Q4 2023 Golden Entertainment Inc Earnings Call
Good afternoon, ladies and gentlemen, thank you for standing by and welcome to the Golden Entertainment, Inc. 2023 fourth quarter results conference call at.
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.
At this time all participants are in a listen only mode. A question and answer session will follow the formal remarks. Please note.
Operator: A question and answer session will follow the formal remarks. 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.
Today's call is being recorded today February 29 2024.
I would now like to turn the call over to Mr. Joe <unk> Investor Relations. Please go ahead Sir.
Joseph N. 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 provisions of the federal securities laws, but actual results may differ materially from those contemplated in these statements.
You very much operator, and good afternoon, everyone.
On the call today is breaks our teeny, the company's founder Chairman and Chief Executive Officer, and Charles Propel 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.
Joseph N. Jaffoni: 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 and talk about our performance. You can find the reconciliation of Gap Financial Measures in our press release, which is available on our website.
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.
Can find the reconciliation of GAAP financial measures in our press release, which is available on our website.
Charles H. Protell: 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.
Well start the call with Charles reviewing details of the quarter and a business update followed that Lake Charles will take your questions with that it's my pleasure to turn the call over to Charles for child. Charles. Please go ahead.
Charles H. Protell: Thanks Joe. The fourth quarter concluded a transformative year for Golden Entertainment. During the year, we streamlined the portfolio by divesting non-core businesses at attractive multiples, reduced leverage to favorably refinance our credit facilities, and returned capital to shareholders through a special dividend and opportunistic share repurchase. For the year 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.
Thanks, Joe.
Fourth quarter concluded a transformative year for Golden Entertainment.
During the year, we streamline the portfolio by divesting noncore businesses and attracted multiples reduced leverage to favorably refinance our credit facilities and returned capital to shareholders through a special dividend and opportunistic share repurchases to.
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.
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, an annual EBITDA to 222, and a half million dollars.
Our fourth quarter excludes the operations of the Rocky gap Casino resort and our Montana distributed operations that we sold in the third quarter, which created the majority of our reported declines in consolidated revenue and EBITDA adjust.
Adjusting for these sales revenue was down one 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 eight 8%.
Charles H. Protell: Moving to the results of our continuing operations, for the quarter, revenue at our Nevada casino resorts was up slightly compared to last year, while EBITDA declined 8.8%. Unfortunately, we did not see any benefit from Formula One's initial race in Las Vegas, with the Stratts-Novembri bidot down about 800,000 year-over-year.
Unfortunately, we did not see any benefit from the Formula one initial rates in Las Vegas with distressed November EBITDA down about 800000 year over year.
Despite the disappointing F. One experience for us Strat occupancy in Q4 was 79% up 2% over last year with the weekend full and the midweek occupancy improving but still lower compared to 2019.
Charles H. Protell: 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 a tremendous pickup during the Super Bowl, resulting in approximately $1 million in incremental room revenues over that week. 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.
We are still missing 125000 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 stretch original 118 room tower, the last of our major upgrades to the property, bringing our total renovated rooms to 1300 re.
Recently, we saw a 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 opened in March and we are excited to welcome this new amenity to the strat.
And Muslim fourth quarter revenue was up slightly despite having one less major concert, while EBITDA declined 9%, primarily due to higher labor costs.
In December Loftland 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.
Charles H. Protell: 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 mid-week revenue at our Edgewater property.
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 local casinos. The majority of the EBITDA decline was that 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.
Charles H. Protell: Q4 revenue was down 4%, and EBITDA was down 10% for a Nevada local Spasino. The majority of the EBITDA decline was at our Arizona Charleys 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.
The tavern model continues to generate attractive returns with the last eight taverns, we've 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.
Charles H. Protell: However, sequentially over the third quarter, the operating margin of our local casinos has improved. For our 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.
Between the sale of our Nevada distributed operations. This January and the third quarter sales of our Rocky gap property in 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.
Charles H. Protell: We believe it could create a portfolio of 90 to 100 taverns without meaningful increases in corporate overhead and have targeted 3 to 4 additional locations to be added in 2020. 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 a Nevada Distributed Gaming Business for approximately $240 million, including purchase cash.
Our outstanding debt at year end consisted primarily of a 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 two times 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 <unk> 25 per share the first of which is payable on April 4th.
In addition, we have over $90 million remaining under our stock repurchase authorization that we will use opportunistically to further return capital to shareholders.
Charles H. Protell: In Q4, our total distributed operations were down meaningfully, given that our divested Montana distributed gaming operations were 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 a $398 million floating rate term load and $276 million of fixed-rate bonds.
Divesting our non core businesses has concentrated our portfolio to wholly owned casinos in 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 in Nevada economy.
That concludes our prepared remarks, Blake and I are now available for questions.
Yeah.
Thank you we will now begin the question answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys. If at any time. Your question has been addressed and you would like to withdraw. It. Please press Star then two at this time, we will pause momentarily to assemble.
Our roster.
Today's first question comes from Carlo Santarelli with Deutsche Bank. Please proceed.
Oh, Hey, Blake Hey, Charles.
So guys you obviously have endured some of the labor costs through the back half of this year.
As you look out to next year and in all things considered speaking towards specifically in Nevada casinos strive et cetera, with the room Refurbishments with atomic golf coming on in March with kind of lapping some of the labor expenses.
Charles H. Protell: We will repay the outstanding bonds in April, leaving us with a simplified capital structure, less than two times 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 4th. 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 non-core 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, an increased t That concludes our prepared remarks. Blake and I are now available for questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keypad.
Is there a scenario where margins could be flattish with some of the revenue uplift coupled with some of the presumably at least lap.
Lapping of expenses.
Hello.
Okay.
Hello, Hello. This is the operator.
Can I speak to my guys Jeremy.
Yeah. Good question Carl.
Oh, sorry, yeah, everything when everything went blank there so I wasn't sure.
Your line so call.
Can you hear us.
Yes, okay sorry.
Your question. The answer is yes, we would anticipate the margin trend to be flat.
Throughout the balance of 'twenty four.
You did reference we did incur the.
The renewal of the Union contract at the Strat towards the end of this year, which provides some unique challenges to that property, but I think generally speaking your comment is accurate we would expect flat margin trends.
Going forward.
Great. Thank you for that Blake and then if I could.
Obviously, putting in the dividend are a nice touch just in terms of your thought process around.
Uses of the incremental capital with the leverage where it is.
Was there anything else that you guys, perhaps considered or are do you feel like you're sacrificing any flexibility with.
With the dividend policy.
No.
When we committed to the dividend we did so with the expectation we could we could do the dividend we could do to the dividend as well as with our significant capacity remaining buyback stock.
Carlo Santarelli: If at any time your question has been addressed and you would like to withdraw it, please press star then 2. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Carlo Santarelli with Deutsche Bank. Please proceed. Hey Blake, hey Charles.
And ultimately as we've repositioned the company with this deleveraging we've repositioned for additional.
Significant optionality so from our perspective.
We did this.
With the very cognizant opinion that we can do both and then the company is positioned with Optionality.
Operator: So guys, you obviously have endured, you know, some of the labor costs through the back half of this year. As you look out to next year, and all things considered, speaking towards specifically Nevada Casino, STRAT, etc., with the room refurbishments, with Atomic Golf coming on in March, with kind of lapping some of the labor expenses, is there a scenario where margins, you know, could be flattish with some of the revenue uplifts coupled with, you know, some of the, presumably at least, laughing of expenses. Hello? Hello?
For whatever may potentially come about in terms of M&A or other.
Got it. Thank you. Thank you very much.
Yeah.
Today's next question comes from Jordan Bender with citizens JMP. Please proceed.
Great. Good afternoon. Thanks for taking my question in the slide deck. It says you guys are comfortable bringing the leverage up to three or do you Wanna be under three can you just maybe update us on the parameters around what you would look like what sorry, what you would look for on the M&A front. You know is it more single assets or would you go small portfolio.
Operator: Hello, this is the operator. Can I speak to one of your guys? Can you hear me?
The assets. Thank you.
Yeah, Hey, Jordan, it's Charles So yes, that's obviously our target is to remain under three I don't think we're going to take our leverage up just for the sake of taking our leverage up when you have to have obviously.
Operator: Yes. Yeah, I think you got a good question, Carlo. Oh, sorry. Yeah, everything went blank there, so I wasn't sure. You're live.
Capital opportunities that earn in our mind, a return that's better than those alternatives and returning capital to shareholders. So but in that context, we do look at M&A. We have looked at M&A. I think you were not for us looking at something that yeah.
Blake L. Sartini: Yes. Can you hear us? I do, yeah. Okay, sorry. So the answer is yes. We would anticipate the margin trend to be flat throughout the balance of 24, as you did reference. We did incur the renewal of the union contract at the Strat towards the end of this year, which provides some unique challenges to that property. But I think, generally speaking, your comment is accurate.
$50 million EBITDA, North probably makes the most sense, we're not going to spend a lot of time with things that are smaller just given the integration time and.
Blake L. Sartini: We would expect flat margin trends going forward. Great, thank you for that, Blake. And then, obviously, putting in the dividend, a nice touch, just in terms of your thought process around, you know, uses of the incremental capital with the leverage where it is. Was there anything else that you guys perhaps considered? Or, or do you feel like you're sacrificing any flexibility with the dividend policy?
Management effort and also in terms of moving the needle for the for.
For the makeup of the company at this point so our focus is going to be fairly narrow from an M&A lens, we will want to find opportunities that are either single assets or portfolios that are in the west.
The property's own the underlying real estate.
So I think that in general is where it is but again I think it's Blake was saying you know our view is we've set up the portfolio now with these divestitures that we can be focused on returning capital to shareholders. While we continue to invest in our assets and have positioned ourselves I think well to look at potential M&A opportunities that are accretive.
Blake L. Sartini: No, when we committed to the dividend, we did so with the expectation that we could we could pay the dividend, we could pay the dividend as well as with our significant capacity remaining buyback stock. And ultimately, as we've repositioned the company with this deleveraging, we've repositioned for additional significant optionality. So from our perspective, we did this with the very conscious opinion that we could do both. And then the company's positioned with optionality for whatever may potentially come about in terms of M&A or other. I got it.
Dodge and fit within those parameters.
Great and then just on the back of the merger announced this morning from to the slot suppliers. You know historically speaking has there been any positive or negative impacts to your slot floor, where you put in your purchasing budgets when M&A occurs in that space.
No no I think that.
From our standpoint, the standalone on their end and no effect on our end.
Understood. Thank you.
Jordan Maxwell Bender: Thank you. Today's next question comes from Jordan Bender with Citizens JMP. Please proceed. Good afternoon.
Today's next question comes from Chad Beynon.
<unk> with Macquarie. Please proceed.
Afternoon, Blake and Charles Thanks for taking my question.
Jordan Maxwell Bender: Thanks for taking my question. In the slide deck, it says, you know, you guys are comfortable bringing the leverage up to three, or you want to be under three. Can you just maybe update us on the parameters around, you know, what you would look like, what, or sorry, what you would look for on the M&A front? You know, is it more single assets or would you go, you know, for a small portfolio of assets? Thank you. Yeah, hey Jordan, it's Charles.
Congrats on simplifying the story and everything here.
Wanted to start with the strat midweek opportunities I feel like that's something we've been talking about for a couple of years in the prepared remarks, you mentioned that again for 'twenty for what's the convention calendar look like do you think that just overall visitation to the strip, which.
Strong.
Charles H. Protell: So yeah, obviously, our target is to remain under three. I don't think we're going to take our leverage up just for the sake of taking our leverage up. We have to have, obviously, capital opportunities that earn, in our minds, a return that's better than the alternatives of returning capital to shareholders. But in that context, we do look at M&A. We have looked at M&A. I think we're not, for us, looking at something that's 50 million EBITDA north probably makes the most sense. We're not going to spend a lot of time with things that are smaller, just given the integration time and management effort and also in terms of moving the needle for the makeup of the company at this point. So our focus is going to be fairly narrow from an M&A lens. We will want to find opportunities that are either single assets or portfolios that are in the West, where the properties own the underlying real estate.
We will finally see kind of an inflection point for that mid week, which obviously leads to margin.
Improvement, so and any visibility into <unk> into 'twenty four mid week. Thanks.
Yes, Chad I think I think you're right we have been talking about that and we are beginning to see some green shoots in the fourth quarter of that midweek trend, obviously as I've talked about before.
Given 65% of our room occupancy comes from the O T a.
Sites.
We are dependent a lot on those citywide for some of that mid week.
Calendar looks pretty robust for city wides, but as you know some of these larger hotel casinos have added or increased.
Always have their casino.
Their of their own convention areas, particularly some of the new properties that have just come on that may put some pressure on the citywide but.
I would I would bring into this conversation last year, we had significant disruption in the spring and fall from construction of the rooms, I think we've said in the past that aggregated to around $5 million, we felt and hotel revenue that disruption is gone and we have the $75 million of atomic.
Charles H. Protell: So I think that, in general, that is where it is. But again, as Blake was saying, our view is that we've set up the portfolio now with these divestitures so that we can be focused on returning capital to shareholders while we continue to invest in our assets and have positioned ourselves, I think, well to look at potential M&A opportunities that are accretive to us and fit within those parameters.
These are things we can control is what I'm getting at there's atomic range golf facility coming on which we believe will greatly enhance our ability to generate additional midweek traffic with that wholly owned facility outside of.
The city Wides are looking like but we remain bullish on our prospects for mid week weekends were full primarily.
Our rates getting better.
We believe this midweek begins to fill in both through our own efforts atomic another.
Operator: And then just on the back of the merger announced this morning from two of the slot suppliers, you know, historically speaking, has there been any positive or negative impacts to your slot floor or even your purchasing budgets when M&A occurs in that space? No, no, I think that, from our standpoint, is standalone on their end and has no effect on ours. I understand. Thank you. Today's next question comes from Chad Beynon with Macquarie. Please proceed. Afternoon, Blake and Charles. Thanks for taking my question. Congratulations on simplifying the story and everything here.
As well as the the robust citywide calendar.
And Chad I would just add to that we have seen improvement. If you look over the course of all of 2023, our midweek occupancy was around 66% in our Q4 midweek occupancy even despite F. One was at 72%. So we are seeing that improvement that being said in 19.
Our midweek occupancy was around 85% and so that 125000 missing room nights for the strat relative to 19, that's worth about 40 million in revenue to the property at its current spend levels that we're seeing and so thats about 20 million in EBITDA.
So.
That's where we really see the opportunity of that property. That's the reason, we're making the investments we are and forming the partnerships. We are with folks like atomic and others. So we're excited now that we've got the bulk of construction behind us atomic opened need to really see what the property guys. Yeah. As we go through this year.
Chad C. Beynon: I wanted to start with the STRAT mid-week opportunities because I feel like that's something we've been talking about for a couple years. In the prepared remarks, you mentioned that again. For 24, what's the convention calendar look like? You know, do you think that just overall visitation to the strip, which remains strong, will finally see kind of an inflection point for that mid-week, which obviously leads to margin improvement? Any visibility into 24 mid-week? Thanks. Yeah, Chad.
Thank you and then with respect to eventually getting to our goal of 90 to 100 taverns, we've heard of increased competition in the market.
Charles you talked about the returns so it certainly sounds like a business.
How to do it well it sounds like a good business to be in but.
The new opportunities the three to four in 'twenty four and then beyond that are these conversions from other.
Blake L. Sartini: I think you're right. We have been talking about that, and we are beginning to see some green shoots in the fourth quarter of this midweek trend. Obviously, as I've talked about before, given 65% of our room occupancy comes from the OTA sites, we are dependent a lot on those citywides for some of that midweek. The calendar looks pretty robust for citywides, but as you know, some of these larger hotel casinos have added or increased the size of their casino, of their own convention areas, particularly some of the new properties that have just come on.
Other operators that just don't have kind of the the best practices that you have are you getting into new housing markets that are expanding in the valley, maybe just a little bit more color around the competition and kind of where these these new opportunities can come from thanks.
Yes, Chad.
As we divested of the call it the third party route side of the business we.
We were continuing to focus on our wholly owned tavern business.
And by virtue of that simplification, if you will.
We are I would say pretty humble at the top of the pyramid in terms of new sites that are coming about and what we would call AAA locations. We tend to get the first phone call on those sites because of our size scale scope and our success in operating tavern. So we are very dialed into new <unk>.
Blake L. Sartini: That may put some pressure on the citywides. But as I would bring into this conversation, last year, we had significant disruption in the spring and fall from construction of the rooms. I think we've said in the past that amounted to around $5 million in hotel revenue. That disruption is gone.
Average sites around the valley piece will be greenfield sites that were very.
We're very good at building, we're very good at building.
Boxes that have solid returns as Charles mentioned.
Charles H. Protell: And we have this $75 million Atomic, these are things we can control, is what I'm getting at. There's the Atomic Range Golf Facility coming on, which we believe will greatly enhance our ability to generate additional mid-week traffic with that wholly owned facility outside of what these city-wides are looking like. But we remain bullish on our prospects for mid-week. Trends were mostly full, our rates were getting better, and we believe this mid-week begins to fill in both for our own efforts, Atomic and others, as well as the robust city-wide calendar. And Chad, I would just add to that: we have seen improvement.
We do see opportunity at times for acquisitions, which this year we have.
We have four coming on.
For one in the north that were prior owners that we felt locations met our criteria and that there are demographic met our criteria. There are going to continue to be those opportunities, but we're focused on mostly new sites at this point going forward and we believe that the landscape can provide the amount of sites over the years.
That will get us to that 90 to 100 number.
Thank you both I appreciate it.
Thanks, Chad.
Our next question is from John decree with C. B R. E Securities. Please proceed.
Good afternoon, Blake good afternoon Charles.
I wanted to revisit your comments about F. One I think it's fairly common we've heard from from a number of your peers not on center strip.
Charles H. Protell: If you look over the course of all of 2023, our mid-week occupancy was around 66% in our Q4 mid-week occupancy, even though F1 was at 72%. So we are seeing that improvement. That being said, in 19, our mid-week occupancy was around 85%.
Turning to the Ultra high end curious your thoughts as to that event for next year and going forward. If there's some opportunities that you.
If you could either change for the city overall or that you might be able to do differently to.
Maybe maximize.
The contribution to the strat for next year in future periods.
Charles H. Protell: And so that 125,000 missing room nights for the strat relative to 19, that's worth about $40 million in revenue to the property at just current spend levels that we're seeing. And so that's about $20 million in EBITDA. So that's where we really see the opportunity in the property. That's the reason we're making the investments we are and forming the partnerships we are with folks like Atomic and others. So we're excited now that we've got the bulk of construction behind us, the Atomic opening, to really see what the property does as we go through this year. Thank you. And then with respect to eventually getting to a goal of 90 to 100 taverns, we've heard of increased competition in the market. Charles, you talked about the returns, so it certainly sounds like a business. If you know how to do it well, it sounds like a good business to be in.
Yeah I think.
It's a good question we've had some discussions with other operators. We think there is quite frankly, a lot of things that they could do to broaden the appeal and the audience for F wine.
Not only to our customers, but to local here in Las Vegas.
Things like selling individual day ticket instead of a package potentially making the start times a little bit earlier.
Allowing for dedicated.
Casino area. So it's easier access for our guests. So those are just a few things.
Yeah, we shared with the folks at F. One and we've talked about with other operators, but I think there is a general acknowledgment that the event needs to appeal to more than just a high end properties at the center strip that are connected to the event to make it a real success for all of Las Vegas, There is an organized.
Non mid trip co op that has that is working together. If you will significant there are significant numbers of people involved in operators involved working with F. One to do just what Charles said trying to activate more of the city during the event, even though we didn't participate and what we expect it to be up.
Blake L. Sartini: But the new opportunities, the three to four in 24 and then beyond that, are these conversions from other operators that just don't have the best practices that you have? Are you getting into new housing markets that are expanding in the valley? Maybe just a little bit more color around the competition and where these new opportunities can come from. Thanks.
Syed I personally think it was a great event for the city of worldwide event for the city the way it was.
It was packaged on T V, particularly internationally. So I think taking one for the team last year was probably.
Something that.
Knowing what we know now we would do again, but going forward.
We want to we want to work with them to be more involved in the activities around that week or 10 days. It's not just the weekend, that's a week or 10 days and is co op of these non midstream operators I think is going to be successful in gaining some traction certainly better than last year.
Blake L. Sartini: Yeah, Chad, we as we divested of, what we call the third party route side of the business. We were continuing to focus on our wholly owned tavern business. And by virtue of that simplification, if you will, I would say pretty humbly that in terms of new sites that are coming about in what we would call AAA locations, we tend to get the first phone call on those sites because of our size, scale, scope, and our success in operating taverns. So we are very dialed in to new tavern sites around the valley. These would be greenfield sites that we're very good at building. We're very good at building boxes that have solid returns, as Charles mentioned. We do see opportunity at times for acquisitions, which this year we have, I think we have four coming on. Four, one in the north that were prior owners that we felt the locations met our criteria and that their demographic met our criteria.
Great. That's good to hear and I think we've heard similar Blake's I appreciate your thoughts on that as well and then maybe as a follow up question bigger picture at the Strat. So.
Quite a bit of reinvestment.
Lately, you've mentioned construction disruption last year.
What's left in the near term to do at the Strat and then perhaps ask that in a bigger context of some of the land that you have around obviously atomic golf is activating some of that but I think you've got quite a bit more that you could.
Maybe utilize or monetize you've talked in the past about maybe third party partners I'm curious if you've had any updated thoughts or further conversations on those opportunities since the last time, you kind of talked about it.
Yes, we have.
There's no there's no major disruptive.
Additional capital programs planned to describe at this point as Charles mentioned, we have 1300 of our 2400 room inventory pretty much brand new the other 900 or 1100, let's call it.
Chad C. Beynon: There are going to continue to be those opportunities. But we're focused on mostly new sites at this point going forward. And we believe that the landscape can provide the number of sites over the years that will get us to that 90 to 100 number. Thank you both. I appreciate it. Thanks, Chad.
Rooms.
Or within seven to nine years and in pretty good shape. So the hotel itself was situated pretty well we are and we have embarked on a slot floor upgrade which is we think will be meaningful this year.
Which we which we.
John G. DeCree: Our next question is from John DeCree with CBRE Securities. Please proceed. Good afternoon, Blake. Good afternoon, Charles.
Despite being done here by mid March.
And the.
There are other projects small bar design projects and things like that designed to capture more of that traffic coming through the casino.
Blake L. Sartini: I wanted to revisit your comments about F1. I think it's fairly common we've heard from a number of your peers, you know, not on the center strip or positioned at the ultra high end. Curious as to that event for next year and going forward if there's some opportunities that you think could either change for the city overall or that you might be able to do differently to maybe maximize the contribution to the strat for next year and future periods. Yeah, I think it's a good question. We've had some discussions with other operators, and we think there are, quite frankly, a lot of things that they could do to broaden the appeal and the audience for F1, not only to our customers but to locals here in Las Vegas.
So in terms of disruption I think I think we're pretty much done with that certainly this year on the adjacent property, we own approximately six acres across the street.
We've had significant conversations with many different types of uses.
Ultimately, we want to land on something that quarterly.
Brings more inertia to the strat in terms of whether it's a non gaming hotel, we have apartment condo type discussions.
And frankly, it's come out of the box Entertainment type discussion. So we are very active in trying to activate that property in and around the strat and in addition by the way we have property around our other our other facilities that we're having the same conversation about how we can energize our other properties with adjacent property that we currently own.
Oh fantastic that sounds great.
Thank you very much.
Yeah.
Yeah.
And the next question comes from David Katz with Jefferies. Please proceed.
Blake L. Sartini: So things like selling individual day tickets instead of a package, potentially making the start times a little bit earlier, and allowing for dedicated casino areas so there's easier access for our guests. So those are just a few things that we shared with the folks at F1 and we've talked about with other operators. But I think there is a general acknowledgment that the event needs to appeal to more than just high-end properties on the Center Strip that are connected to the event to make it a real success for all of Las Vegas. Yeah, there's an organized non-mid-strip co-op that is working together, if you will. There are significant numbers of people involved and operators involved working with F1 to do just what Charles said, trying to activate more of the city during the event.
Hi afternoon, Thanks for taking my question.
I wanted to go back to the M&A landscape in and ask it a bit of a different way.
Which is the last time, we talked about this 90 days ago, just given how quickly the <unk>.
Landscape has improved and a lot of areas for.
For consumers capital markets et cetera.
Is the market different today than it was 90 days ago and household.
I think improving is definitely the word to be using and I think youll see it continue to improve as the financing market gets better. So I think that's all predicated obviously on interest rates and so as we see it as fed rate cuts coming and people's anticipation of that and plus I think once those settle into.
Somewhat of that new margin environment, it's easier to predict cash flows of the businesses that we all have and where the consumer demand is and so as long as that is stable at rates starting to come down I think ultimately you'll see more consolidation not only in our industry, but others.
Blake L. Sartini: Even though we didn't participate in what we expected to be the upside, I personally think it was a great event for the city, a worldwide event for the city, the way it was packaged on TV, particularly internationally. So I think taking one for the team last year was probably something that, knowing what we know now, we would do again. But going forward, we want to work with them to be more involved in the activities around that week or ten days. It's not just the week.
Got it so if I can follow up a little bit more specifically are there more deals is the bid ask different narrower or the same.
In what way would we would we note improvement.
So I think it's certainly narrowing but again, it's about the expectations.
We've had situations in the past where people are trying in market assets off of 2021 numbers and people are buying assets off of 2025 numbers that bid ask has now.
Charles H. Protell: It's a week or 10 days, and this co-op of these non-midstrip operators is going to be successful in gaining some traction, certainly better than last year. Great. That's good to hear.
<unk> narrowed in terms of the discussion but.
I think yes again, it comes down to where our where are the financing markets and I think those ultimately only get better I think the REIT play a large part also in M&A and to the extent that their cost of capital improves as rates come down I think that they will play a big part.
John G. DeCree: I think we've heard similar, Blake, so I appreciate your thoughts on that as well. And then maybe the follow-up question, the bigger picture at the Strat. So quite a bit of reinvestment lately. You mentioned construction disruption last year. What's left in the near term to do at the Strat? And then perhaps ask that in the bigger context of some of the land that you have around.
Advancing consolidation in the sector and I would anticipate that to happen over the course of this year.
Perfect. Thank you very much.
At this time, we're showing no further questioners in the queue and this does conclude our question and answer session as well as our conference. Thank you for attending today's presentation and you may now disconnect.
Blake L. Sartini: Obviously, Atomic Golf is activating some of that, but I think you've got quite a bit more that you could maybe utilize or monetize. You've talked in the past about maybe third-party partners. Curious if you've had any updated thoughts or further conversations on those opportunities since the last time we kind of talked about them. Yeah, we have.
[music].
Blake L. Sartini: You know, there's no major disruptive additional capital programs planned at the Strat at this point. As Charles mentioned, we have 1300 of our 2400 room inventory pretty much brand new. The other 900 or 1100, let's call it, rooms are within seven to nine years and in pretty good shape. So the hotel itself is situated pretty well.
Okay.
[music].
Yeah.
[music].
Uh huh.
[music].
Blake L. Sartini: We are and we have embarked on a slot floor upgrade, which we think will be meaningful this year, which we anticipate being done here by mid-March. And the, You know, there are other projects, small bar design projects and things like that designed to capture more of that traffic coming through the casino. So in terms of disruption, I think we're pretty much done with that certainly this year. On the adjacent property, we own approximately six acres across the street that we've had significant conversations with many different types of uses that, ultimately, we want to land on something that clearly brings more inertia to the Strat in terms of whether it's a non-gaming hotel, we have apartment condo type discussions, and frankly, some out-of-the So we are very active in trying to activate that property in and around the Strat. And, in addition, by the way, we have property around our other facilities that we're having the same conversations about how we can energize our other properties with adjacent property that we currently own. Oh, fantastic. That sounds great.
Okay.
Yeah.
Okay.
[music].
Uh huh.
[music].
Okay.
Hum.
Hum.
[music].
Blake L. Sartini: Blake, thank you very much. And the next question comes from David Katz with Jefferies. Please proceed. Hi, afternoon.
David Brian Katz: Thanks for taking my question. I wanted to go back to the M&A landscape and ask it a bit differently, which is the last time we talked about this 90 days ago, just given how quickly the landscape has improved in a lot of areas, you know, for consumers, capital markets, etc. Is the market different today than it was 90 days ago, and how so? I think improving is definitely the word to be using, and I think you'll see it continue to improve as the financing market gets better. So I think that's all predicated, obviously, on interest rates, and so as we see the spend rate cuts coming and people's anticipation of that, and plus, I think once folks settle into somewhat of the new margin environment, it's easier to predict cash flows of the businesses that we all have and where the consumer demand is, and so as long as that is stable and rates are starting to come down, I think ultimately you'll see more consolidation, not Is the bid-ask different, narrower, or the same? In what way would we note improvements?
Okay.
Yes.
[music].
Okay.
Hum.
[music].
Yeah.
Charles H. Protell: So I think it's certainly narrowing, but again, it's about expectations. So, you know, we've had situations in the past where people were trying to market assets off of 2021 numbers, and people were buying assets off of 2025 numbers. So that bid/ask is now narrowed in terms of the discussion. But so, you know, I think, you know, again, it comes down to where are the financing markets? And I think those will ultimately only get better. I think the REITs also play a large part in M&A. And so to the extent that their cost of capital improves as rates come down, I think that they'll play a big part in advancing consolidation in the sector. And I'd anticipate that to happen over the course of this year.
Charles H. Protell: Perfect. Thank you very much. At this time, we are showing no further questioners in the queue, and this does conclude both our question and answer session as well as our conference. Thank you for attending today's presentation, and you may now disconnect. ?? ?? ?? ?? ? ? ? ?? ?? ?? © BF-WATCH TV 2021 © BF-WATCH TV 2021 © BF-WATCH TV 2021 © BF-WATCH TV 2021 © BF-WATCH TV 2021 ?? ?? ?? ?? ?? © BF-WATCH TV 2021 © BF-WATCH TV 2021 © BF-WATCH TV 2021, © The Ultimate Parody Site!