Golden Entertainment, Inc. Price & Performance (GDEN)

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 Charles Purtell, company's President and Chief Financial Officer On this call, we will make forward looking statements under the Safe Harbor provisions of federal securities laws.

Actual results may differ materially from those contemplated in these statements. Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise. During the call, we will also discuss non GAAP financial measures and talking about our performance.

You can find the reconciliation of GAAP financial measures our press release, which is available on our website we will start the call with Charles reviewing details of the fourth quarter results and a business update. Following that, Blake and Charles will take your questions. With that, I will turn the call over to Charles. Thanks, James. The fourth quarter Golden During 2024, we streamlined the portfolio by closing on the sale of our Nevada distributed business the last of our non core divestitures at attractive multiples which collectively generated over $600,000,000 of proceeds.

We use these proceeds to optimize our capital structure reducing our leverage as well as lowering our cost of capital by repricing our term loan. Also in 2024, we accelerated capital returns to our shareholders by instituting a regular quarterly dividend repurchasing 2,900,000.0 shares of our common stock representing 14% of the free float outstanding.

Turning to our financial results. In the fourth quarter, our operation generated revenue of $164,000,000 and EBITDA of 39,000,000 bringing our full year revenue and EBITDA in 2024 to $667,000,000 and $155,000,000 respectively. When looking at Q4 for our continuing operations, our results were lower year over year, but up meaningfully from Q3.

Which we noted on our last call would be the low point in our quarterly financial performance. In Q4, we saw material sequential EBITDA in improvements at all of our properties, excluding Laughlin, which as a market is seasonally weaker in Q4 compared to Q3. As we start 2025, we saw broad strength in January, offset in February given the tough comp where they However, when we look at the monthly cadence of our rated gaming revenue compared to prior year, October was down 7%, November was down 4%, December was flat to prior year, As mentioned, without the lift from Super Bowl, February will be down year over year. But our forecast for March currently shows better trends over 2024 which reinforces our anticipation of improving performance for our properties throughout 2025. Now for some additional color on our specific properties. At The Strat, for Q4, our weekend occupancy was flat to prior year at 95%. But our mid week occupancy was down 6% bringing overall occupancy to 75% for the quarter which contributed to declines in our Nevada Casino Resort segment. Las Vegas citywide occupancy and ADR were weak in October and November, particularly for mid to lower tier properties impacted by the election and a softer second year of F1.

However, both December and January were strong and we see from returning mid week occupancy and increased spend from our core consumer. In Laughlin, we increased market share in Q4 and reduced operating expenses. Our RiverFront Bingo room continued to help drive increased local business we have programmed our smaller entertainment venue with more frequent from reduced large scale entertainment. For our Nevada locals casinos, we saw increased revenue and EBITDA over last year as well as sequentially from Q3.

We also saw the same trend in margins with our local casino EBITDA margin improving to 46% Our biggest improvement within the local segment came from our small [indiscernible] which caters to our most value oriented guests and has been the most pressured over the last few quarters.

This property's recent performance is a positive sign for continued stability and growth in the locals market in 2025. For the fourth quarter, Nevada Tamer performance continued to be negative Tavern additions six of which were acquisitions where we are revamping prior ownership's operations and reinvestment strategy. Although a slower start than anticipated, these new taverns continue to improve performance month over month and should stabilize at expected levels by the end of the year. On a same store basis, we have seen sequential improvement in taverns with revenue up 6% from Q3 to Q4. [indiscernible] Moving on to our capital structure. We continue to maintain one of the best balance sheets in the gaming industry. With total funded debt of approximately $400,000,000 net leverage of 2.3 times EBITDA, and $220,000,000 of remaining availability under our revolving credit Since selling our non core assets over the last two years, we have repaid over $500,000,000 of debt and returned nearly $190,000,000 to shareholders through a combination of share repurchases and dividends. Including $113,000,000 in 2024. In Q4, we repurchased approximately 1,100,000.0 shares at an average price $32.65 totaling $36,000,000 We have $99,000,000 of capacity on our current buyback authorization and we will continue to pursue opportunistic share repurchases.

Which can be funded from our free cash flow and availability on a revolving credit facility given our low leverage profile. Our wholly owned casino and branded tavern portfolio is well positioned to benefit from the favorable long term economic trends in Nevada. Which remain some of the most favorable in the country. Nevada continues to be one of the fastest growing states in terms of population employment and discretionary income, which is anticipated Last year also marked the fourth straight year of Las Vegas visitation growth reaching nearly 42,000,000 people. This is still below twenty nineteen's visitor volume, highlighting room for continued recovery to pre pandemic visitation and beyond. Supported by billions of dollars of future development projects to drive growth in Las Vegas. We are confident in our business prospects for 2025. With expected organic growth to come from improved performance at The Strat stabilized revenues at our new taverns, the rest of our portfolio benefiting from the continued strength of Nevada's economy. We remain committed to exploring all options to maximize value for our shareholders. Including traditional M and A as well as monetization of our real estate holdings. In the meantime, we will continue to focus on operational efficiency investing our own assets, and returning capital to the shareholders.

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

Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. Our first question comes from Barry Jonas with Truist Securities.

Hey, guys. It's Patrick Keough on for for Barry. Thank you for taking my question.

First one from me. Has your thinking or the general environment around M and A changed the last time we spoke? No, Patrick, this is Blake. As we outlined on our last call, we continue to be [indiscernible] And pursuing all options really to grow shareholder value as Charles, I think, mentioned in his prepared remarks, We continue to believe we're well positioned for various strategic alternatives between potential share repurchases with value dislocation and other strategic alternatives we have plenty of capacity going forward to do both. So our situation is exactly the same as it was last quarter. And we are continuing to be proactive in pursuing opportunities.

Okay. That's great. Thank you for the color. As my follow-up, you'd previously stated that you've ramped promos for F1 this time around. Could you give any color on how that weekend trended for you in year two? And either way, do you have any conviction you could benefit further as the event carries on in years to come? Thank you.

Yes. Patrick, hey, it's Charles. So I don't think anyone expected dramatic fall off in F1. So where we saved and it was I would say, less bad for us was around ARR and vest in tickets and direct expenses related to the event, Where we did suffer a little bit was just that we weren't able to compress our rate at all given the low occupancy in the town relative to the prior year?

Okay. Appreciate the color guys. Thank you again.

Thanks. Thank you. Our next question comes from Jordan Bender with Citizens. Please go ahead.

Good afternoon, everyone. A strip operator noted the expectation that an uplift in you'll see an uplift in group and convention business in 2025 and 2026. So can you just remind us where you stand in terms of the recovery or your positioning at The Strat and what that means for the property as citywide continues come back Yes. Hey, Jordan, it's Charles. So if you look at 2019, we ran that property at almost 92% occupancy and we just noted for Q4 we're at 75.

So all of that is really mid week that we that for us, we are the overflow of others convention business. So when the town is more full with that, that an urge disproportionately to our benefit. And when you look particularly into 2026, you will have the convention center finished off with the third phase of their expansion.

Which is about $600,000,000 that they could finish off in Q3 of this year.

So once the convention center gets more use and more full with their new amenities, We're very close to that and we see The Strat benefiting from that increased traffic.

Thanks for that. And on my follow-up, switching to taverns, you noted expense growth in 'twenty four was fairly elevated. Without getting into any guidance, are you able to just help us with OpEx growth in that segment in 2025? And then maybe just more broadly, the major buckets or swing factors that we should be thinking about for the total company? Thank you. Yes. I would just say in the taverns as we move forward through through 2025 other than Q3, which is seasonally lower. So as we highlight on the call, we basically had to revamp the entire operation to six taverns that we took over for various reasons.

And so those operations now have trended positive from an EBITDA perspective.

And we expect them to continue to grow.

But we've completely revamped how they've traditionally those locations are traditionally reinvesting in customers. As well as the employee base. I think we've had to turn over every single employee. That created some disruption. But now we think we're back on a cadence that we expect those to be wrapped in line with the rest of the portfolio into at the end of twenty twenty five.

For the balance of the company, think it continues to be labor as a headwind. So So if you look at what we've been doing, we've been managing through a new culinary union contract at The Strat which this is the first year of that or this will be the anniversary of the first year of that where most of the cost increases occurred, So we expect those to moderate, but there will still be mid single digit labor in place within the [indiscernible] Working to mitigate as we go through the year.

Yes. Let me just add to that. I think that's exactly right. Our major initiatives just to put it another way, going into 2025 for all of our ops, our focus around our cost control efforts. And as Charles just mentioned, we're making significant progress already in those efforts and our revenues were up or excuse me, down modestly quarter over quarter plus or minus three So So we are laser focused on our cost opportunities with our broader portfolio, with the up most of our upside being there this year, particularly at Strat. In regards to being tangible and us being able to manage that. So off to a great start in that regard.

Thank you very much.

Thank you.

Our next question comes from Zachary Silverberg with Wells Fargo. Please go ahead.

Good evening.

Thanks for taking my question. You touched upon it a bit in the prepared remarks, but you mentioned how your you're seeing the consumer stabilizing or improving post election. Can you maybe just double click on those trends and what you guys are kind of seeing on the ground that gives you confidence to make the statement?

Yes. I think we've seen more health in the database So particularly within the locals market, So as we look at the database, the top tier of our database can continues to be strong both in terms of visitation and spend.

But the trend in Q3 that we really saw was the lower end of the database seemed to be continuously declining almost to double digit rates. That has moderated and we tried to give some cadence of within the quarter, within the fourth quarter how we've seen again those overall database declines that was mostly driven October by the lower in the database a little less in November, again in the low end of the database, to stable year over year to growing in January. So absent the Super Bowl comp, we're very confident in your growth in the health of within the database as we look into 2025.

An additional micro example to that I think it's important to point out that the Strat given the cost challenges that we've had and are currently making great efforts to mitigate and having success with that [indiscernible] for example, continue to show sequential year over year improvement. Even with the mid week challenges, our gaming situation with Astra is improving, particularly in the slots. We are approaching I think around 55% carded play at The Strat was when we took that property over was nonexistent. That's a huge upside for us to be able to target end market to our gaming customers, which we're seeing benefits from and the direct bookings at the property continue to improve. So all of that I think is maybe a bit in the weeds, but in particular for that property, we are seeing green shoots and we are making progress. In the gaming side of that property, even given the occupancy challenges. We believe is very positive going forward.

Thanks for the color. And just for a follow-up, no tax on tips and overtime seem to have some real momentum. You give any color on how this would benefit your assets or maybe not just your assets, but the Las Vegas in general?

It would obviously be huge for Las Vegas Golden the workforce. Think as it directly relates to us, that's about our match in that is about $2,000,000 from a tax perspective around those tips. So maybe not as meaningful, but certainly for our workforce it would be meaningful.

And we see those as just direct discretionary spending dollars that bend up back in the pool for allocation to gaming as their entertainment.

Thank you. Thank you.

Our next question comes from the line of Chad Bannon with Macquarie. Please go ahead.

Hi, good afternoon Blake and Charles.

Thanks for taking my question.

In the last couple of calls, I know you guys have addressed some of the the promotional activity, particularly in the Las Vegas locals Market has that seemed to abate at this point? And Charles, given your comments around the rated play improving, Are you willing to kind of let go more of some of that lower tier unrated play maybe some that's more interested in the promos in the market?

Yes. I think Chad we've seen stability. I think it was a little bit promotional over the summer months and now we've seen that level off and we view it as stable in the markets where we're competing here in the locals segment. I do think there is a reevaluation of how people look at reinvestment at the lower end of the database. That should obviously be a constant.

I think for us, it's a balance of how much you're investing in the existing players at low end of the database as well as reactivation of players that we maybe haven't seen back. So a lot of our campaigns are focused on both of that the reactivation of players and evaluation of what we have so that we're not over investing in this in any one segment.

Yes, Chad, promotional activity, I think, is remains in the category or is now in the category of rational. I think what we're seeing if there is any anything that we're seeing in the market, it's rational, it's food and beverage oriented, it's it's reasonable We aren't seeing at least from the major local operators including ourselves lead to anything that we think is could be deflationary.

Okay.

Thank you.

And then on the back on the strategic question that you addressed earlier in the call, [indiscernible] particular size of portfolio or maybe a leverage target, if you do proceed down the M and A route? How should we think about maybe the regions of the country that you'd be interested in? And then maybe more importantly, the financial implications and kind of a target leverage goal that would obviously come down Over time. Thanks.

Yes. Chad, I think it's easier to outline what we would not be doing. We would not be looking at any greenfield developments. And I don't think we'd be looking at any single asset acquisitions that are sub $40,000,000 to $50,000,000 of EBITDA.

I'd say outside of that, we are open to all types of avenues of M and A. And so I don't have to walk you through what those would be.

But I think that when we look at how we think about leverage in a pro form a entity, we said our target long term is three times or less, which is obviously where we are now. I think we'd be comfortable going higher than that.

But I wouldn't want to give you a number around that right now, but we want to have a quick deleveraging path either if we're in a combination with another company or we're an actual acquirer of another company. Chad, in the past, I've mentioned on these calls and in another conversations that if we do if and when we do something and something as Charles put, we want to move the needle. We don't want to go regionally into small operations that are capital deferred or disperse our management to a point that doesn't make sense. Given where we sit with our capital structure, with our current organic growth opportunities we can continue to be pretty patient What we're not patient with is our share price continuing to lag in these ranges. So that's motivation for us to, as I said, to be proactive But it's going to be, I think, a transformational type of an activity that would that we would pursue. It's not going to be kind of a piecemeal approach. [indiscernible] Thanks, Gian. Thank you. Thank you. The next question comes from Max Marsh with CBRE Securities. Please go ahead.

Hey, guys. Thanks for taking my questions.

You're at 72 taverns now, I know some of those are still ramping, but do you have any idea of what the cadence of new acquisitions might look like Las Vegas Valley and whether or not you guys have thought about expanding that business geographically outside of Las Vegas?

Yes, we definitely have thought about expanding it outside of Las Vegas. We obviously we have a few that are up in Reno right now. I think that the gaming component to those taverns as long as there's opportunities to continue to grow in Nevada, which we think that there are, that that will be the focus. Given that aspect of it. And within the context of acquisitions versus Greenfield, we're much more focused on Greenfield developments right now. We have two sites signed up for this year.

And we'll look for others, but I don't think you'll see us in the acquisition mode for the near future.

Going to be much more focused on adding A plus sites to our existing portfolio in Las Vegas.

Great. Great. Thanks for that. And just quickly as a follow-up, here. If you guys have any update of the ramping of the Atomic Golden facility at The Strat, whether that might be helping drive mid week demand. And I believe you also have some additional excess land there. If you could just update us on your thoughts or plans for that?

Yes. So, Atomic I think Atomic continues to move forward in terms of continuing to attract additional business. I was at the property yesterday and we are seeing some bookings that are is a package between our room product and atomic. They are improving from what I understand greatly in their group business. We do see some crossover from that. We continue to believe that as they We will refine our ability to drive cross traffic from that facility, which I mentioned before is a world class $80,000,000 facility.

So we are very continue to be bullish on that particular activity moving business into our property as they continue to grow. The excess property [indiscernible] adjacent to that. But more importantly, there's 5.5 to six acres directly across the street on Las Vegas Boulevard We continue to be very active and have in-depth conversations with a lot of different uses for that particular piece. We see that as a great opportunity for The Strat going forward. With a blank canvas, we want to make the right decision, but there is a lot of optionality that we are discussing on that additional acreage.

Great. Thank you, guys.

Thank you. Our next question comes from David Katz with Jefferies. Please go ahead.

Hi, good evening.

You for [indiscernible] Look, it sounds like the geography of where you're potential consideration markets may be expanding I want to be clear that that's is that something outside the state of Nevada?

Or should we still be thinking within it? And if we're going outside, To talk about [indiscernible] what kinds of markets Would be, I guess, non starters or inbounds or out of bounds, anything would help.

Thanks.

Yes. Thanks, David. I think if we're looking out of state, it would be in the context of multiple properties And as Blake was alluding to a more transformative type of deal for us. I think we would only look really for single assets within the state. So I don't really want go into it much more beyond that, but we won't go by a one off riverboat in Iowa that's doing $15,000,000 to $20,000,000 of of EBITDA. But things that are part of a larger portfolio, we certainly look at that.

And again, I think we'd be not interested in pure greenfield development projects. But certainly, if there's an aspect of future growth and development with existing cash flow in operations we would look at those opportunities.

Understood. And should we be thinking As broadly as historical racing markets or other kinds of gaming machine facility markets that may be classified as adjacencies to the traditional commercial casino markets?

We would except for the distributed gaming business. So as part of our divestiture of that business, we do have a non compete to reenter into that business. So we would not look at that. But to the extent that there is growing cash flow with any adjacencies, we look at that. Obviously, we don't have an online presence, so we would not be looking on the digital landscape. We'd be purely focused on brick and mortar opportunities where we could use our expertise and incorporate infrastructure to help grow and improve those businesses.

Very helpful. Thank you. Thanks, David.

Thank you. Ladies and gentlemen, as there are no further questions, that concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.