Q2 2024 Golden Entertainment Inc Earnings Call
Yeah.
Operator: Good afternoon, ladies and gentlemen. Thank you for standing by.
Speaker Change: Good afternoon, ladies and gentlemen, thank you for standing by.
Operator: Welcome to the Golden Entertainment second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal remarks. Please note that this call is being recorded today. Now, I'd like to turn the call over to James Adams, the company's Vice President of Corporate Finance. Please go ahead, sir.
Speaker Change: Welcome to the Golden Entertainment second quarter, 'twenty 'twenty four earnings conference call.
Speaker Change: At this time all participants are in a listen only mode.
A question and answer session will follow the formal remarks. Please.
Please note that this call is being recorded today.
Now I'd like to turn the conference over to James Adams, The company's Vice President of corporate Finance. Please go ahead Sir.
James Adams: 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 this call, we will make forward-looking statements under the safe harbor provisions of the federal security bar laws. However, actual results may differ materially from those contemplated in these statements. Except as required by law, and to take no obligation to update these statements as a result of new information or otherwise. During the call, we will also discuss non-gap financial measures when talking about our performance. You can find the reconciliation of gap financial measures in our press release, which is available on our website.
Speaker Change: Thank you very much operator, and good afternoon, everyone on the call today is Blake <unk>, the company's founder Chairman and Chief Executive Officer, and Charles <unk>, The company's President and Chief Financial Officer.
On this 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.
As required by law, we undertake no obligation to update these statements as a result of new information or otherwise.
Speaker Change: During the call. We will also discuss non-GAAP financial measures in talking about our performance you can find the reconciliation of GAAP financial measures in our press release, which is available on our website we.
James Adams: We will start the call with Charles reviewing details of the second quarter results and a business update. Following that, Blake and Charles will take your questions. With that, I will turn the call over to Charles.
Speaker Change: We will start the call with Charles reviewing details of our second quarter results and a business update following that Blake Charles will take your questions.
Blake Charles: That I will turn the call over to Charles.
Charles Protell: Thanks, James. Starting with our financial results, we generated revenue of $167 million and EBITDA of $41 million in the second quarter. Note that our prior year period includes the results from our divested Maryland casino and distributed gaming businesses in Nevada and Montana; comparing the results of the continuing operations, hold property revenue to Clyde 1.4% and consolidated EBITDA to Clyde 4.9% in the second quarter. For Nevada casino resorts, revenue declined 1.4% and EBITDA declined 2.3%. At the Strat, we achieved record Q2 hotel revenue, with ADR up 8%, and total occupancy up 4% to 73% for the quarter. Weekend occupancy at the Strat was 97%, and midweek occupancy improved 2% to 64%.
Charles: Thanks, James starting with our financial results, we generated revenue of 167 million and EBITDA of 41 million in the second quarter note. Our prior year period, excluding the results from our divested, Maryland Casino and distributed gaming businesses in Nevada and Montana.
Charles: Impairing the results of our continuing operations total property revenue declined one 4% and consolidated EBITDA declined four 9% in the second quarter.
Charles: Our Nevada Casino resorts revenue declined one, 4% and EBITDA declined two 3%.
Charles: At the Strat, we achieved record Q2 hotel revenue with ADR up 8% and total occupancy up 4% to 73% for the quarter.
Charles: Weekend occupancy at the Strat was 97% and midweek occupancy improved 2% to 64%.
Charles Protell: We see opportunity in continuing to improve midweek occupancy as we are still missing only 18% of occupancy compared to 2019. Strat revenue and EBITDAE increased in Q2 despite higher labor costs related to our new union contract. Last July, we started accruing for increased labor expenses because we expect more moderate cost increases in the second half of this year. Atomic Golf, which opened at the end of March, continues to build its customer base, which we anticipate will drive additional visitors and locals to the Strat in the fall, with cooler weather and more convention visitors. In law Flynn, we experienced declines in revenue and EBITDA, primarily due to our decision to reduce large-scale entertainment acts, as well as increased labor costs compared to last year. Thank you, too.
Charles: We see opportunity and continuing to improve midweek occupancy as we are still missing nearly 18% of occupancy compared to 2019.
Charles: Strong revenue and EBITDA increased in Q2, despite higher labor costs related to our new Union contract last July we started accruing for increased labor expense do we expect more moderate cost increases in the second half of this year.
Charles: Atomic golf, which opened at the end of March continues to build its customer base, which we anticipate will drive additional visitors and locals the strat in the fall with cooler weather and more convention visitors.
Charles: And Laughlin, we experienced declines in revenue and EBITDA, primarily due to our decision to reduce large scale entertainment acts as well as increased labor costs compared to last year.
Charles Protell: We focused on the more cost-effective entertainment options in our smaller showroom, which allowed us to achieve higher profitability on each act, although it resulted in lower-related gaming and F&B revenue due to DeCree's patron volume. However, lower entertainment-related revenue was partially offset by our local initiatives and bingo program that improved our market share in Laughlin during the quarter. For our Nevada local casinos, revenue declined 4.9% and EBITDA declined 13%, primarily due to decreased visitation and spend from our lower-tier customers. The largest revenue and EBITDA declines came from our Arizona Charlies Boulder property, which caters to our most value-oriented guests. In addition, road construction negatively impacted entry to our Arizona Charlie's Decatur property in April and May.
Charles: Q2, we focused on bringing more cost effective entertainment options to our smaller showroom, which allowed us to achieve higher profitability on each act. Although it resulted in lower related gaming and F&B revenue due to decreased patron volume.
Charles: Lower entertainment related revenue was partially offset by our locals initiatives and bingo program that improved our market share in laughlin during the quarter.
Charles: We're in Nevada, local casinos revenue declined four 9% and EBITDA declined 13%, primarily due to decreased visitation and spend from our lower tier customers. The largest revenue and EBITDA declines came from our Arizona, Charlie's Boulder property, which caters to our most value oriented.
Speaker Change: Yes. In addition to road construction negatively impacted entry to our Arizona, Charlie's Decatur property in April and May.
Charles Protell: We also started modest renovations to the 259-room hotel at the caterer, which should be completed in 2025. Despite lower margins year over year, our local segment has operated at approximately 45% margins over the last four quarters, which we expect to continue. For the second quarter, Nevada Tavern revenue was up 3% over last year, supported by the purchase of six new taverns compared to the prior year period. This brings our total locations to 71 at the end of June, and we anticipate opening our 72nd Taverning G3.
Speaker Change: We also started in modest renovations to the 259 room hotel at Decatur, which should be completed in 2025.
Charles: Despite lower margins year over year, our local segment has operated at approximately 45% margins over the last four quarters, which we expect to continue.
Speaker Change: For the second quarter, Nevada Tavern revenue was up 3% over last year supported by the purchase of six new taverns compared to the prior year period.
Speaker Change: This brings our total locations to 71 at the end of June and we anticipate opening our seventy-second tavern in Q3.
Charles Protell: On a same-store basis, total revenue declined 2.4%, driven by a 10% decline in food and beverage revenue, partially offset by a 6% increase in same-store gaming revenue. Lower F&B revenue was largely attributed to the Golden Knights' exit in the first round of the playoffs, compared to last year's Stanley Cup Championship. During the regular season, we observed meaningful increases in F&B and gaming revenue throughout our average when the Golden Knights played. However, additional costs associated with adding six acquired locations, in addition to increased labor costs across the portfolio, resulted in EBITDA declines for our tavern business.
Speaker Change: On a same store basis total revenue declined two 4% driven by 10% decline in food and beverage revenue, partially offset by a 6% increase in same store gaming revenue.
Speaker Change: Lower F&B revenue was largely attributed to the Golden Knights exit in the first round of the playoffs compared to last year's Stanley Cup Championship.
Speaker Change: During the regular season, we observed meaningful increases in F&B and gaming revenue throughout our taverns when adult nights play.
Speaker Change: Additional costs associated with adding six acquired locations. In addition to increased labor costs across the portfolio resulted in EBITDA declines for our tavern business.
Charles Protell: Turning to the balance sheet, we started the quarter by redeeming our $276 million senior unsecured notes with proceeds from the sale of our Nevada distributed business in January. This resulted in our outstanding debt at the end of the quarter being primarily consisting of only a $396 million term loss. We also closed the quarter with $89 million of cash and access to $240 million of additional liquidity from our unfunded revolver. In May, we repriced our term loan, reducing our interest rate by 60 basis points to SOFR plus 225, which created $2.4 million of annual interest savings.
Speaker Change: Turning to the balance sheet, we started the quarter by redeeming, our 276 million senior unsecured notes with proceeds from the sale of our Nevada distributed business in January.
Speaker Change: This results in our outstanding debt at the end of the quarter, primarily consisting of only a $396 million term loan.
Speaker Change: We also closed the quarter with $89 million of cash and access to $240 million of additional liquidity from our unfunded revolver.
Speaker Change: In May we repriced, our term loan reducing our interest rate by 60 basis points to sofa, plus 225, which created a $2 4 million of annual interest savings.
Charles Protell: Since the beginning of 2021, we have repaid over $750 million of debt, and our position today is the strongest balance sheet in our history, a net leverage below two times. Our balance sheet strength facilitates our ability to accelerate returning capital to shareholders, which includes our regularly quarterly cash dividend of 25 cents per share and the repurchase of nearly 1 million shares in Q2. At the end of the quarter, we had $61 million of availability on our share repurchase authorization, and we intend to use this full amount by the end of the year.
Speaker Change: At the beginning of 2021, we have repaid over $750 million of debt and our position today with the strongest balance sheet in our history, our net leverage below two times.
Speaker Change: Our balance sheet strength facilitates our ability to accelerate returning capital to shareholders, which includes our regular quarterly cash dividend of <unk> 25 per share and the repurchase of nearly 1 million shares in Q2.
Speaker Change: At the end of the quarter, we had $61 million of availability on our share repurchase authorization and we intend to use this full amount by the end of the year.
Charles Protell: Over the last 18 months, we've returned over $110 million to shareholders through a combination of share repurchases and dividends. While we continue to evaluate strategic opportunities as they arise, we still have not reviewed any opportunities that would offer a better return than investing in our own equity in our buyback program. With our low net leverage and access to liquidity, we can return capital to shareholders and currently reinvest in our own properties. Our cash flow from continuing operations is generated from wholly owned casinos and the market-leading tavern portfolio in Nevada, where we continue to see long-term trends of increased visitation and population growth that will support the future performance of our business. That concludes our prepared remarks; Blake and I are now available for questions.
Speaker Change: Over the last 18 months, we've returned over $110 million to shareholders through a combination of share repurchases and dividends.
Speaker Change: While we continue to evaluate strategic opportunities as they arise we still have not reviewed any opportunities that would offer a better return than investing in our own equity through our buyback program with our low net leverage and excess liquidity, we can return capital to shareholders and prudently reinvest in our own properties.
Speaker Change: Our cash flow from continuing operations is generated from wholly owned casinos in the market, leading tavern portfolio in Nevada, where we continue to see long term trends of increased visitation and population growth that will support the future performance of our business that concludes our prepared remarks, Blake and I are now available for questions.
Speaker Change: <unk>.
Speaker Change: Okay.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from this process, please press star, followed by two. If you're using a speaker phone, please lift the handset before pressing any key.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your Touchtone phone.
Speaker Change: You'll hear a prompt that your hand has been raised should you wish to decline from this process. Please press star followed by to it.
Speaker Change: If you're using a speaker phone please lift the handset before pressing any keys one moment for your first question.
Operator: One moment for your first question. Your first question comes from Barry Jonas with Truist Securities. Please go ahead.
Speaker Change: Okay.
Speaker Change: Your first question comes from Barry Jonas with Jewish Securities. Please go ahead.
Barry Jonas: Hey guys, wanted to start with Atomic Golf, maybe talk about how it's been progressing relative to your expectations and how you see the path to hitting those targets. Any commentary on cross-selling to the strap would be appreciated. Thanks.
Barry Jonas: Hey, guys wanted to start with atomic Golf's, maybe talk about how its been progressing relative to your expectations and how you see the path to hitting those targets any.
Barry Jonas: Any commentary on cross sell to the strat would that would be appreciated. Thanks.
Blake Sartini: Yeah, thanks. So, from a physical standpoint, it has met or exceeded our expectations, I think, as we've talked about since they opened. It's a phenomenally competitive, world-class building. They got out of the gate slow. So our expectations were not met as they opened. I would say, you know, it was a rough rollout for them in learning the market, understanding their position in the market, and so on. Recently they have right-sized their staff.
Speaker Change: Yeah. Thanks, so from a physical standpoint, it has met or exceeded our expectations I think as we've talked about since they opened.
Speaker Change: Phenomenally competitive world class building.
Speaker Change: They got out of the gate slow so our expectations were not met as maybe as they opened I would say.
Speaker Change: It was it was a it was a rough rollout for them.
Speaker Change: During the market understanding their position in the market and so on.
Speaker Change: Recently, they have right sized their staff.
Blake Sartini: They have turned over their marketing efforts to another firm. Additionally, they've ramped up specialty events, including group events, entertainment events, and so on. All of that leading to them gaining momentum. We continue to believe that the future is bright for cross-traffic between Atomic, given its obvious location immediately adjacent to us, as well as their learning and their ability to position that property more effectively. We are seeing green shoots with what they're doing, and we anticipate that to continue. So again, we anticipate a future of a lot of cross-traffic, significant cross-traffic between our two problems.
Speaker Change: They have turned over their marketing.
Speaker Change: Party marketing efforts.
Speaker Change: Efforts to.
Speaker Change: Another firm.
Speaker Change: They've ramped up specialty events, including group events entertainment events, and so on all of that leading to the they are gaining momentum.
Speaker Change: We continue to believe that the future is bright for cross traffic between.
Speaker Change: Atomic given it's obvious.
Speaker Change: Location immediately adjacent to us.
Speaker Change: As well as their learning and their ability to position our property more effectively.
Speaker Change: We are seeing we are seeing green shoots with what theyre doing and we anticipate that to continue so we again, we anticipate the future of <unk>.
Speaker Change: A lot of cross traffic significant cross traffic between our properties.
Barry Jonas: Great, and then just for my follow-up, you know, as you know, to strip properties of clothes, to resell materials to get your thoughts. If you see yourself as a potential beneficiary from the closures,
Speaker Change: Great and then just for my follow up as you know too.
Speaker Change: Two strip.
Speaker Change: Properties have closed recently and curious to get your thoughts if you see yourself as a potential beneficiary.
Speaker Change: Closures. Thanks.
Charles Protell: Yeah, hey, Barry, it's Charles. Yeah, I mean, look, that's obviously a significant amount of rooms coming off a little more the center and south strip, but less supply certainly helps from our perspective as we get into the fall.
Speaker Change: Yeah, Hey, Barry it's Charles Yeah, I mean look thats, obviously, a significant amount of rooms.
Speaker Change: Coming off a little more center in south strip, but less.
Speaker Change: Less supply certainly helps from our perspective as we get into the fall.
Barry Jonas: Great, I appreciate it; thank you.
Barry Jonas: Great I appreciate it thank you.
Barry Jonas: Thank you.
Speaker Change: Okay.
Operator: Thank you. Your next question comes from Jordan Bender with Citizens JMP. Please go ahead.
Speaker Change: Thank you. Your next question comes from Jordan Bender with citizens JMP. Please go ahead.
Jordan Bender: Great, good afternoon everyone. MGM made comments about F1 and maybe some of the weakness around pricing that they're seeing in the 4Q. Yeah, I think last year for you guys, that weekend might have been a headwind. You know, so you're just starting from maybe an easier comp, if you want to call it that. But can you just give us some color direction on what you're seeing at the Strat that weekend in terms of booking and pricing? Thank you.
Jordan Bender: Great Good afternoon, everyone.
Speaker Change: GM made comments around Epsilon and just maybe some of the weakness around pricing that they're seeing in the <unk>, Yes, I think last year for you guys that weekend might have been a headwind.
Speaker Change: We're just starting from maybe an easier comp if you want to call. It that but can you just give us some color directionally on what youre seeing at the strat that weekend in terms of booking and pricing. Thank you.
Blake Sartini: Yeah, you're right. Last year, I would have said headwind was probably an appropriate term for that weekend. This year, we are way ahead of promotional activity during that weekend for both downtown and the north part of the Strip, which obviously we're included in. There has been a concerted effort between casino ownership and operations to work with the LBCVA to provide an entertainment-heavy weekend with music events, pop-up events, and significant investment with the participation of the LBCVA.
Speaker Change: Yes, Youre right last year, I would say headwind was.
Speaker Change: It was probably an appropriate term for that weekend. This year. We are way ahead of our promotional activity during that weekend for both downtown and the north part of the strip, which obviously were included in.
Speaker Change: There has been a concerted effort between casino ownership and operations to work with the <unk> CVA to provide an entertainment heavy weekend that weekend with music events pop up events.
Blake Sartini: So we are in offensive mode this year for that weekend. And as a result, we anticipate a much better weekend for us as we continue to roll out or plan for the specific events that will occur. All of the downtown properties are involved. I think part of the Arc District as well is involved, which is adjacent to us, and we intend to be involved heavily in that process. For the entertainment schedule
Speaker Change: Significant investment with the with the.
Speaker Change: With the participation of the <unk> CVA. So we are an offensive mode. This year for that weekend and as a result, we anticipate a much better we can.
Blake Sartini: And for US as we continue to rollout or plan for the specific events that will occur all of the downtown properties are involved I think part of the art district as well as involved which is adjacent to us and we intend to be involved heavily in that process.
Speaker Change: Alright, Nice entertainment schedule.
Jordan Bender: Great, thanks for that. And just to follow up or maybe clarify something in this slide deck, where he talks about the bill, it says it will help for future non-gaming development opportunities. I believe that could be new commentary on that. Are you seeing any uptick in terms of interest for that parcel of land?
Speaker Change: Great. Thanks for that and then just a follow up or maybe a clarification in the slide deck.
Speaker Change: Where it talks about the bill it says held for future development opportunities.
Speaker Change: Believe that could be new commentary for that are you seeing any uptick in terms of interest for that parcel of land.
Charles Protell: Yeah, hey, it's Charles. We do have an interest in that land. I think the point of that commentary is there will not be gaming reintroduced to that site within that market. That's not in the cards at this time.
Jordan Bender: Yeah, Hey, it's Charles we do have interest in that land I think the point of that commentary as they will not be gaming reintroduced to that site within that market that's not.
Charles Protell: That's not in the cards at this time.
Blake Sartini: It's approximately 1,000 feet of Colorado River frontage, which does not exist anywhere else along that resort corridor down there. We believe it has significant future value and, to Charles' point, we're exploring possibilities for May to see what the possibilities are for that piece of property, to enhance the already robust room inventory that exists in law.
Speaker Change: Approximately a 1000 feet.
Blake Sartini: It's approximately 1,000 feet above the Colorado Riverfront.
Charles Protell: Of Colorado River frontage, which does not exist.
Blake Sartini: Anywhere else along met resort corridor down there.
Blake Sartini: We believe it has significant future value and to Charles' point.
Charles Protell: We're exploring from a to Z what the possibilities are for that piece of property to enhance.
Blake Sartini: The already robust room inventory that exists in laughlin.
Speaker Change: Thanks for the questions.
Blake Sartini: Thanks.
Operator: Thank you. Our next question comes from David Katz with Jeffries Group. Please go ahead.
Speaker Change: Thank you. Our next question comes from David Katz with Jefferies Group. Please go ahead.
Operator: Okay.
David Katz: Hi, sorry, I was unmuted. Thanks for taking my question. In your initial commentary, you talked about the opportunity at midweek. You know, I think it was an 18% gap to 2019.
David Katz: Hi, sorry, I was on mute thanks for taking my question.
David Katz: Okay.
David Katz: In your in your initial commentary you talked about the opportunity at mid week.
David Katz: How do you, how are you going to do it? I guess that's the short version of the question. What strategies do you have for that?
Speaker Change: I think it was 18% for 2019.
David Katz: How do you how are you going to do it I guess is the short version of the question what strategies do you have to drop.
Charles Protell: Well, I think we have been doing it. I mean, we've been improving midweek occupancy by two to three percent every quarter for the last few quarters, and we expect that to continue. So we've improved our direct bookings quite a bit since we took over the property, and that continues. I think when we took the property over, direct bookings between groups and the casino were less than 20 percent. Now we're over 30 percent, so I think it's that continued march. It's not going to be overnight, but it's something that we're working on, and we're seeing progress, and we expect that to continue for the next several quarters.
Speaker Change: Well I think we have been doing it I mean, we've been improving midweek occupancy by 2% to 3% every quarter for the last few quarters and we expect we expect that to continue so we've improved our direct booking quite a bit since we've taken over the property and that that continues I think when we took the property.
Charles Protell: Yes, very direct bookings between Groupe casino was less than 20% now we're over 30%. So I think it's that continued march it's not going to be overnight, but.
Charles Protell: But it's something that we're working on and we're seeing progress and we expect that to continue for the next several quarters. The other area on top of that and I think direct bookings to Charles' point is the focus which we are seeing improvement we are seeing.
Blake Sartini: The other area on top of that, and I think direct bookings to Charles' point, is the focus, which we are seeing improvement in. We are seeing headcounts improve in our casino, particularly in the slot area. So as we grow that particular part of our business, that leads to more casino bookings, more direct bookings, and again, tangibly, we are seeing increases in our player count. So between those things, we do believe, and we're seeing, the results have been weak outcomes.
Blake Sartini: Head counts improve in our casino, particularly in the slot area. So as we grow that particular part of our business that leads to more casino bookings more direct bookings and again tangibly. We are seeing increases in our player counts. So between those things, we do believe and we're seeing results of midweek occupancy.
David Katz: Got it. And as for my follow-up perspective, tavern business, you know, having come through this, the entirety of this earnings season, there's been a lot of talk about the lower end of the database, so to speak, showing some weakness. I just want to double back on that and, you know, talk about anything you may or may not have seen within your customer base, particularly in the tavern. You know, that would be something we should note.
Speaker Change: Got it.
Speaker Change: And as for my follow up with respect to the tavern business, having come through this the entirety of this earnings season, there's been a lot of talk about a little lower end.
David Katz: The database so to speak showing some weakness I just wanted to double back on that.
David Katz: Talk about anything you may or.
David Katz: Or may not.
Speaker Change: Seen within your customer base, particularly in the <unk>.
David Katz: That would be something we should note.
Charles Protell: Yeah, I mean, David, we commented on the low end of the database, continuing to show weakness and stir in terms of visitation and spend, and I think, you know, for us, the taverns tend to have been flowing generally in line with the local casinos, so the trends are, you know, fairly consistent from that perspective for us, on that lower tier of the players. If you look at the mid to upper tiers, there's a bit more stability, but it's really just the low end tier we're seeing.
David Katz: Yes, I mean, David we commented on the low end of the database continuing to show weakness there in terms of visitation and spend and I think.
Charles Protell: For us the taverns tend to ebb and flow generally in line with the locals casinos.
Charles Protell: So the trends are fairly consistent from.
Charles Protell: From that perspective for us on that lower tier of the players. If you look at the mid to upper tiers as had been more stable, but it's really at the low end tier where you're seeing the weakness.
Charles Protell: Protell's asking if it's getting, you know, better, or getting any worse.
Speaker Change: I suppose I was asking is it getting is it.
Protell: Is it the same better or worse or getting any worse.
Charles Protell: I think my expectation is the same for it to get better, and part of that is seasonality. You know, the summer, the first part of the summer is always tough for the local business in general and the tavern business. As the population continues to grow, school starts again, and people begin to get into their regular local patterns, and football is coming as a big driver to our taverns. I expect it to be the same and get better in the near future. The taverns, as I mentioned before, are a very resilient part of our portfolio.
Speaker Change: I think I think it's more.
Charles Protell: My expectation is the same to getting better and part of that is seasonality.
Charles Protell: The summer the first part of the summer is always tough for the for the local business in general and the tavern business.
Charles Protell: As the population continues to grow school starts again people begin to get into their regular local patterns football is coming as a big driver to our taverns.
Charles Protell: I expect it to be the same and get better.
Charles Protell: Over the over the near future the taverns as I've mentioned before.
Charles Protell: We are a very resilient part of our portfolio.
David Katz: I appreciate it. Thank you very much.
Speaker Change: I appreciate it thank you very much.
Speaker Change: Thank you.
Operator: and our next question comes from John DeCree with CBRE. Please go ahead.
David Katz: And our next question comes from John Decree with CBRE. Please go ahead.
John Decree: Good afternoon, guys. Thanks for taking my questions. Maybe to start in Laughlin, Charles, I think in your prepared remarks, you mentioned that you've shifted to a focus on smaller-scale events there. Obviously, you reported some improved profitability on those, but you know, curious, it's kind of been an event-driven market; what drove the decision to downsize? And, you know, is that temporary, or more structural in kind of how you manage Laughlin in the event? Caldergo Forward.
John Decree: Yes, good afternoon, guys. Thanks for taking my questions.
John Decree: Maybe to start in Laughlin, Charles I think in your prepared remarks, you mentioned that you've shifted to a focus on smaller scale events. There obviously reported some improved profitability on those but curious.
John Decree: Been an event driven market, but what drove the decision to downsize and is that temporary.
John Decree: Or a more structural and kind of how you how you manage lost one in the event.
Caldergo Forward: Calendar going forward.
Charles Protell: Yeah, I think if we looked at the same period last year, we had five events at the Lack the Large 10,000, 12,000 seat amphitheater, and only one of those events for us was prominent and profitable in terms of looking at, can we cover the act through selling tickets? So, you know, I think as we regroup and look at that, I think the other issue was frequency. So we had too many, right? So for our customer base, when over 70% of our gaming revenue is rated play, we are constantly incentivizing them to, you know, come into our locations.
Speaker Change: I think as we look at the same period last year, we had five events at the lack of the large 10000 12000 seat amphitheater and only one of those events for us.
Charles Protell: Profitable profitable in terms of looking at can recover the act through selling tickets.
Charles Protell: I think as we regroup and looked at that I think the other issue is frequency. So we had too many.
Charles Protell: For our customer base, when we have over 70% of our gaming revenue is rated play we're constantly incentivizing them to come into our locations. It says the frequency is a little bit too high and the cost of the ask was getting a bit too high.
Charles Protell: And so the frequency is a little bit too high, and the cost of the acts was getting a bit too high. You know, that said, we have 1,500 to 2,000-seat secondary showroom, depending on how you configure it. So instead of spending $750 to $1 million on an act, we could spend $50,000 to $150,000 on an act. And we could do, you know, three of those acts a month and not really burn out our own players in terms of visitation or their wallets without taking as much risk on the expense of those acts.
Speaker Change: Third we have 502000 feet.
Charles Protell: Secondary showroom, depending on how you configure it so instead of spending $7 $50 million to $1 million in act, we can spend 50000 to 150000.
Charles Protell: And act and we could do.
Charles Protell: Three of those acts of months and not really.
Charles Protell: Burnt out our own players in terms of visitation or their wallet without taking as much risk on the expense of those yes, I think it's important to note that we believe this direction will produce more profitability in laughlin versus the prior direction through more frequent lower price shows.
Blake Sartini: Yeah, I think it's important to note that we believe this direction will produce more profitability in Laughlin versus the prior direction through more frequent lower-priced shows in a 2,000 to 2,500-seat environment and a reinvestment of some of that money that was going into some of these expensive acts into player-driven events, specific player-driven events where we've seen significant improvement on the cost side and on the revenue side. So we are marching toward more profitability.
Blake Sartini: A 2000 2500 seat environment and a reinvestment of some of that money that was going into some of these expensive that into player driven events.
Blake Sartini: Specific player Durbin event in which we've seen significant improvement on the cost side and on the revenue side. So we are marching toward more profitability.
Blake Sartini: It's a fundamental change in the way we're going to market in that market in Laughlin. As a result, we believe, and we're seeing early results that we will provide more profitability in that market than the prior, if you will call it, AAT, big ticket that has been kind of priced out of the market, if you will, given what we can provide, picked up on the ticket sales side. So I want to make it clear that we're marching towards more profitability than others with this new entertainment director.
Blake Sartini: It's a fundamental change in the way, we're going to market in that market that market in Laughlin as a result, we believe.
Blake Sartini: We're seeing early results that we will provide more profitability in that market than the prior if you will call at big ticket that has been kind of priced out of the market. If you will given what we can.
Blake Sartini: What we can.
Blake Sartini: Pick up on the ticket sales side, so I want to I want to make it clear that we're going we're marching towards more profitability with this new entertainment direction.
John Decree: got it like that, that's clear, Charles, Richard, that helpful color, maybe one of the shift gears back to the strap, you know, it looks like overall that casino is a work segment margin, held up, held up really well, you know, particularly relative to one cue, and only spreading the higher labor cause. So, I think you mentioned that the high ADR, so, you know, how much of kind of the...
Speaker Change: Got it that's clear Charles I appreciate that's helpful color.
John Decree: Maybe one shift gears back to the strat.
John Decree: It looks like.
John Decree: All of that Casino resort segment margin held up held up really well, particularly relative to <unk>.
John Decree: In spite of higher labor costs, So Anthony you've mentioned that the high ADR, so how much of it.
John Decree: Kind of the <unk>.
Charles Protell: Margin, Kate, and Sir Improvement were revenue mix, a high radar was there's something you were kind of able to do on the cost mitigation side, you know, kind of anniversary and enjoy some of the accruals, but you know, look like two to the margin held up well. So, you know, here's if there was some maybe expense management or revenue mix. We do, I mean, look. We do have cost mitigation plans in place at this point, and we expect that also to accelerate towards the end of the year.
Speaker Change: Margin cadence or improvement was revenue mix higher ADR was there something that you're kind of able to do on the cost mitigation side I know you've kind of anniversarying in July some of that.
Charles Protell: Accruals, but it looked like Q2, the margin held up well. So curious if there was some maybe expense management or mix. We do I mean look we do have cost mitigation plans in place at this point, we expect that also to accelerate.
Charles Protell: Towards the end of the year, but within that resort segment, a lot of that benefit was at a loss on the strategy that we that we just discussed which even though you had higher revenue and EBITDA at the Strat and like we said record hotel levels. I mean, we were at 14% year over year and just hotel revenue.
Speaker Change: At the Strat.
Speaker Change: That revenue came in at a lower margin due to the union contract on a year over year basis that should normalize we were accruing for that in July last year.
Charles Protell: Yes.
Speaker Change: Delta should be decreasing as we get through it we're not we're not happy with the threat margin at all currently and we are laser focused on.
Charles Protell: On that particular part of the business at the moment through as Charles mentioned significant cost mitigation as well as refining how we market and drive direct bookings to the property.
John Decree: Awesome. I appreciate it. Two unrelated questions that tie it all together. Thanks, guys.
Speaker Change: I appreciate it.
Speaker Change: Related questions with the tie altogether thanks, guys.
John Decree: Thanks.
Operator: Thank you. The next question comes from Chad Beynon with Macquarie Bank. Please go ahead.
Speaker Change: Thank you.
John Decree: The next question comes from Chad Beynon with Macquarie. Please go ahead.
Chad Beynon: Good afternoon. Thanks for taking my question. Charles wanted to focus on the sheer repurchases; you acquired a substantial amount in the quarter. You have a significant amount left under the authorization plan, wondering if you could shine a little bit more light on... If we should expect something of the same pace if you would consider drawing down on the revolver, obviously, it's an interesting time with the stock and I don't think you're being, you know, probably valued, nor are you, given the activity in the second quarter, but maybe just a little bit more color in terms of how active you could be here.
Chad Beynon: Good afternoon, Thanks for taking my question.
Charles Protell: Charles I wanted to.
Speaker Change: Focus on the share.
Speaker Change: Purchase is you acquired a substantial amount in the quarter.
Speaker Change: You have a significant amount.
Speaker Change: Left under the <unk>.
Speaker Change: Authorization plan.
Chad Beynon: Wondering if you could just shine a little bit more light in terms of.
Speaker Change: If we should expect something of the same pace, if you would consider drawing down on the revolver.
Speaker Change: Obviously, it's an interesting time with the stock and I don't think youre being appropriately valued nor do you given the <unk>.
Speaker Change: Activity in the second quarter, but yeah, maybe maybe just a little bit more color in terms of how active you could be here.
Charles Protell: Look, I mean, the base plan you saw us buy over, or close to a million shares in the last quarter. We intend to keep that pace through the remainder of the year, call it roughly $30 million in each quarter. We'll buy as many shares as we can over that, and then we'll go get another authorization from the board and re-up that. So there's no issues with that. I think that if the opportunity gets bigger, we obviously have a $240 million unfunded revolver with full availability and no restrictions. So we'll see what happens, but we're not afraid to use leverage to an appropriate extent in order to buy our own equity.
Speaker Change: Look I mean, our base plan, you solid by over or close to a million shares in.
Charles Protell: In the last quarter in the last quarter, we intend to keep that pace through the remainder of the year call. It roughly $30 million spend in each quarter and will buy as many shares as we can over that and then we'll go get another authorization from the board in and re up that so there's no <unk>.
Charles Protell: Issues with that and I think that if the.
Charles Protell: <unk> gets bigger we obviously have a $240 million unfunded revolver with full availability with no restrictions. So we will see what happens but.
Speaker Change: We're not afraid to use leverage to inappropriate that order to buy our own equity.
Speaker Change: Okay. Thank you.
Chad Beynon: Okay, thank you. With respect to promotional activity in the Valley, I know probably three or six months ago, it seems like some of the private companies were becoming a little bit more active. Maybe you felt some of that with one or two of your properties in the region. Has that faded away just in terms of how promotional some have been? And is that something that you're still feeling in the numbers and could get, you know, maybe better or worse going forward? Thanks.
Speaker Change: With respect to promotional activity.
Speaker Change: In the valley.
Chad Beynon: I know, probably three or six months ago. It seems like some of the private companies, we are becoming a little bit more active maybe you felt some of that with one or two of your properties and.
Chad Beynon: The region has that faded away just in terms of how promotional some have been and is that something that you're still feeling in the numbers and could get maybe better or worse going forward. Thanks.
Blake Sartini: It seems that promotional activity is pretty consistent to maybe go up a notch or two in the market, and you're right, the private guys kind of lead that direction there, but overall, we're seeing a pretty consistent elevated approach with maybe even a little bit of a higher approach. Do we see that continuing? I think so. You know, as long as the lower end, which I think, I'll speak for ourselves, that we're seeing, I think you're gonna see some tweaking and adjusting in that kind of a market.
Speaker Change: It seems that promotional activity is pretty consistent to even maybe up a notch or two in the market and you're right. The private guys kind of lead that.
Blake Sartini: Lead.
Blake Sartini: The direction, there, but overall, we're seeing a pretty consistent elevated approach with maybe even a little bit of a higher.
Blake Sartini: Approach do we see that continuing I think.
Blake Sartini: You know as long as the lower end, which I think.
Blake Sartini: I'll speak for ourselves that we're seeing I think youre going to see some tweaking and adjusting into that kind of a market. So I do think it continues for a period of time I don't think it becomes irrational, which at this point I don't think it's a rational it's more aggressive but.
Blake Sartini: So I do think it will continue for a period of time. I don't think it becomes irrational, which at this point, I don't think it's irrational, it's more aggressive. But I think most operators have, we're certainly not gonna be irrational, I don't think others will. But I see it continuing as long as we're facing these kinds of low-end challenges
Blake Sartini: I think most operators have.
Blake Sartini: I'll now point, we're certainly not going to be rational I don't think of it as well, but I see it continuing as long as we're facing these kind of low end challenges.
Chad Beynon: Thanks. And maybe I can squeak in the last one here, just kind of going back to the midweek opportunity at the Strat. I know previously a lot of your business was sourced from OTAs, and that's something that was kind of in the plan for 24. Is there still an opportunity to just grow this directly when you increase the occupancies midweek? Or will you have to rely on, yeah, maybe some of the more expensive vendors that come at a lower margin for your business? Thank you.
Speaker Change: Thanks, and maybe if I can squeak in last one here just kind of going back to the mid week opportunity at the Strat I know previously a lot of your business.
Chad Beynon: It was sourced from Otas and Thats something that that was kind of in the plan for 'twenty. Four is there still an opportunity to just grow this directly when when you increase the occupancies mid week or will you have to rely on.
Speaker Change: Yeah, maybe some of the more expensive vendors that come at a lower margin to your business. Thank you.
Speaker Change: Answer is yes, we can still improve that direct booking as we've talked about I mean again, when we took that property over it was close to 80% on the Otas, we've moved down below 70% and even though we don't have.
Speaker Change: Meeting space within the property, we do sell direct wholesale into group citywide packages. So we have folks that we've hired from a sales perspective that are making good progress in that so between those efforts.
Blake Sartini: The direct to new players as Blake alluded to through our new card sign up programs on the slot floor.
Speaker Change: These things are going to be pushing.
Speaker Change: Less reliant for us on the Otas as we go forward.
Chad Beynon: Thanks, Charles. Thanks, Blake.
Blake Sartini: Thanks, Charles Thanks Blake.
Speaker Change: Thank you Ken.
Operator: Thank you. Your next question comes from Carlo Santarelli with Dutch Bank. Please go ahead.
Speaker Change: Thank you. Your next question comes from Carlo Santarelli with Deutsche Bank. Please go ahead.
Carlo Santarelli: Hey, Blake Katz, I had a couple of questions, but all kind of related to the same thing. In slide 9, you guys assume 90 million dollars of rent. Coincidentally, that's roughly half of the casino's EBITDAAR. Is that kind of what that is assuming just kind of two times rent coverage on the casino only real estate? Yeah, that's it!
Carlo Santarelli: Hey, Blake Hey, Charles.
Carlo Santarelli: I have a couple of questions, but I'll kind of related to the same thing in slide nine you guys assume $90 million of rent coincidentally, that's roughly half of kind of the casino EBITDAR is that kind of what that is assuming just kind of two times rent coverage on advocacy.
Blake Katz: And only real estate, yeah, that's right and it's probably a little bit conservative.
Charles Protell: Yeah, that's right, and it's probably a little bit conservative, but... I feel that it's fair.
Charles Protell: I feel that's a fair number.
Carlo Santarelli: And then when you think about, like... These multiples, and acknowledge that, you know, I think the average multiple for real estate paid is a little bit higher than your low end here if you look at the history of all the transactions. Desire, I believe that exists from some of the reeds to get in to the Las Vegas locals market. Do you feel like you need to kind of hold out for the higher end of this range, despite, you know, the kind of the interest rate environment that exists right now that maybe makes it challenging?
Speaker Change: Okay and then when you when you think about like.
Speaker Change: These multiples and acknowledging you know I think the average multiple for real estate paid us a little bit higher than your low end here. If you look at the history of all the transactions and the.
Carlo Santarelli: Desire I believe that exists from some of the rights to get into the Las Vegas locals market.
Speaker Change: Do you feel like you need to kind of hold out for the higher end of this range. Despite kind of the interest rate environment that exist right now that maybe it makes it challenging.
Charles Protell: Well, Carlo, obviously, that interest rate environment is anticipated to be changing between now and the end of the year and certainly into next year, significantly. So, I don't think we have far to go for read multiples to get back to the levels where they arguably should be meaning that they have an ability to pay lower cap rates for our casino rent if they ever decide to go that. And then if you look back, even just recently at, you know, our rocket gap transaction, that was in a deal where it was north of 13 times the value of a relatively small rent stream on. Lisa Landaset.
Carlo Santarelli: Yes, Carl I mean, obviously that that interest rate environment is anticipated to be changing between now and the end of the year and certainly into next year fairly meaningfully. So I don't think we have.
Charles Protell: Far to go for REIT multiples to get back to levels, where they arguably it should be meaning that they have an ability to pay lower cap rates for.
Charles Protell: For our casino Ryan if we ever decide to go that to go that path.
Charles Protell: And then if you look back even just recently.
Charles Protell: Our Rocky gap transaction that was in a deal where it was north of 13 times.
Charles Protell: From a relatively small rent stream on lease.
Blake Sartini: So I feel like that the mid to high end of that range is achievable or should be achievable multiples. If it was something that we were to consider, and it's not something that we consider at the cap rates that are out there right now at this moment, but rates are coming down, at least as we look at all the forecasts that your banks are putting out over the remainder of this year and into next year.
Charles Protell: Lease land assets, so I feel like that that mid to high end of that range is an achievable.
Blake Sartini: Or should be achievable multiples. If it was something that we were to consider and it's not something that we consider at the cap rates that are out there right now at this moment, but rates are coming down.
Blake Sartini: At least as we look at all the forecast that you are banks are putting out over the remainder of this year and into next year.
Blake Sartini: As we sit here Carlo and its been mentioned above.
Blake Sartini: About.
Speaker Change: Valuations that we don't believe are appropriate I think if you look at US currently I think we're trading at or less certainly do the math, even conservative math plus in our real estate value set up the question for US is youre right and Charles is right. There is I think and I believe it and maximize value by waiting a bit for.
Blake Sartini: For the macro environment to change specifically regards to interest rates.
Speaker Change: Question for US is long term, how do we generate.
Blake Sartini: The most value.
Charles Protell: Being the public company is that owning our real estate or not and we go through that constantly and right now as Charles said, we're not anticipating changing direction, because with our balance sheet with our free cash with our undrawn revolver and our position.
Blake Sartini: Strategically I guess.
Blake Sartini: If you will in the market.
Blake Sartini: We think we have a lot of optionality and a lot of ways to drive value.
Blake Sartini: <unk>.
Blake Sartini: And owning real estate certainly I think is a pretty good backstop to analyzing all of those opportunities.
Speaker Change: I appreciate that guys. Thank you both.
Carla: Thanks Carla.
Blake Sartini: Okay.
Operator: There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you so much for your participation. You may now disconnect.
Speaker Change: There are no further questions at this time, ladies and gentlemen. This concludes today's conference call. Thank you. So much for your participation you may now disconnect.
Operator: Yes.
Operator: Sure.
Charles Protell: The answer is yes, we can still improve that direct booking, as we've talked about. I mean, again, when we took the property over, it was close to 80% on the OTAs. We've moved down below 70%, and even though we don't have group meeting spaces in the property, we do sell direct wholesale into group citywide packages, so we have folks that we've hired from a sales perspective that are making good progress on that.
David Bain: David Bain, John DeCree, John DeCree, John DeCree, John DeCree,
Charles Protell: But we did that resort segment, a lot of that benefit was out of the lawfulness strategy that we just discussed, which even though you had higher revenue and you've adopted stratt, and, like we said, record hotel levels. I mean, we were 14% year over year in just hotel revenue, you know, at the stratt, but that revenue came at a lower margin due to the union contract on a year over year basis.
Blake Sartini: Yeah, as we sit here, Carlo, and there's been some talk about valuations that we don't believe are appropriate. I think if you look at us, currently, I think we're trading at or less, certainly due to math, even conservative math, less than a real estate value set up. The question for us is whether you're right, and Charles is right.
Charles Protell: So, between those efforts, the direct approach to new players, as Blake alluded to, through our new science programs on the slot floor, those things are going to be pushing less reliance for us on the OTAs as we go forward.
Blake Sartini: There is, I think, an ability to maximize value by waiting a bit for the macro environment to change, specifically with regard to interest rates. I think the question for us is, long-term, how do we generate the most value as this public company, is it owning real estate or not? And we go through that constantly. And right now, as Charles said, we're not anticipating a changing direction because with our balance sheet, with our free cash, with our undrawn revolver, and our strategic position, I guess, if you will, in the market. We think we have a lot of optionality and a lot of ways to drive value. And owning real estate, certainly, is a pretty good backstop to analyzing all those opportunities. I appreciate that.
Charles Protell: That's hit normalized; we were accruing for that in July last year. So, you know, the delta should be decreasing as we get through. Yeah, we're not happy with the stratt margin at all currently. And we are laser focused on that particular part of the business at the moment through, as Charles mentioned, significant cost mitigation as well as refining how we market and drive direct bookings to the property.
Carlo Santarelli: I appreciate that, guys. Thank you both. Thanks, Carla. There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call.