched pool the

main We food we've casino, in and and will then casino have all and the touched on up north the the life beverage work refreshed offerings. some

-- and So Atomic balance a off adding the of coming way, golf $XX the not our in of sheet. amenity that we're by is million form

as see that So and further could to to investment a the of be into really the in what in property. going [indiscernible] when what into fall as able we [ph] that get the we'll to it all we're you of does then that, do we at head to be look think raters property line, the evaluate with I position see Bowl, the Super trajectory when with the

Edward Engel

you. Thank helpful. It's

Operator

[Operator comes Instructions] question with Your from Please next go ahead. Macquarie. Benyon Chad

Chad Beynon

for my your revenues comment, last were Afternoon, wanted but million Thanks up you're able renovated quarter inform compression Strip asked talk to of weekdays. quarter, on Charles, just be question. for about Obviously, what you rooms? Blake. you will the charge the I some your right to to to respect think kind significantly, just your Charles, the roughly $X to help I Thanks. on in gap the And Can of rooms hit with year-over-year. now. about is then of with saw this kind taking what ADR average what kind going the

Charles Protell

mean, for And occupancy the performance I 'XX, look how And quarter's XX%. where this down all it, say kind is I'd is we really to XXXX you that we about of looking most back. look, if do that Yes. part. to relative occupancy were at in we think how of is relative at still get midweek

we while little which displacement bit. a that that going think on, weekend, the that of I had was us some construction happened during there this cost

aren't when So performance the facilities, who, perspective, to of others improvement and space, have room way, from larger have offline, base group that. XX% we in quite at have we a Strip EBITDA your by revenue there. meeting again, our you relative you expect look But

up off-line. with the of So STRAT show from up our that encouraged pretty the EBITDA perspective, rooms at we're XX% are revenues

Chad Beynon

maybe have then that different you And you. Thank Great. or you cater meaningful change different any the tiers within in taverns, of your with your seen database within trends the customers levels to? of

Charles Protell

think past, within across a when clearly Yes. the was which comp the demographics I mean, you had QX, back of very the tavern I you we all look go the ago, if for performance strong plus look, database. over year

that bit and have we've the off We little tail seen bit, little at that a end seen more higher of a volatility database.

see more, up I in alternatives are think we folks opened tavern traveling things those just are volatility within had the as that top town, And lot a spend. end. for more you've more there's more

Now QX. that's in

nights like run player deeper across when business pick of playoffs, that make things the also the we tavern I it up happen into database. see the entire the the think spectrum

Chad Beynon

Thanks for the Nice Okay. color. quarter. additional

Operator

you. Thank

from Your DeCree Securities. Please go next question with ahead. comes John CBRE

John DeCree

using mentioned Blake, Thanks I but well. Charles. loan in in not bonds I doing proceeds caught the I'm not had I'm Gap anything And XQ to you taking Hey, question. down. and thinking if the Rocky for were my remarks, about refinancing caught potentially that as with term the that. Charles, pay prepared if about you sure sure from

to capital June? So closing closer structure Gap as Rocky we is in maybe plans the question get

Charles Protell

rate existing would said refinance think the distributed and the cost from forward, term, our lower near you the year. unsecured that is to we'd off proceeds up I debt loan the on at our term this until outstanding, the use a is $XXX if then protection after think the leave to in and we in point, that pay a distributed April Rocky I outstanding. now million their sale of of as fixed the And at sale just have do we million the the like we perspective next use, from I right which proceeds are that. Yes. call frankly, is We we bonds quite to $XXX view secured bonds fast mean Gap remarks, than in close of

million term find go plenty us if Now all loan of $XXX-ish million $XXX that unfunded forward loan net revolver are basis, you fast provides a million levered. that's through $XXX a place that, a EBITDA of million a with liquidity entity we times to opportunities. just in We term X.X on $XXX

John DeCree

that. for all Thanks

one my caught ask follow-up question, You I'll operations. so maybe about

You cost similarly. the that inflation metric I the think you've of labor taverns, up XX%, in was up and components experienced discussed different think quarter, if had in I Laughlin,

if when us inflation wondering was you of anniversary. and help maybe that could I cost you for kind understand revisit us start the to

that it off, I think taper you've starts all that's of mentioned to maybe absorbed.

or chunk at good it. of a -- least So

little you bit of would thinking maybe how more that us could about if So costs, a color helpful. on give be the balance year the for you're

Charles Protell

Yes.

think been I this QX, mean, range. months, look, the -- consistent was if have nine at QX, that the you I look within last fairly QX, margins over

you'll kind back, we've So But if increases of been some still months, saw some going hey, the think last forward have margins cost we're that margin of the see in people, we it's despite point. telling that historically over the that of continued you year-over-year this at our in at point again, we from view settled look QX, QX. nine

John DeCree

thanks, Blake. Got Charles, Thanks, it.

Operator

Thank session you Thank concludes presentation. today's call. you. and attending for our conference question-and-answer This today's

may You disconnect. now

Golden Entertainment (GDEN) 10 May 232023 Q1 Earnings call transcript