Golden Entertainment (NASDAQ:GDEN) Misses Q4 Revenue Estimates
Casino, tavern, and slot machine operator Golden Entertainment (NASDAQ:GDEN) missed analysts' expectations in Q4 FY2023, with revenue down 17.5% year on year to $230.7 million. It made a GAAP loss of $0.33 per share, down from its profit of $0.35 per share in the same quarter last year.
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Golden Entertainment (GDEN) Q4 FY2023 Highlights:
Revenue: $230.7 million vs analyst estimates of $234 million (1.4% miss)
EPS: -$0.33 vs analyst estimates of $0.25 (-$0.58 miss)
Gross Margin (GAAP): 44.4%, up from 42% in the same quarter last year
Market Capitalization: $1.05 billion
Blake Sartini, Chairman and Chief Executive Officer of Golden, commented, “In January, we completed the sale of our Nevada distributed gaming business, completing a year-long process of divesting our non-core assets that also included the sale of our casino resort in Maryland and our Montana distributed gaming business. Following these transactions, our portfolio is comprised of Nevada casino resorts, Nevada locals casinos and Nevada’s largest branded tavern portfolio, all of which are expected to benefit from Nevada’s positive economic trends. The completion of our non-core divestitures generated significant cash proceeds, which strengthened our balance sheet, created strategic and financial flexibility, and facilitates returning capital to our shareholders.”
Founded in 2001, Golden Entertainment (NASDAQ:GDEN) is a gaming company operating casinos, taverns, and distributed gaming platforms.
Casinos and Gaming
Casino and gaming companies that offer slot machines, Texas Hold ‘Em, Blackjack and the like can enjoy limited competition because gambling is a highly regulated industry. These companies can also enjoy healthy margins and profits-have you ever heard the phrase ‘the house always wins’? Regulation cuts both ways, however, and casino and gaming companies may face stroke-of-the-pen risk that suddenly limits what they do or where they can do it. Furthermore, digitization is changing the game, pun intended. Whether it’s online poker or sports betting on your smartphone, innovation is forcing casino and gaming companies to adapt to keep up with changing consumer preferences such as being able to wager anywhere on demand.
Sales Growth
A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one may grow for years. Golden Entertainment's annualized revenue growth rate of 4.3% over the last five years was weak for a consumer discretionary business.
Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Golden Entertainment's recent history shows a reversal from its already weak five-year trend as its revenue has shown annualized declines of 2% over the last two years.
We can dig even further into the company's revenue dynamics by analyzing its most important segment, Nevada. Over the last two years, Golden Entertainment's Nevada revenue (primarily gambling) averaged 2.4% year-on-year growth. This segment has outperformed its total sales during the same period, lifting the company's performance.
This quarter, Golden Entertainment missed Wall Street's estimates and reported a rather uninspiring 17.5% year-on-year revenue decline, generating $230.7 million of revenue. Looking ahead, Wall Street expects revenue to decline 33.3% over the next 12 months, a deceleration from this quarter.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income–the bottom line–excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Golden Entertainment has been a well-oiled machine over the last two years. It's demonstrated elite profitability for a consumer discretionary business, boasting an average operating margin of 25.2%.
This quarter, Golden Entertainment generated an operating profit margin of 3.1%, down 9.6 percentage points year on year. Note that last quarter's unusually high operating margin was due to a one-time gain on sale transaction.
Over the next 12 months, Wall Street expects Golden Entertainment to become less profitable. Analysts are expecting the company’s LTM operating margin of 37.9% to decline to 14%.
Key Takeaways from Golden Entertainment's Q4 Results
We struggled to find many strong positives in these results. Its Nevada revenue unfortunately missed and its operating margin fell short of Wall Street's estimates. The company did not provide financial guidance. Overall, this was a mediocre quarter for Golden Entertainment. The stock is flat after reporting and currently trades at $37.06 per share.
So should you invest in Golden Entertainment right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
