Q1 2022 Golden Entertainment Inc Earnings Call
Yeah.
Good afternoon, ladies and gentlemen, thank you for standing by welcome to the Golden Entertainment first quarter 2022 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 may five 2022.
Now I would like to turn the conference over to Joe <unk> Investor Relations. Please go ahead Sir.
Thanks, Kevin and good afternoon, everyone on today's call is Blake's our teenie Golden Entertainment's founder Chairman and Chief Executive Officer, and Charles portal, 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 Securities and Exchange Commission.
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 today's call with trials reviewing the details of the 2022 first quarter 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 Charles portals. Charles Please go ahead.
Thanks, Jim our record performance in 2021 continued into the first quarter of 2022 with Q1 revenue of $274 million and adjusted EBITDA of $67 million up 14% and 13% respectively from last year.
These results reflect increased visitation to our destination properties continued strong levels of customer spend at our local casinos and distributed gaming locations and our ability to maintain margins well in excess of pre COVID-19 periods.
Revenues for Nevada Casino resorts rose, 29% year over year to $96 million and EBITDA improved 26% to $34 million margins were down slightly primarily due to increased volume at the strat, which has a higher cost structure.
The return of concert to our large scale entertainment venue in Laughlin as rep as well as overall higher labor costs.
The <unk> revenue and EBITDA were up meaningfully from last year. Despite the impact of Covid in January and the continued lack of midweek occupancy we saw very strong weekend demand for mid February on driving occupancy to over 70% at the strat for the quarter compared to 45% in Q1 last year.
Although midweek business is recovering we are still missing almost 20 points of occupancy of distress, which we expect to return over the rest of the year.
In Laughlin the return of live Entertainment helped drive increased visitation with nearly 16000 concert tickets sold for various events in the quarter and we've also seen our core older demographic returned to our properties.
We have a great entertainment lined up for the remainder of the year with upcoming contracts in Q2, having already sold over 30000 tickets.
For our Nevada, Local's casino revenue increased 4% to $40 million and EBITDA rose, 3% to $20 million for the quarter.
Increased employment in Las Vegas, the continued influx of new residents from out of state and appreciating home equity has created sustained demand in our local properties. We continue to see a rational promotional environment in the locals market, which has contributed to our success in maintaining margins despite increasing costs.
Turning to Maryland at our Rocky Gap resort revenue was up 11% to $18 million and EBITDA was up 14% to $5 6 million for the quarter with margins up slightly on increased gaming volume.
We recently renovated all of our rooms at Rocky gap revamped the food offerings and added to support clients. So the property is ready for the summer season, when EBITDA is typically 50% higher than the winter quarters of Q1 and Q4.
For our distributed gaming operations revenues were up 9% to $119 million and EBITDA rose, 7% year over year to $22 million for the quarter similar to our casinos margins were modestly impacted from increased labor costs relative to Q1 of last year.
Our Montana distributed gaming operations were affected by weather in January and February but rebounded nicely in March.
In Nevada at the same macro drivers for our locals casinos are driving revenue and EBITDA growth for our distributed business, particularly for our 65 owned taverns most of which are located in Las Vegas.
The continued recovery of the strip has led to increased mid week as well as late night business, which helped drive record win per unit metrics that our taverns this quarter.
This February we opened a new tavern in the northwest part of Las Vegas and based on early results. This has quickly become one of our top performers.
Moving to our balance sheet in Q1, we continued to return capital to our stakeholders repaying $25 million of our term loan in addition to repurchasing $50 million of our stock.
Since the beginning of 2021, we have paid down approximately $160 million of our debt.
December we have repurchased more than $25 million of our common stock.
We ended the first quarter with plenty of liquidity with more than $200 million of cash and no outstanding borrowings on our $240 million revolver. Currently our total debt outstanding is approximately $1 billion.
Given our low net leverage at two seven times and a continued strength across all of our properties, we'd expect to remain focused on returning capital to shareholders Opportunistically over the course of this year.
To support that this week, our board of directors reauthorized, our $50 million share repurchase program.
Our strong operational performance in Q1 has continued into Q2 and we see no signs of slowdown at any of our properties. As we have said before our cash flow is primarily generated from wholly owned gaming assets in southern Nevada, which we view as the most attractive and stable gaming market in the world today, we remain focused on <unk>.
Optimizing our core business, capturing the upside from our destination resorts, while maintaining the performance of our local properties and distributed gaming locations that concludes our prepared remarks, Blake and I are now available for questions.
Thank you so to register for a question press. The one followed by the four on your keypad Youll hear <unk> prompt that acknowledges the request for your question has been answered and you would like to withdraw your registration press. The one followed by the three so again for questions. It's one four.
First question is from Omar Center with Jpmorgan. Please go ahead.
Hey, Charles Blake, Thanks for taking my question.
On EBITDA and margins your margins were very strong for <unk> and.
And up nicely up nicely on a sequential basis. When you think about the aggregate of what any COVID-19 impacts early on in the quarter to any labor inflation pressures there any pockets of consumer weakness.
Your peers have talked about how do you think about <unk> EBITDA on an absolute dollar basis, and your margins versus a quote unquote call it clean quarter without those impacts.
Yes, I mean look I think if you just look in the January and early February CES was not impactful to the town at all and.
And that was largely due to up to <unk> and lack of international travel.
If you thought of normalized basis could we be $3 million to $4 million in EBITDA higher the answer is yes, and obviously that would benefit our margins.
Awesome, Thanks, and maybe pivoting just a different topic you have some more real estate expertise on your board now does that change how you think about your own real estate portfolio.
Yes, Martin this is Blake.
Okay.
And he's a great addition to our board obviously with his background, but no I don't think that portends our signals anything in the short term in regard to how reviewing our real estate, which continues to provide significant underlying value for.
For our shareholders. So the short answer right now as well.
We welcome Andy but our approach to our real estate remains the same.
Awesome. Thanks, so much nice quarter.
Thanks, Nick.
Next question is from Carlo Santarelli with Deutsche Bank. Please go ahead.
Hey, Blake Hey, Charles.
Obviously, you talked a little bit about some of the margin slippage in the first quarter year over year.
Sounding Lee.
Will it lead to mix of the of the Strats EBITDA contribution in the period.
With strip still kind of under promising I think where you guys think it will end up and when that occupancy comes back.
And whatnot.
From a mix of revenue perspective.
The strat ultimately get to margins that are kind of comparable with the rest of that portfolio.
I think it gets closer not comparable because the labor cost there are much higher and we.
We have more categories of employees there than we do in our other properties, we have actually more employees and we have more products that we're servicing there from entertainment to food and beverage outlets.
Yes, I think it.
Ultimately when the Strat gets busier, it's accretive to EBITDA, but it will be dilutive a little bit to the overall margins.
As we get through the year.
Both of those as Charles mentioned those are bigger numbers Carlo.
Under punching is a relative term right we said.
We're very happy with the returns we're getting on our current.
Recent capital investment at the property.
And even with the white space.
In capacity that we're experiencing midweek, we're seeing significant year over year growth at the property. So I just wanted to back into that that we are launching over our weight in terms of return on the capital. We invested I think Charles is that regarding the margin discussion going forward.
Great. Thank you Blake and Charles Thanks for that answer just one follow up.
It was probably 18 months ago, one of your peers.
You mentioned shouldn't be anecdotally look all the events and things like that that we do there are generally going to be they're generally going to be great margins with all of that stuff shut down group gatherings and stuff like that we're not allowed etcetera that.
That was all very helpful for margins. So you guys, obviously mentioned kind of bringing the cockpit contracts back in Laughlin and the driver that they've always been.
From an EBIT standpoint dollar standpoint, I understand from a margin standpoint there.
It could be a little bit dilutive, but from a dollar standpoint does that stuff still makes sense in an environment right now.
The gaming dollar, it's a little bit more competitive with other forms of entertainment that are out there.
Look for US we can only speak to loughlin, which is clearly an event driven market on the weekend and we have a 10000 C outdoor amphitheater that drive those bodies right into our properties. After those events, which are directly across the street. So from our perspective the answer.
Yes, I mean, we have.
<unk> that are already sold out in the upcoming months and we'll have a good lineup going into the fall as well. So we've seen that it's actually pulled back some of our core demographic that's been missing, it's giving us the excuse to get back out and reach out to them and draw them back into the market. So absolutely if any.
Attainment is dilutive from a margin perspective, it's absolutely accretive from an EBITDA perspective.
Correlation between entertainment attendance and gaming revenue.
That market.
Great. Thank you guys.
Thanks Carla.
Yeah.
And so again for questions. It's one four on your Keypad next question is from Cassandra Lee with difference and your line is open.
Hi, Good afternoon. Thank you for taking my question just one for the team.
Can we talk about the strategy for them.
Moment.
I remember a few quarters ago, when the occupancy was running about mid low to mid 70.
I think you guys are pushing $7 million EBITDA per month, just wondering what that looks like today.
So I think the key.
Commentary from other operators they are pretty bullish point of strength for the rest of the year.
The convention and entertainment side, So I'm wondering.
Well there is the shock could potentially push above.
Like $100 million you bought that we I think we are seeing people will have before.
Yes. So so the strategy is clearly in our in our portfolio and in our minds poised for significant EBITDA growth.
Going forward.
I think.
Mike Challenge your memory, a little bit.
We were running significantly lower midweek occupancy as in prior quarters. We are now approaching I think in overall occupancy run rate of around 70%, 75% and that's resulting in that $7 million to $8 million a month runway run rate. Currently we are we are pretty confident both in our budgeting process and what we're seeing now.
Now that we can achieve those results and then the hurdle to get to that $100 million.
We will come with.
The account experiencing kind of all of shifts all the ships rising in the high tide of additional international travel and.
Tenants and conventions.
The Convention center being.
Fully utilized along with.
Some additional targeted capital at that property when we see the returns we believe the returns would mimic what we're seeing now and I think that march toward that $90 million to $100 million is very realistic going forward.
Got it thank you very much.
Thanks Cassandra.
Next question is from Chad Beynon with Macquarie. Please go ahead.
Hi, This is Aaron on for Chad. Thanks for taking my question.
I just wanted to touch on.
Sequential monthly trends for a second.
Rocky gap property Wow local spend here in town has been very very strong and that has continued steadily.
Opening seven quarters ago.
Great perfect.
Last one for me.
On Maryland sports betting it looks like they could launch online.
Later, this year or potentially next year.
Is there any color you can share on how you're thinking about that potential opportunity.
Look for US, we really don't think about it quite frankly, much as an opportunity for our company. We do have a sports lounge at the property, which is unbranded and untether.
Do any of the sports wagering or online operators, but really for us. It's an amenity for our guests to be they'll have a place to sit watch games in.
Use what they have already from a from a wage rate perspective, many of our guests are coming from out of state where they may already have an account established even if they can't use it they place to back before they come to our property.
So look I know, Maryland has been a little bit slower out of the gate and I think everyone. In the state has had hoped for.
For our for our property, which will get smaller we don't view it as a big driver to us directly to that asset but.
It is something that our customers theyre doing cajun when they come and visit us from other states.
Okay. Thank you congrats on the quarter.
I appreciate it.
Next question is from Edward Engel with Roth Capital. Please go ahead.
Okay.
Hi, Thank you for taking my question it looks like visitation to loughlin on a market wide basis, its still down significantly versus pre COVID-19.
You've been kind of lagging Las Vegas, I guess, how quickly can you ramp up some of those events in the market. It is scheduled for the summer pretty jam packed or could it take a couple of quarters to kind of get back to where you are from event slate perspective.
Yeah, Hey, Ed just keep in mind part of that is because of us. So we had three properties open.
Now we have two that are opened and what we've really seen if you will just look at the market from a gross gaming revenue perspective, yes. It is.
That the lower end of our database that we have purposely pulled out of that business.
That was an unprofitable segment of the business, but even though it was generating gross gaming revenues.
From that perspective, we think the market is very healthy our properties right. There are very healthy right now and in the contracts are bringing back our core customer that was higher worth higher frequency higher spend that has been on the sidelines for COVID-19 or other reasons, because they did enjoy the entertainment and other things now.
Now theyre coming back so we're anticipating we're already seeing it now like I mentioned, we have a lot of tickets sold already for upcoming events in Q2, almost double what we had in Q1, and we think that that momentum to continue throughout the year and part of it part of entertainment cadence in fact, a large part of it.
Seasonal driven as you know the summer is down there are very warm so we.
We tend to it tends to be the high season also for visitation. So we have a smaller venue down there that's been closed for about 2000 seats that we keep.
Entertainment Rolling through there during the summer, but our larger vent.
The 10 to 12000 feet venue will pick back up in the fall and we're seeing good momentum for good <unk> coming.
And so I just wanted to make a point.
Through the summer.
Our own management of of what we provide an entertainment due to the climate once that cools down it'll pick right back up.
Great. Thanks for the color and then Theres been some talk I guess recently about softening in the lower end consumer segment. I know you talked about how you're kind of phasing youre kind of phased out of that part, but I guess anything just kind of.
Commentary, you can give about that kind of lower tier customer.
Yes, I don't think theres much more commentary I think Charles made the point that we have cold or I would say limited our reinvestment into that lower end of the database.
Any change that we're experiencing on that level I think it's due to that marketing approach.
From what we're seeing in addition, though I would add that we are seeing robust new sign ups in our rewards program.
Significant new sign ups.
Coming from new residents moving into this community into the valley and so that's providing a lot of fuel for growth going forward, while we retool that lower end of the marketing database. So.
That lowering of the database has kind of been cold as Charles is that we are by design and we're seeing significant pickup in our new offering our new sign ups as this valley continues to grow with residents.
Yeah.
Great. Thank you.
Okay.
There are no further questions I'll turn it back to Charles Patel for closing comments.
Okay. Thanks to everyone for joining our call and we look forward to updating you next quarter.
And that does conclude our call for today, we thank everyone for participating and you can now disconnect.
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