Golden Entertainment, Inc. (GDEN) on Q1 2023 Results - Earnings Call Transcript
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. Now I'd 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 Blake, 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 provisions 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 the 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 the details of the first quarter results and the 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. For the first quarter, we generated revenue of $278 million and EBITDA of $62 million, with revenue up over last year, but EBITDA impacted by cost pressures as well as disruption of the STRAT from ongoing room renovations we are undertaking to be ready for the strong Las Vegas calendar later this year. Before getting into the operations, we have a few updates on our previously announced M&A activity. At the end of April, the Maryland Lottery Commission improved Century Casinos to acquire a Rocky Gap resort. We have one more step in Maryland, the approval of VICI's lease with the state and then we will be able to close, which we still anticipate by the end of June. In March, we announced the sale of our Nevada and Montana distributed businesses to J&J Gaming, the largest distributed operator in Illinois, which will become the largest distributed operator in the country after closing. We remain confident both transactions will close by year-end, and we look forward to having J&J as our gaming partner in our Nevada taverns. Importantly, both these transactions accomplished our goal of divesting noncore businesses at attractive valuations, leaving us with a Nevada portfolio of owned casino assets and the largest gaming tavern footprint in the state. Collectively, these transactions will generate over $500 million of net proceeds, which will allow us to reposition our balance sheet, more effectively invest in our core assets, return capital to shareholders and evaluate strategic opportunities. Within our segment results, revenue at Nevada Casinos resorts increased 4%, while EBITDA declined 5.5%. Revenue for the STRAT increased 9% and EBITDA rose 6% despite having about 15% less rooms available given the ongoing renovations. Disruption from having rooms off-line during the quarter cost us about $2 million in EBITDA, and we expect similar disruption in Q2 before the renovations are completed. We initially plan to renovate the rooms throughout the year, but we were able to accelerate construction and are willing to live with a little disruption now to get these 537 rooms and pull renovations finished before 4th of July and in advance of the fall citywide event calendar. Atomic golf construction is also progressing nicely, and we expect our development partner to open this new amenity by the end of the year. We had a challenging comp in Laughlin as this year, we had one less Laughlin Event Center concert, resulting in 4,000 less event attendees this quarter. Laughlin revenue was down 1% and EBITDA was down 13% as labor and utilities increased more than 10% from last year. For Q2, we have a stronger event calendar in Laughlin, which is expected to drive increased visitation over the coming months. Our Nevada local casino has maintained strong year-over-year performance for the quarter with increased revenue and EBITDA. Within our Locals segment, Las Vegas outpaced our Pahrump properties, where a few of our higher rated guests, too. Our overall Nevada Casino margins were down compared to Q1 of last year, but up sequentially from Q3 and Q4. As we said on recent calls, cost increases began to moderate in Q3 of last year. So going forward, we expect our casino margins to be roughly in the range of this quarter. At Rocky Gap, revenues were up, but higher payroll costs impacted EBITDA for the quarter compared to last year. As the summer season gets started, Rocky Gap will papalize on higher visitation, and we expect the property to perform very well for Century Casinos after closing. For Nevada tavern operations, first quarter revenue and EBITDA was down from last year, reflecting one less tavern in the portfolio and lower same-store revenue. Total tavern revenue was down 3% with margins impacted meaningfully by labor and other operating expenses that were up 10% over last year. This is partially the result of wage inflation for our back-of-the-house employees primarily due to increased labor demand on the strip. Despite current revenue and margin pressures, we expect the long-term demographic trends in Las Vegas to support our tavern growth strategy. With the sale of our third-party distributed businesses, we are turning our focus to expanding our leading tavern market share. And to that end, we now have six locations under contract to be acquired and agreements for two future development sites. In addition, we opened our newest tavern in April, which is performing well and ramping up in line with our expectations. We expect the signed tavern acquisitions to close at the end of the year or early 2024, depending on regulatory approval and anticipate that they will add about $4 million of annual EBITDA to our results. Our acquisition development pipeline represents about 14% unit growth, and we will continue to add premier sites in the Las Vegas Valley. Total third-party distributed revenue was flat compared to last year, while EBITDA decreased 13%. We saw some weakness in Nevada across our third-party tavern partners, which was similar to our own Nevada tavern performance for the quarter. We are seeing improved performance in April and May as the Golden Knights playoff run has helped tavern visitation and spend. In Montana, we grew revenue and EBITDA with the addition of new accounts and our business remains a leader in the market. Moving to our balance sheet. Our total debt outstanding is approximately $910 million, and we ended the quarter with $161 million of cash and cash equivalents. Our net leverage remains at 2.9 times, and we intend to maintain our net leverage below 3 times going forward. We will use $175 million of the proceeds from the sale of Rocky Gap to reduce our first lien term loan, which we plan to refinance in Q2. On a pro forma basis, our leverage will be approximately 2.4 times after the sale of Rocky Gap. Looking forward, after the closing of the sale of our distributed business, our pro forma net leverage moves down to 1.4 times. With a target net leverage of less than 3 times, we will have significant room in our capital structure to pursue value-creating initiatives, whether investing in our own assets, pursuing acquisitions or more aggressively returning capital to shareholders. That said, in the near term, we will be primarily focused on closing our previously announced transactions, executing on modest reinvestment in our core businesses and maintaining our low leverage profile. After the sale of Rocky Gap in our distributed businesses, we will have transformed the company to being 100% focused on Nevada with own strip and local casinos as well as the leading Las Vegas gaming tavern platform. These assets will continue to benefit from the long-term visitor and population growth of Las Vegas, which will also remain the most stable regulatory and competitive environment in the country. Regardless of the future economic outlook, we will have one of the most pristine balance sheets in our industry, enabling us to take advantage of potential acquisition opportunities in our core markets and to establish a more regular return of capital to our shareholders. That concludes our prepared remarks. Blake and I are now available for questions. Operator: [Operator Instructions] Your first question will come from David Bain with B. Riley. Please go ahead. Operator: Your next question comes from David Katz with Jefferies. Please go ahead. Operator: Your next question comes from Edward Engel with ROTH MKM. Please go ahead. Operator: [Operator Instructions] Your next question comes from Chad Benyon with Macquarie. Please go ahead. Operator: Thank you. Your next question comes from John DeCree with CBRE Securities. Please go ahead. Operator: Thank you. This concludes our question-and-answer session and today's conference call. Thank you for attending today's presentation. You may now disconnect.
Golden Entertainment, Inc. (NASDAQ:GDEN) Q1 2024 Earnings Insights
Golden Entertainment, Inc. (NASDAQ:GDEN) recently held its Q1 2024 earnings conference call, drawing attention from investors and analysts alike. The call, detailed by Seeking Alpha, was a platform for the company's top executives, including Joe Jaffoni, Charles Protell, and Blake Sartini, to discuss the financial outcomes and strategic directions of GDEN during the initial quarter of the year. Analysts from prestigious firms like B. Riley, Truist, Deutsche Bank, and Macquarie participated, highlighting the significant interest in Golden Entertainment's performance and future prospects.
One of the key financial metrics discussed was GDEN's price-to-earnings (P/E) ratio, which stands at approximately 3.43. This figure indicates that the company's shares are trading at a relatively low price compared to its earnings, suggesting that the stock might be undervalued or that the company is performing well relative to its share price. This is a crucial piece of information for investors, as a low P/E ratio can often signal a good buying opportunity, assuming the company's fundamentals are strong.
Another important metric is the price-to-sales (P/S) ratio, which is about 0.83 for GDEN. This suggests that the stock is also reasonably valued based on its sales, providing another indicator that the company's stock might be a good investment. The enterprise value to sales (EV/Sales) ratio of roughly 1.40 further supports this, indicating that the company's valuation in relation to its sales is moderately priced, neither too high nor too low.
The enterprise value to operating cash flow (EV/OCF) ratio, at approximately 12.41, is particularly telling. It shows how the market values the company's operating cash flow, which is a critical measure of financial health and efficiency. A higher ratio could indicate that investors are willing to pay more for each dollar of cash flow generated by the company, suggesting optimism about its future growth prospects.
Lastly, Golden Entertainment's debt-to-equity (D/E) ratio of about 1.26 and a current ratio of approximately 2.35 provide insights into the company's financial stability. The D/E ratio shows a balanced approach between debt financing and equity in the company's capital structure, indicating a moderate level of risk. The current ratio, on the other hand, suggests that the company has a healthy ability to cover its short-term liabilities with its short-term assets, which is reassuring for investors concerned about liquidity and financial resilience.
Golden Entertainment Started With a Buy Rating at Truist Securities
Truist Securities analysts initiated coverage on Golden Entertainment (NASDAQ:GDEN) with a Buy rating and set a price target of $45 on the stock. The analysts outlined their investment thesis on the company, emphasizing a return to fundamental strengths in the Vegas market. They noted that following recent asset sales, Golden Entertainment has transformed into a Nevada-centric operation poised to benefit from the region's positive demographic trends and a favorable, low-tax regulatory landscape.
With the completion of recent construction and the easing of labor challenges, analysts anticipate robust growth in EBITDA and free cash flow. They also pointed out that the company's current market valuation does not fully account for the expected improvements in business performance, the significant reduction in financial leverage, or the security provided by real estate holdings. The analysts believe the management is strategically positioned to enhance shareholder value through both organic growth and potential acquisitions, along with increasing returns to shareholders.
