Golden Entertainment, Inc. (NASDAQ:GDEN) Q4 2023 Earnings Call Transcript
Golden Entertainment, Inc. (NASDAQ:GDEN) Q4 2023 Earnings Call Transcript February 29, 2024
Golden Entertainment, Inc. misses on earnings expectations. Reported EPS is $0.18 EPS, expectations were $0.25. 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, and welcome to the Golden Entertainment, Inc. 2023 Fourth Quarter Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note that today's call is being recorded today, February 29, 2024. I would now like to turn the call over to Mr. 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 today's 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 reviewing details of the quarter 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. The fourth quarter concluded a transformative year for Golden Entertainment. During the year, we streamlined the portfolio by divesting noncore businesses at attractive multiples, reduce leverage to favorably refinance our credit facilities and return capital to shareholders through a special dividend and opportunistic share repurchases. To begin 2024, we completed the sale of our Nevada distributed business in January and established a quarterly dividend to initiate regular returns of capital to shareholders. In the fourth quarter, our operations generated revenue of $231 million and EBITDA of $48.8 million, bringing our total annual revenue to $1.1 billion and annual EBITDA to $222.5 million. Our fourth quarter excludes the operations of the Rocky Gap Casino Resort and the Montana distributed operations that we sold in the third quarter, which created the majority of our reported declines in consolidated revenue and EBITDA.
Adjusting for these sales, revenue was down 1.6% and EBITDA was down 11% in the fourth quarter, with margins impacted by increases in labor and other costs over last year. Moving to the results of our continuing operations. For the quarter, revenue at our Nevada Casino Resorts was up slightly to last year, while EBITDA declined 8.8%. Unfortunately, we did not see any benefit from the Formula 1's initial race in Las Vegas with distressed November EBITDA down about $800,000 year-over-year. Despite the disappointing F1 experience for us, STRAT occupancy in Q4 was 79%, up 2% over last year, with the weekends full and the midweek occupancy improving, but still lower compared to 2019. We are still missing 125,000 room nights at the STRAT when compared to 2019, which we see gradually returning as we complete renovations and add amenities to the property.
In October, we completed the renovation of STRAT's original 118-room tower, the last of our major upgrades to the property, bringing our total renovated rooms to 1,300. Recently, we saw tremendous pickup during Super Bowl, resulting in approximately $1 million in incremental room revenues over that weekend. After a few weeks of construction delays, Atomic Golf should be open in March, and we are excited to welcome this new amenity to the STRAT. In Laughlin, fourth quarter revenue was up slightly despite having one less major concert. While EBITDA declined 9%, primarily due to higher labor costs. In December, Laughlin revenue and EBITDA showed positive growth over the prior year, and we continue to see signs of margin stabilization to start 2024.
Entertainment is a big driver of performance for our Laughlin properties, and we are working to optimize our offerings to create more cost-effective traffic drivers to our venues over the coming year. In addition, our new bingo room, which caters to local residents, has been successful in growing midweek revenue at our Edgewater property. Q4 revenue was down 4%, and EBITDA was down 10% for Nevada Locals Casinos. The majority of the EBITDA decline was at our Arizona Charlie's Boulder property, where we experienced reduced room nights due to the loss of a meaningful group contract relative to last year. This led to lower margins in the fourth quarter compared to last year. However, sequentially, over third quarter, the operating margin of our local casinos has improved.
For Nevada Taverns, fourth quarter revenue was up 3% compared to last year and EBITDA was up 4% as we acquired four new taverns under a new brand and same-store performance remained stable. As of year-end, we had 69 tavern locations in Nevada with 66 of them in Las Vegas. We believe it could create a portfolio of 90 to 100 taverns without meaningful increases in corporate overhead and have targeted three to four additional locations to be added in 2024. The tavern model continues to generate attractive returns with the last eight taverns we have built or bought creating an average ROI of over 25%. In January of this year, we completed the sale of our Nevada Distributed Gaming business for approximately $240 million, including purchase cash.
In Q4, our total distributed operations are down meaningfully, given that our divested Montana distributed gaming operations are included in last year's results. Between the sale of our Nevada distributed operations this January and the third quarter sales of our Rocky Gap property and Montana distributed operations, we received total proceeds of over $600 million, generating over $500 million of liquidity after taxes and transaction expenses. These proceeds have significantly improved our leverage profile and enhanced our strategic flexibility. We reduced our debt by over $60 million in Q4, bringing our total debt repayments to nearly $240 million for the year. Our outstanding debt at year-end consisted primarily of $398 million floating rate term loan and a $276 million of fixed rate bonds.
We will repay the outstanding bonds in April, leaving us with a simplified capital structure less than 2x net leverage and full availability under our $240 million revolver. Given our low leverage and liquidity profile, we are establishing a quarterly cash dividend of $0.25 per share, the first of which is payable on April 4. In addition, we have over $90 million remaining under our stock repurchase authorization that we will use opportunistically to further return capital to shareholders. Divesting our noncore businesses has concentrated our portfolio to wholly owned casinos and branded taverns in Southern Nevada, where we see some of the most favorable macro trends in the country. Going forward, our primary organic opportunities will come from improved performance at the STRAT and increased Tavern footprint and the entire portfolio benefiting from the continued strength of Nevada's economy.
That concludes our prepared remarks. Blake and I are now available for questions.
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