Q3 2021 Golden Entertainment Inc Earnings Call
Good afternoon, ladies and gentlemen, thank you for standing by welcome to the Golden Entertainment third quarter 2021 earnings Conference call. At this time, all participants are in listen only mode.
And the answer session will follow the formal remarks. Please note that this call is being recorded today November three 2021, now I'd like to turn the conference over to Joe <unk> Investor Relations. Please go ahead Sir.
Adjusted EBITDA 73 million, both which are third quarter Records third quarter EBITDA was up over 60% higher than Q3 of 2020 and 70% higher than Q3 of 2019.
These results were driven by continued strong performance across our entire portfolio from our Las Vegas strip asset to our Laughlin and locals properties as well as our Montana and Nevada distributed operations.
Even with the strong performance, we still have opportunities for further improvement that will touch on in a moment.
Last year's third quarter saw the full reopening of most of our operations other than our tavern, which were not allowed to have.
To operate games on the bar until the end of September this.
This year in bars were fully open for Q3, so you'll notice a big increase in the contribution from our Nevada distributed business over last year.
At the Strat revenue was up over 50% in EBITDA was up over 150% compared to Q3 of 2020 as we saw occupancy improve and continued strong spend per guest.
Occupancy for the quarter was about 73% without meaningful midweek business and up from around 50% in Q3 of 2020, well below historical occupancy levels of 90%.
Our investment in the property casinos for restaurants room base is no doubt playing a role in our ability to capture more of our guest that we're seeing record number out of Ah restaurants, particularly top of the world and a casino marketing program is having huge success attracting new players.
The property is still missing midweek room night over 35000, Q3 alone when compared to 19, So we anticipate meaningful improvement in distress performance at citywide convention and other traffic drivers continue to return to Las Vegas.
Our largest contributor to EBITDA for the quarter came out of Laughlin with revenue up almost 20% and EBITDA up almost 24% compared to Q3 of 2020.
We saw the return of many of our core gaming customers in Laughlin, but we're still missing some key players in our database. So we see more upside from a rated play at these properties going forward.
Notably, we just restarted concerts and our last one event center with four shows scheduled this quarter. We already had 28000 guests attend concerts at the loss of events Center in October and we know contracts will drive improved performance in Laughlin for us in queue for next year as we are allowed to have a full schedule.
Or to Las Vegas local casinos also continue to maintain their high level of performance with sustained EBITDA margins of about 50% on slightly lower revenues for last year we.
We felt some impact or a local business in the later part of the Q3 compared to last year as people were finally able to travel for vacations schools restarted in person in the Delta very became more prevalent in Clark County.
That said EBITDA for these properties is still over 100% higher than it was in Q3 of 2019.
Additionally, we have not seen any increased promotional spending in the local market over the last five quarters, and we don't see that dynamic changing in the future. So we expect to maintain the current margins from these assets.
For a prompt casinos EBITDA improved 20% compared to Q3 of 2020, while maintaining margins of over 40% and in Maryland, Ah Rocky Gap Casino EBITDA was meaningfully up from 2019, but down slightly to 2020.
Looking at our casinos and total EBITDA was up 28% compared to Q3 of 2020, while EBITDA margin improved by 210 basis points for nearly 40%.
Compared to 2019 or casino EBITDA is up 54% with a margin expansion of 1200 50 basis points.
We expect continued strong performance from our casinos operations given that the strat in our Laughlin property generate almost 50% of total property EBITDA, where we have yet to see full occupancy return and we are sustaining the performance of our local and other regional properties.
For a distributed gaming operations in Nevada, EBITDA was up exponentially from Q3 of 2020 due to the tavern is not being allowed to have patrons at the bar for most of the third quarter last year.
Q3, EBITDA was double 2019 levels with meaningful revenue growth and margin expansion.
All of our distributed locations demonstrated strong performance, but our 66, only one tavern significantly outperformed reflecting their appeal to Las Vegas locals and the benefits of our streamlined cost structure.
We're fortunate also to have several of our newer tavern and areas of Las Vegas that have seen recent residential development as more people move here from other states, particularly California.
Our Montana distributed operations should similar strength as the rest of our business growing revenue by 15% EBITDA by 27% from Q3 of 2020.
Clearly this was another quarter with tremendous strength across all of our operations and as we finalize October we anticipate favorable comps the rest of 2021 and into 2022.
Moving to a balance sheet in Q3, we continue to aggressively repay debt, reducing our term loan borrowings by 50 million combined with last quarter, that's $100 million of debt reduction in the last six months, we ended the quarter with plenty of liquidity with $290 million of cash and no outstanding borrowings on a revolver.
Last month or liquidity improve further as we expand our revolver to $240 million, while extending the maturity date by 18 months to April of 2024.
Our total did Fema's currently consists primarily of a $675 million term loan and a $375 million unsecured notes.
Our LTM net leverage is approximately three two times, we expect to drop less than three times by year end.
Dispositions as well to refinance our bonds when they are callable next April and to begin returning capital to shareholders.
Our current valuation relative to a Nevada centric peers does not reflect the sustainability of our margin improvement the continued upside in our portfolio of one casino assets, particularly on the strip and in Laughlin or are markedly and aid distributed operations.
We are in our database gaming company that owns its own real estate and continues to generate meaningful cash flow.
Our investment thesis remains uncomplicated and given the valuation disconnect to our peers, we believe that using our buyback program is the most prudent way to return capital to shareholders in the near term as.
As we look into next year, we anticipate using both buyback as well as special dividends turn capital and further increased value for shareholders. Operator that concludes our prepared remarks Lake in Iowa are available for questions.
Sorry, I was new to the old ladies and gentlemen, if you have a question or a comment at this time. Please press the star them a <unk> on your Touchtone telephone. If your question has been answered you wish to move yourself in the queue. Please press the county fair.
First question comes from Carlos censor, all even touch base.
And skies.
Charles Blake whoever wants to take this one child you kind of spoke there at the end of your remarks to the way you intend to exit the year and obviously with the opportunity on the the bond refinancing next April and credit ratings and whatnot does that shape at all that the cadence or thought process around the timing of.
Kind of getting underway with with the buyback program and obviously it sounds like potentially the special dividend is more of a 2022 event then it would be between now and April.
I think that's right Carlo regarding this special dividend I mean quite frankly.
We see the value disconnect now, we have $50 million and it's authorized under our current share buyback. We have 220 ish million of cash on the balance sheet and growing say from my perspective, using a little bit of that over the course.
Balance of the year, it's certainly into next year as we can.
I think the cadence relative to the bond deal with plenty of liquidity and our leverage point given the improved comps relative to the EBITDA that we printed fourth quarter that we anticipate and also go into the queue. One we're going to be positioned well and will still be at three times. Her last when we think about a refund.
Great Charles Thank you and then just as it pertains to the three Q.
Your cash was up give or take 70 million sequentially Youre that was down 50, So about 150 $120 million of net debt reduction my senses that you got the the payment from from the CESARS deal in the quarter.
Is that correct, we did as we talked about on our on our second quarter call. We had received that $60 million in July.
And there's a little bit more perhaps fourth coming on that potentially when they get on with the rest of the transaction is that is that accurate.
It depends on ultimately win and what price that deal closer to that but if it closes at the announced price it's unlikely that will receive anything.
Understood. Okay. Thank you guys.
Thank you Darling.
Okay. Next question comes from David bearing with me Riley.
Great. Thanks, so much and congratulations on the Knights quarter again.
So the question on color out occupancy trends now and visibility.
Getting back to normalcy, I guess 90 per cent at the Strat and.
At offline.
You had mentioned back have 22 on a previous call, but correct me if I long and I'm wondering if you could kind of opine as to what you think the EBITDA deferential would be.
Between those levels and the levels, we saw in the third quarter.
So I mentioned on that on that.
Prepared remarks were missing over 35000 room nights for the quarter.
Malaria to what we saw in queue to see if you just look at for the six months those 70000 room nights.
In the mid week, given a little bit lower rates that equates to about 5 million of Houghton.
Count revenue, which is pretty much right to the bottom line for us that doesn't include any additional spend from new guests stay in the room. So from our perspective, it's at least $10 million a year in roughly EBITDA out of the hotel side.
But we get in terms of the list that would come out of.
Of our guest they're staying in distress.
So again, it's Y Blake and I feel very strongly that property, which is running about $6 million a month in EBITDA right now could be a 100 million EBITDA property wants to town comes back and once we are.
Again, we see the citywide and the midweek group business come back the way it was in 2019.
Okay, perfect and then on the flight.
Slight cough deal how do you think we should look at the return.
Given your land contribution.
There is $70 million of Capex Bye Bye fight golf and I believe.
And you get a leaf and that and I'm just trying to understand if we could see a potential <unk>.
15% laptop at $70 million from the casino often enough.
More combined.
Combined with the lease payments how do you think we should look at the return.
Yeah, quite frankly, I mean, the pure return and the property, we would get 5%.
Revenue, that's coming out of that facility and that's probably somewhere in the neighborhood as <unk>.
Three and a half to 5 million as we think about what's the range of potential outcomes for that but at the same time, we're not as focused on now we're more focused on driving the bodies to the property. We tried to think about that somewhere in the neighborhood of 70 800000 bodies that we take as additional visitation that proper.
30, if you think about where that attraction is positioned on the strip. It's close to the convention Theater center eight caters to downtown it's obviously the north end of the strip and it's very easy for locals to get two officer HERA and we have a 4000 space parking garage that could host them. So I think from all of those types of dry.
Rivers, we view it as Jed adding.
Adding another amenity that's meaningful all to our side of the strip and they could feed more visit visitation to the shrimp, David I would add to that but I think Charles mentioned six or seven 700000, or so volumes, we think will be driven to that facility.
Hey, it's designed and the oil we put that together because we've got approximately 4000 space parking garage, which most of the time is pretty.
Some pretty large capacity even given.
<unk> and so on one more full in the hotel so that that.
That parking garage and will feed through our casino.
Through our amenities between the south and north end of that property right directly into that top golf. So.
The ability for us to generate additional.
Ben off of that traffic along with.
Some going forward potentially targeted.
Food and beverage outlets, where.
We're switching up our entertainment outlet in the showroom all of those things will combine thing to keep people on that property, which was the thesis for original investment in the first place was to make that property. If you will more sticky. So those that are saying and those that are coming to visit so.
I think that design is providing for us a confidence level that we can generate.
Some pretty significant spend from the visitation to the.
Atomic range.
Okay, Fantastic I know I'm going what over but he.
Has been asked in a while I'll just give them the multiples we've seen for the strip property property is out there in terms of M&A.
That caused you to reevaluate the abkhaz structure it off or.
The strat or even the land values.
Across the board recently for your other properties.
Just giving you mentioned the disconnecting and your evaluation.
Or are there other long term positioning factors to consider when you are looking at that and just kind of wondering your recent views.
Yeah, I think the bottom line for the David is these valuations are are significantly enhancing the valuations of those that own their own real estate, which were included in that.
I look at I look at that real estate is will be the third leg of our asset portfolio, along with a brick and mortar and our unique distributed gaming platform.
Owning are having a wholly owned real estate and my mind has significant embedded value in this overall portfolio of assets.
And that I think from what we're seeing that would continue to grow to answer your question specifically no I don't see any change to the current.
The current landscape in terms of how reviewing a real estate I think we're going to stay the course continue to own it and I think that embedded value continues to grow and just to add to that a little bit I don't think I've seen a transaction where the value of the real estate has gone down from the previous transaction. So when you look at cap that are 5% at this point in time.
I would think that as they continue to grow and have access to lower cost of capital that enhances their ability to pay for view is it.
Aircraft are increasingly becoming more scarce asset in terms of Las Vegas real estate that supported by.
Casino cash flow.
Alright, great. Thanks, guys.
Thank you.
Again, ladies and gentlemen, if you have a question or a comment at this time. Please press the star than the one key on your Touchtone telephone.
Our next question comes from David cancel Jeffries.
Hi, This is Cassandra asking on behalf of day that thank you for taking my question.
Sure I'm I'm wondering.
And can we can we saw the casinos Martin.
And a little bit first is two Q.
It said Martha function of amenities opening more fit in every inch offerings or.
Actually I have anything to do with labor shortage or wage pressure.
Yeah, Cassandra I think there is a little bit of wage pressure that we all.
Whole industry has been experiencing as we reopen and it's starting to get going with some of our other amenities on our properties.
That we really dealt with in June and July in terms of being the full brunt wait.
Wage pressure increases so there are certainly some of that I think some of it is also the normalization again at the volumes that we've seen in our on our local casinos versus the increase in the volume that we've seen it described which operates because of its cost structure at a lower margin that are the businesses.
Yeah, yeah, a bit more a bit more color to that is.
July we were right size, if you will in terms of the labor and fixed cost ratio August and September showed some on the top line some pressure from Covid expanding.
Things, where we didn't make those adjustments knowing that that would come back. So I think it was really.
Kind of a function of the volume going from July August September.
More so than being a permanent kind of a drag on margins.
Got it thank you and if I need another one.
And lots of nice ladies talk about kept me, where I can note graphics younger people can I get you the casinos.
Do you have any observations on maybe like longer term stickiness sustainability us.
The volume from younger players.
I think for us it more in terms of new players that we saw in terms of it during the pandemic and coming out of the pandemic.
Where we had it where we saw levels unrated play that were coming through our local casinos converting those players integrated play we have seen increased levels within our player club sign up.
Part of that we think is due to the net migration into Las Vegas from out of state.
And the state folks to experiencing local casinos and our tavern quite frankly more so as a form of entertainment that may not have been available available to them from where they moved from.
We aren't seeing some stickiness of that I mean, if you had.
10, new folks and you kept three of them that's still three more than you had before so I think we are.
We are encouraged by our player's club program and what we're seeing in terms of sign up and I would say that we commented on the strat, where we spent a lot of focus on the on the casino marketing program and we've seen that pay a lot of dividends in terms of the performance and that property. Obviously, we talked about the restaurants we've added.
Hi limit room, so all of that starting to pay off and I think the tangible effected that is for us when you look at some of our.
Bookings that we see at the property, we're now at a point, where we're running about over 30% of our bookings that distract our direct and we bought the property it was around 10%.
Cassandra I would just add in Laughlin in particular I think that was the original part of your question.
I think it would be aggressive to call loughlin, a young person's market.
Although to Charles point coming of endemic with with.
Receiving funds from the federal government and so on I am sure. There was a lot of experimentation into that market. However, we do have the opportunity through our entertainment offerings down in that market to continue to expand that market through younger people.
By virtue of the acts that we have come to the outlet facility, which holds 12000 people and we are focused on that.
And so just a little bit added color for that particular market.
Got it thank you very much.
Our next question comes from our standard with today to Morgan.
Lake Charles Thanks for taking the question just one for US just a little bit more on kind of the demand your commentary across the low cost market regarding the delta variant trying to school on vacations, you think some of that pickup posts labor day in in that Tobar I guess has to asked another way and was there any meaningful shift and vegetation are spend per visit.
Are you exited the three Q versus the June July levels.
Yes, yes, we have October has picked up pretty significantly keep in mind that going through the remainder of this year, we do have seasonality in our business. However, however specific to your question October did show significant improvement both.
Both of them visitation and spend.
We saw that throughout the majority of our both local and resort property Strat in Laughlin.
Okay Awesome and then just maybe one on the bottom line there as you kind of see the fluctuations in the pickup and.
And vacation and spend how do you think about adjusting the the opex in the labor environment to accommodate that.
Already yeah, and when were you. So we've already made those adjustments they are pretty much fully.
Reflected in the queue three numbers like you said, we were doing those adjustments in June and into early July.
For a company of our size.
We measured it in the single millions of dollars in terms of adjustments on the labor side for the entire portfolio versus the tens of millions of dollars again, I think what you're seeing right now in the margins are the numbers and those are those adjustments yes.
I think part of your question is Charles mentioned in his in his.
In his comments.
The.
As we pick up more room occupancy mid week, we're going to need more guestroom attendance right, we're going to add more labor, but I think those costs will be mitigated in our margin discipline will continue through more revenue opportunities.
More pricing opportunities and we've anticipated that so we are we are committed to our margin disciplined and as we add those positions.
We can mitigate through additional revenues in other ways to drive more profitability.
Awesome, that's really helpful. I appreciate it because.
Our next question comes from tried to him with Macquarie.
Hi, This is Aaron on for Chad and thanks for taking my question.
Hey, can you give an update on any impact or benefit from resort smoke.
Yeah, and I think from our perspective, it's a little too early to tell we really haven't seen much.
Of an impact at all I think.
Without meaningful convention citywide you mentioned business for international travel I don't think we've really seen the flu.
Potential of that property either way so this really not.
Not an impact to be honest with you know there hasn't been but I will tell you earn going forward as we mentioned I think on our last call, there's pretty significant construction going on that boulevard, and it's impacting put traffic as well as the vehicle traffic going both north and south as that is that begins to dissipate that can.
Struction goes away convention comeback resource World I think capitalizes on their residencies convention and so on all of that inertia will ultimately benefit the strat and that's R.
But in one of our thesis all along with that property. So we do anticipate no no negative impact going forward I anticipate positive impact as the construction and citywide conventions return to which I think resort will capitalize on that.
Great.
Quick follow up I, just wanted to go back to the played golf for a little bit so you're contributing about 70 acres of land I believe this news 10 acres of excess land outside this strat that you own.
How are you thinking about uses for the remaining land.
When we get approached with content all the time and quite frankly, we feel that more valuable piece, which sits outside of this is about six acres directly across from the property and long Las Vegas Boulevard.
That and if you do anything with it it will be in the same type of capitalized model.
Think we're trying to look for ways to drive again additional traffic volume through attractions and.
An amenity for the strat versus deploying our own capitalism opportunities at this point, but.
Little early in terms of being able to chat about anything over there but.
We certainly have several concepts that are in the works we get all the time, we're going to be disappointed I think to Charles point, and making sure that.
We have one one time to paint account, so we want to do it right.
But as we are being disciplined and receiving these various inquiries on what they could do on the property.
There is a significant amount of development that are occurring both south and north of us between downtown and the strat in between South stripping the stress that are on the strength. There was a piece of property directly across the street from us a seven acres for self of $70 million.
There's been various trades within that neighborhood.
Four acreage at high dollar amounts in which developers are building anything from boutique hotels too.
Food and beverage facilities.
And other things are coming that way so.
That whole again that whole area I think is going the stress going to benefit from the continued development and as that developed studying as I said, we will be disciplined and try to.
To choose something that is the highest and most of that property to enhance our property.
That's helpful. Thank you appreciate the color.
Yeah.
And I'm not showing any further questions at this time electron the call back to management for any closing remarks.
Okay. Thank you all for participating and we look forward to chatting with you next quarter.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
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Good afternoon, ladies and gentlemen, thank you for standing by welcome to the Golden Entertainment third quarter 2021 earnings Conference call. At this time all participants are in listen only mode. A question and answer session will follow the formal remarks. Please note that this call is being recorded today November three 2021, now I'd like to turn the conference over to Joseph only Investor Relations. Please go ahead Sir.
Thanks, Kevin and good afternoon, everyone.
On the call today is Blake sorry can you need the company's founder Chairman and Chief Executive Officer, and Charles per child, 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 are contained in today's press release and our filings with the FCC.
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 certain 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 the website.
We'll start the call with Charles reviewing details of recent results 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 the call over to Charles fertile Charles Please go ahead.
Thanks, Tim.
Our strong performance continued in the third quarter with revenue of 282 million and adjusted EBITDA of $73 million, both which are third quarter record third.
Third quarter EBITDA was up over 60% higher than Q3 of 2020, and 70% higher than Q3 of 2019.
These results were driven by continued strong performance across our entire portfolio from our Las Vegas strip asset to our Laughlin and locals properties as well as our Montana, Nevada distributed operations.
Even with this strong performance, we still have opportunities for further improvement there will touch on in a moment.
Last year's third quarter saw the full reopening of most of our operations other than our tavern, which we're not allowed to have.
To operate games on the bar until the end of September.
This year, our bars were fully opened for Q3, so youll notice a big increase in the contribution from our Nevada distributed business over last year.
At the Strat revenue was up over 50% and EBITDA was up over 150% compared to Q3 2020, as we saw occupancy improve and continued strong spend per guest.
Occupancy for the quarter was about 73% without meaningful midweek business and up from around 50% in Q3 of 2020, well below historical occupancy levels of 90%.
Our investment in the property casino floor restaurants room base is no doubt playing a role in our ability to capture more of our guests fad.
We're seeing record number out of our restaurants, particularly top of the world and our COO.
Casino marketing program is having huge success attracting new players.
The property is still missing midweek room nights over 35000 in Q3 alone when compared to 19, So we anticipate meaningful improvement in the strat performance as citywide convention. Another traffic drivers continue to return to Las Vegas.
Our largest contributor to EBITDA for the quarter came out of Laughlin with revenue up almost 20% and EBITDA up almost 24% compared to Q3 of 2020.
We saw the return of many of our core gaming customers in Laughlin, but were still missing some key players in our database. So we see more upside from our rated play at these properties going forward.
Notably, we just restarted concert at our last one event center with four shows scheduled this quarter. We already had 28000 guests 10 conscious that the loss of an event center in October and we know contracts will drive improved performance and last one for us in Q4 and next year as we are allowed to have it full schedule.
Our two Las Vegas locals casinos also continue to maintain their high level of performance with sustained EBITDA margins of about 50% on slightly lower revenues for last year.
We felt some impact for our local business in the later part of Q3 compared to last year as people were finally able to travel for vacations schools restarted in person in the Delta area became more prevalent in Clark County.
That said EBITDA for these properties is still over 100% higher than it was in Q3 of 2019.
Additionally, we have not seen any increased promotional spending in the locals market over the last five quarters, and we don't see that dynamic changing in the future. So we expect to maintain the current margins from these assets.
For our Pahrump casinos, EBITDA improved 20% compared to Q3 of 2020, while maintaining margins of over 40% and in Maryland, Our Rocky gap Casino EBITDA was meaningfully up from 2019 were down slightly to 2021.
Looking at our casinos in total EBITDA was up 28% compared to Q3 of 2020, while EBITDA margin improved by 210 basis points to nearly 40%.
Compared to 2019, our casino EBITDA is up 54% with a margin expansion of 250 basis points.
We expect continued strong performance from our casino operation given that the strat and our Laughlin properties generate almost 50% of total property EBITDA, where we have yet to see full occupancy return and we are sustaining the performance of our local and other regional properties.
For our distributed gaming operations in Nevada, EBITDA was up exponentially from Q3 of 2020 due to the tavern has not been allowed to have an agent that the bar for most of the third quarter last year.
Q3, EBITDA was double 2019 levels with meaningful revenue growth and margin expansion.
All of our distributed locations demonstrated strong performance, but our 66 wholly owned tavern significantly outperformed reflecting their appeal to Las Vegas locals and the benefits of our streamlined cost structure. We are fortunate also they have several of our newer taverns in areas of Las Vegas, but have seen recent residential development.
As more people move here from other states, particularly California.
Our Montana distributed operations showed similar strength as the rest of our business growing revenue by 15% EBITDA by 27% from Q3 of 2020.
Clearly this was another quarter with tremendous strength across all of our operations and as we finalize October we anticipate favorable comps the rest of 2021 and into 2022.
Moving to our balance sheet in Q3, we continued to aggressively repay debt, reducing our term loan borrowings by $50 million COO.
Combined with last quarter, that's $100 million of debt reduction in the last six months, we ended the quarter with plenty of liquidity with $290 million of cash and no outstanding borrowings on our revolver.
Last month, our liquidity improve further as we expanded our revolver $240 million, while extending the maturity date by 18 months to April 2024.
Our total debt outstanding currently consists primarily of a $675 million term loan and a $375 million of unsecured notes.
Our LTM net leverage is approximately three two times, we expect to drop less than three times by year end.
This positions us well to refinance our bonds when they are callable next April and to begin returning capital to shareholders.
Our current valuation relative to our Nevada centric peers does not reflect the sustainability of our margin improvement the continued upside in our portfolio of owned casino assets, particularly under stripping in laughlin or our market leading distributed operations.
We are in a database gaming company that owns its own real estate and continues to generate meaningful cash flow.
Our investment thesis remains uncomplicated and given the valuation disconnect to our peers, we believe that using our buyback program is the most prudent way to return capital to shareholders in the near term as.
As we look into next year, we anticipate using both buybacks as well as special dividends to return capital and further increase value for our shareholders.
Operator that concludes our prepared remarks like United are available for questions.
Sorry, I was muted ladies and gentlemen, if you have a question or a comment at this time. Please press. The star then the one key on your Touchtone telephone. If your question has been answered or you wish to move yourself from the queue. Please press the pound key.
First question comes from Carlos centrally with Deutsche Bank.
Thanks, guys.
Charles Blake whoever kind of wants to take this one Charles you kind of spoke there at the end of your remarks to the way you intend to exit the year and obviously with the opportunity on the buy the bond refinancing next April and credit ratings and whatnot does that shape at all that the cadence or thought process around the timing of.
Kind of getting underway with with the buyback program and obviously it sounds like potentially the special dividend is more of a 2022 event than it would be between now and April.
I think that's right Carlo regarding the special dividend I mean quite frankly.
We see the value disconnect now we have $50 million, it's authorized under our current share buyback, we have 220 ish million dollars of cash on the balance sheet and growing. So you know from my perspective, using a little bit of that over the course.
Balance of the year and certainly into next year as we can.
I think the cadence relative to the bond deal will snap plenty of liquidity and our leverage point given the improved comps relative to the EBITDA that we printed fourth quarter that we anticipate and also go into Q1, we're going to be positioned well and we will still be three times or less when we think about a refi.
Great. Thank you and then just as it pertains to the three Q.
Cash was up give or take $70 million sequentially. Your debt was down 50, so about $150 million to $120 million of net debt reduction my sense is that you got the payment from from the Caesars deal in the quarter.
Is that correct.
As we talked about on our on our second quarter call. We had received that $60 million in July.
And theres, a little bit more perhaps sports coming on that potentially when they get done with the rest of the transaction is that is that accurate.
It depends on ultimately when and what price that deal closure that but if it closes at the announced price it's unlikely they will receive anything.
Understood. Okay. Thank you guys.
Thanks Carlin.
Our next question comes from David Bain with B Riley.
Great. Thanks, so much and congratulations on a nice quarter again.
So quick question on color around occupancy trends now and visibility.
Getting back to normalcy, I guess, 90% at the strat and at Laughlin.
You had mentioned back half 'twenty two on a previous call, but correct me if I'm wrong and I'm wondering if you could kind of opine as to what you think the EBITDA differential would be.
Between those levels and the levels, we saw in the third quarter.
So I mentioned on the on the <unk>.
Prepared remarks were missing over 35000 room nights for the quarter. That's similar to what we saw in Q2. So if you just look at for the six months those 70000 room nights.
In the mid week, given a little bit lower rates equates to about $5 million of hotel.
<unk>, which is pretty much right to the bottom line for us that doesn't include any additional spend.
Those guests or stay in the room, so from our perspective, it's at least $10 million a year in roughly EBITDA out of the hotel side.
What we get in terms of lift that would come out of.
Of our guests that are staying at the strat. So again thats why Blake and I feel very strongly that property, which is running about $6 million a month and EBITDA right now could be a $100 million EBITDA property once the Tau comes back and once were.
Yeah again, we see the citywide and the midweek group business come back the way it was in 2019.
Okay, perfect and then on the flight.
Flight golf deal how do you think we should look at the return.
Given your land contribution there is $70 million of Capex by by fly golf and I believe.
You get a lease payment and I'm just trying to understand if we could see a potential FID.
15% lift off of that $70 million from the casino.
From that or you know.
Combined with the lease payments how do you think we should look at the return.
Yes, quite frankly, I mean, the pure return in the property, we would get 5% of the revenue that's coming out of that facility and that's probably somewhere in the neighborhood as.
Three $5 million to $5 million as we think about what's the range of potential outcomes for that but at the same time, we're not as focused on now we're more focused on driving the bodies to the property.
Trying to think about that somewhere in the neighborhood of seven to 800000 body that we think is additional visitation that property. If you think about where that attraction is positioned on the strip. It's first the convention Theater center caters to downtown it's obviously, the north end of the strip and it's very easy for them.
To get to office Tahira, and we have a 4000 space parking garage that could host them. So I think from all of those types of drivers we view it as just add.
Adding another amenity.
Thats meaningful to our side of the strip and they could feed more visit visitation to the strat, yes, David I would add to that that I think Charles mentioned six or seven 700000, or so bodies, we think will be driven to that facility. The way, it's designed and the way we put that together because we've got approximately a four phase <unk>.
And garage, which most of the time is pretty.
Some pretty large capacity even given.
Weekends installing more full in the hotel so that debt.
That parking garage will feed through our casino and through our amenities between the south and north end of that property right directly into that top golf, so the ability for us to generate additional.
Fend off of that traffic along with.
Some going forward potentially targeted.
Food and beverage outlets, where switching up our entertainment outlet in the showroom all of those things will combine I think to keep people on that property, which is what's the thesis for our original investment in the first place was to make that property. If you will more sticky to those that are staying in those that are coming to visit so I think that design is providing.
Our confidence level that we can generate.
Some pretty significant spend from the visitation to the atomic range.
Okay Fantastic I know I'm going one over but it hasn't been asked in a while just given the multiples that we've seen for the strip property properties out there in terms of M&A.
That caused you to reevaluate the opco structure at all for you.
No.
Strat or even the land values, we've seen across the board recently for your other properties.
Just given you mentioned the disconnect in your valuation.
Or are there other long term positioning factors to consider when you're looking at that and just kind of wondering your recent views.
Yes, I think the bottom line for that David is these valuations are are significantly enhancing the valuations of those that own their own real estate, which were included in that.
I look at I look at that real estate is really the third leg of our asset portfolio, along with our brick and mortar and our unique distributed gaming platform.
Owning our having our wholly owned real estate in my mind has significant embedded value in this overall portfolio of assets.
And I think from what we're seeing that would continue to grow to answer your question specifically no I don't see any change to the current.
The current landscape in terms of how we're viewing our real estate I think we're going to stay the course continue to own it.
And I think that embedded value continues to grow and just to add to that a little bit I don't think I've seen a transaction where the value of the real estate has gone down from the previous transaction.
When you look at cap rates that are 5% at this point in time I would think that as we continue to grow and have access to lower cost of capital of that enhances their ability to pay for what we view as it.
Sure.
Recently, becoming more scarce asset in terms of Las Vegas real estate that supported by Covid.
Casino cash flow.
Alright, great. Thanks, guys.
Thank you.
Again, ladies and gentlemen, if you have a question or a comment at this time. Please press. The Star then the one key on your Touchtone telephone.
Our next question comes from David Katz with Jefferies.
Hi, This is Cassandra asking on behalf of David. Thank you for taking my question.
I'm wondering.
In <unk>, we saw the casinos margin down a little bit versus Q2.
Is it more of a function of amenities opening more food and beverage offerings or is.
Does it have anything to do with labor shortage or wage pressure.
Yes, Cassandra I think there is a little bit of wage pressure that we all.
Long history has been experiencing as we've reopened and starting to get going with some of our other amenities on our properties.
That we really dealt with in June and July in terms of being a full broad wage.
Wage pressure increases so theres certainly some of that I think some of it. It also the normalization again at the volumes that we've seen in our on our local casinos versus the increase in the volume that we've seen at the strat, which operates because of its cost structure at a lower margin than our other businesses.
Yes.
A bit more a bit more color to that.
July we were right sized if you will in terms of the labor and fixed cost ratio August September showed some on the top line some pressure from Covid expanding another other things, where we didn't make those adjustments knowing that that would come back. So I think it was really it.
Kind of a function of the volume going from July August September.
More so than being a permanent kind of.
Drag on margins.
Got it thank you and if I may another one.
And last one I believe you've talked about.
New York demographics younger people coming to the casinos.
Do you have any observations on maybe like longer term stickiness or sustainability of.
The volume from younger players.
Okay.
I think for US it's more in terms of new players that we saw in terms of it during the pandemic and coming out of the pandemic.
We had it where we saw levels of unrated play that were coming through our local casinos converting those players integrated play we have seen increased levels within our player club sign up.
Part of that we think is due to the net migration into Las Vegas from out of state.
Now, let's take folks too are experiencing local casinos and our taverns quite frankly more so as a form of entertainment that may not have been available available to them from where they move from and.
And so we are seeing some stickiness.
On that I mean, if you had.
10, new folks and you kept your three of them that still three more than you had before so I think we are.
We're encouraged by our players club program and what we're seeing in terms of sign ups and I would say that we commented on the strat, where we spent a lot of focus on.
On the on the Casino marketing program and we've seen that pay a lot of dividends in terms of the performance in that property. Obviously, we've talked about the restaurants, we've added a high limit room and so all of that starting to pay off and I think the tangible effect of that is for us. When you look at some of our direct bookings that we see.
At the property, we are now at a point, where we're running about over 30% of our bookings at the Strat are direct and we bought the property it was around 10%.
So, yes, Cassandra I would just add in Laughlin in particular, I think that will be.
Original part of your question.
I think it would be aggressive to call Laughlin, a young person's market.
Although to Charles' point coming out of a pandemic with with.
People receiving funds from the federal government and so on I'm sure. There was a lot of experimentation into that market. However, we do have the opportunity through our entertainment offerings down in that market to continue to expand that market through younger people.
By virtue of the act that we have coming to that left facility, which holds 12000 people and we are focused on that.
And so just a little bit added color for that particular market.
Got it thank you very much.
Our next question comes from Omer Sander with Jpmorgan.
Lake Charles Thanks for taking the question just one for US just a little bit more on kind of the demand in your commentary.
Cross the locals market regarding the Delta variant return to school and vacations Youre seeing some of that pickup post labor day in October I guess asked another way was there any meaningful shift in visitation and spend per visit.
You exited the third Q of <unk>.
The June July levels.
Yes, yes, we have October has picked up pretty significantly keep in mind that going through the remainder of this year, we do have seasonality in our business. However, however specific to your question October did show significant improvement.
Both visitation and spend.
We saw that throughout the majority of our both local and resort property Strat in Laughlin.
Okay Awesome and then just maybe one on the bottom line there as you kind of see the fluctuations in the pickup in.
And visitation and spend how do you think about adjusting the opex in the labor environment to accommodate that.
We've already yes, yes, so we've already made those adjustments they are pretty much fully.
Reflected in the Q3 numbers like you said, we were doing those adjustments in June and into early July.
So for a company of our size.
Measured it in the single millions of dollars in terms of adjustments on the labor side for the entire portfolio versus the tens of millions of dollars.
I think what you're seeing right now in the margins those are the numbers and those are those adjustments yes.
Part of your question as Charles mentioned in his in his.
In his comments.
The.
As we pick up more room occupancy mid week, we're going to need more guests from attendance right, we're going to add more labor, but I think those costs will be mitigated in our margin discipline will continue through more revenue opportunities are more pricing opportunities and we've anticipated that so we are we are committed to our <unk>.
Arjun discipline and as we add those positions I believe we can mitigate through additional revenues and other ways to drive more profitability.
Awesome, that's really helpful. I appreciate it guys.
Our next question comes from Chad Beynon with Macquarie.
Hi, This is Aaron on for Chad. Thanks for taking my question.
Hey, can you give an update on any impact or benefit from resorts world.
Yes, Erin I think from our perspective, it's a little too early to tell we really haven't seen much.
Of an impact at all I would say.
Without meaningful convention citywide convention business for international travel I don't think we've really seen that.
Full potential of that property either way. So this really not <unk>.
Not an impact to be honest with you I know there hasn't been but I will tell you earn going forward.
As we mentioned I think on our last call. There was a pretty significant construction going on on that Boulevard, and it's impacting foot traffic as well as vehicle traffic going both north and south as that as that begins to dissipate that construction goes away convention comeback resorts World I think capitalizes on.
Their residencies convention and so on all of that inertia will ultimately benefit the strat and Thats our thats.
<unk> been one of our thesis all along on that property. So we do anticipate no no negative impact going forward I anticipate positive impact as the construction and citywide conventions return to which I think resort will capitalize on that.
Great.
Quick follow up I, just wanted to go back to the flight golf for a little bit so you're contributing about seven acres of land I believe this news.
Occurs of excess land outside the strat that you own.
How are you thinking about uses for that remaining land.
When we get approached with content all the time and quite frankly, we feel that more valuable piece, which sits outside of this is about six acres directly across from the property along Las Vegas Boulevard, a fix that.
<unk> anything with it it will be in the same type of capital light model.
We're trying to look for ways to drive again additional traffic volume through attractions and.
Amenity for the strat versus deploying our own capital and those type of opportunities at this point, but.
A.
Little early in terms of being able to chat about anything over there but.
We certainly have several concepts that are in the works we get pitched all the time, we're going to be disciplined I think to Charles' point and making sure that.
We have one one time to paint a canvas so we want to do it right.
But as we are being disciplined in receiving these various inquiries on what they could do on our property. There is significant amount of development that are occurring both south and north of us between downtown and the strat and between South strip and the stress that are in our strat theirs.
Property directly across the street from us that seven acres for sale for $70 million.
There's been various trades within that neighborhood.
Our acreage is that high dollar amounts and which developers are building anything from boutique hotels.
Two food and beverage facilities and other things are coming that way so that whole again that whole area. I think is going the stress is going to benefit from the continued development and as that develops I think as we as I said, we will be disciplined and try to.
To choose something that has the highest the most pieces of property to enhance our property.
That's helpful. Thank you I appreciate the color.
Yes.
And I'm not showing any further questions at this time last turn the call back to management for any closing remarks.
Okay. Thank you all for participating and we look forward to chatting with you next quarter.
Yes.
Hello, Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.