Q4 2024 Golden Entertainment Inc Earnings Call
Good afternoon, ladies and gentlemen, thank you for standing by.
Welcome to the Golden Entertainment fourth quarter 2024 earnings Conference call.
At this time all participants are in a listen only mode.
<unk> and answer session will follow the formal remarks.
Please note that this call is being recorded today.
Speaker Change: Now I'd like to turn the conference over to James Adams, The company's Vice President of corporate Finance and Treasurer.
Speaker Change: Please go ahead Sir.
Blake: 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 with Cowen <unk> Company's President and Chief Financial Officer.
Speaker Change: 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 except 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.
Speaker Change: We will start the call with Charles reviewing the details of the fourth 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.
Charles: Thanks, James the fourth quarter concluded a transformative year for Golden Entertainment. During 2024, we streamline the portfolio by closing on the sale of our Nevada distributed business. The last of our noncore divestitures at attractive multiples, which collectively generated over $600 million of proceeds.
Charles: We use these proceeds to optimize our capital structure, reducing our leverage as well as lowering our cost of capital by repricing our term loan.
Charles: Also in 2024, we accelerated capital returns to our shareholders by instituting a regular quarterly dividend and repurchasing $2 9 million shares of our common stock representing 14% of the free float outstanding.
Charles: Turning to our financial results in the fourth quarter, our operations generated revenue of $164 million and EBITDA of $39 million, bringing our full year revenue and EBITDA in 2000 $24 million to $667 million and $155 million respectively.
When looking at Q4 for our continuing operations compared to prior year, our results were lower year over year, but up meaningfully from Q3, which we noted on our last call would be the low point in our quarterly financial performance.
Charles: In Q4, we saw material sequential EBITDA improvement in all of our properties, excluding La Plaza, which has a market is seasonally weaker in Q4 compared to Q3.
Charles: As we start 2025, we saw broad strength in January offset in February given the tough comp related to Las Vegas hosting the Super Bowl last year. However.
Charles: However, when we look at the monthly cadence of our rated gaming revenue compared to prior year October was down 7% November was down 4% December was flat to prior year and January was up 4% with January 2025, EBITDA up meaningfully over prior year.
Charles: As mentioned without the lift from Super Bowl February will be down year over year, but our forecast for March currently shows better trends over 'twenty, 'twenty, four which reinforces our anticipation of improving performance for our properties throughout 2025.
Charles: Now for some additional color on our specific properties.
Charles: At the Strat for Q4, our weekend occupancy was flat to prior year at 95%, but our midweek occupancy was down 6%, bringing overall occupancy to 75% for the quarter, which increase attributed to declines in our Nevada Casino resort segment.
Charles: Las Vegas, citywide occupancy and ADR were weaker than October November, particularly for mid to lower tier properties impacted by the election and a softer second year of F. One.
Charles: However, both December and January were strong and we see opportunity for growth in 2025 from returning midweek occupancy and increased spend from our core consumer.
Charles: In Laughlin, we increased market share in Q4 and reduced operating expenses, our riverfront bingo room continue to help drive increased local business. We have program are smaller entertainment venue with more frequent acts on weekends to offset lower visitation from reduced large scale entertainment.
Charles: Foreign Nevada locals casinos, we saw increased revenue and EBITDA over last year as well as sequentially from Q3. We also saw the same trend in margins with our local casino EBITDA margin improving to 46%.
Charles: Our biggest improvement within the local segment came from our smaller, Arizona, Charlie's Boulder property, which caters to our most value oriented guests and it has been the most pressured over the last few quarters.
Charles: This property's recent performance is a positive sign for continued stability and growth in the locals market in 2025.
Charles: For the fourth quarter, Nevada Tavern performance continued to be negatively impacted by our seven most recent tavern additions six of which were acquisitions, where we are revamping prior ownership operations and reinvestment strategy.
Charles: Although a slower start than anticipated. These new taverns continued to improve performance month over month and should stabilize at expected levels by the end of the year.
Charles: On a same store basis, we have seen sequential improvement in the taverns with revenue up 6% from Q3 to Q4.
Charles: Moving onto our capital structure, we continue to maintain with the best balance sheets in the gaming industry with total funded debt of approximately $400 million net leverage of two three times EBITDA and.
Charles: And $220 million of remaining availability under our revolving credit facility.
Charles: Selling our non core assets over the last two years, we have repaid over $500 million of debt.
Charles: Turned nearly $190 million to shareholders through a combination of share repurchases and dividends, including $113 million in 2024.
Charles: In Q4, we repurchased approximately one 1 million shares at an average price of $32 65.
Charles: Totaling $36 million, we have $99 million of capacity on our current buyback authorization and we will continue to pursue opportunistic share repurchases, which can be funded from our free cash flow and availability on our revolving credit facility, given our low leverage profile.
Charles: Our wholly owned casino and branded tavern portfolio is well positioned to benefit from the favorable long term economic trends in Nevada, which remains some of the most favorable in the country.
Charles: Data continues to be one of the fastest growing states in terms of population employment and discretionary income, which is anticipated to continue well into the future.
Charles: Last year also marked the fourth straight year of Las Vegas visitation growth, reaching nearly 42 million people. This is still below 2019 as visitor volume highlighting room for continued recovery to pre pandemic visitation and beyond supported by billions of dollars of future development projects to drive growth in Las Vegas.
Charles: We are confident in our business prospects for 2025 with expected organic growth to come from improved performance at the strat stabilized revenues at our new taverns and the rest of our portfolio benefiting from the continued strength of Nevada's economy.
Charles: We remain committed to exploring all options to maximize value for our shareholders, including traditional M&A as well as monetization of our real estate holdings in the meantime, we will continue to focus on operational efficiency investing our own assets and returning capital to shareholders.
Charles: That concludes our prepared remarks, Blake and I are now available for questions.
Blake: Thank you.
Blake: Ladies and gentlemen, we will now be conducting a question and answer session.
Blake: You would like to ask a question. Please press star and one on your telephone keypad.
Blake: Confirmation tone will indicate your line is it the question queue.
Blake: You May press Star and Joe If you would like to remove your question from the queue.
Blake: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Blake: Ladies and gentlemen, if you would wait for a moment when we poll for questions.
Blake: Yeah.
Speaker Change: Our first question comes from Barry Jonas with Twist Securities. Please go ahead.
Speaker Change: Hey, guys, it's Dan Patrick T O on for Barry. Thank you for taking my question first one for me has your thinking or the general environment around M&A changed since the last time, we spoke.
Speaker Change: Yeah.
Speaker Change: No Patrick display.
Speaker Change: We outlined on our last call.
Speaker Change: We continue to be proactive.
Speaker Change: And pursuing all options really to grow shareholder value is Charles I think mentioned in his.
Speaker Change: Prepared remarks.
Speaker Change: We continue to believe we're well positioned for various strategic alternatives.
Speaker Change: And.
Speaker Change: Between.
Speaker Change: Potential share repurchases with value dislocation and other strategic alternatives, we have plenty of capacity going forward to do both.
Speaker Change: So our situation is exactly the same as it was last quarter and we are continuing to be proactive.
Speaker Change: And and pursuing opportunities.
Speaker Change: Okay. That's great. Thank you for the color as my follow up you had previously stated that you've ramped promos for F. One this time around could you give any color on how that weekend trended for you in your Q and either way do you have any conviction benefit further adds are the have been carried out in years to come. Thank you.
Charles: Yeah, Patrick Hey, it's Charles So I don't think anyone expected.
Speaker Change: Dramatic falloff.
Speaker Change: In half one so are we saved them and it was I would say less bad for US was around our investment in ticket indirect expenses related to the event, where we did suffer a little bit was just that you were able to compress our rate at all given the low occupancy in the town.
Speaker Change: Relative to the prior year.
Speaker Change: Okay I appreciate the color guys. Thank you again.
Speaker Change: Thanks.
Speaker Change: Thank you.
Jordan Bender: Our next question comes from Jordan Bender with citizens. Please go ahead.
Speaker Change: Good afternoon, everyone. A strip operator noted the expectation that an uplift in youll see an uplift in group and convention business and 25 and 26. So can you just remind us where you stand in terms of the recovery or your positioning at the strat and what that means for the property citywide continues to come back.
Jordan Bender: Yeah, Hey, enjoying it.
Speaker Change: Charles So if you look at 2019, we ran that property at almost 92% occupancy and we just noted for.
Speaker Change: Q4 were aged 75, so all of that is really mid week.
Speaker Change: That for us.
Speaker Change: We are the overflow of others convention business. So when the town is more forward that that and earn disproportionately to the to our benefit and when you look particularly into 'twenty 'twenty kick you will have the convention center finished off with the third phase of their expansion.
Speaker Change: Which is about $600 million at the exit finish off in Q4 of this year. So once the convention center yet.
Speaker Change: More used and more full with their new amenities were very close to that and we see this draft benefiting from that increased traffic.
Speaker Change: Thanks for that and my follow up switching to calibrate as you know the expense growth and 24 was it was fairly elevated without getting into any guidance are you able to just help us with opex growth in that segment and 25, and then maybe just more broadly the major buckets are swing factors that we should be.
Speaker Change: Thinking of Dow.
Speaker Change: For the total company. Thank you.
Speaker Change: Yeah, I would just say specifically without getting too much into it you'll see sequential growth in the taverns as we move forward through.
Speaker Change: Through 2025 other than Q3, which is seasonally lower so you know as we highlight on the call. We basically had to revamp the entire operations of six taverns that we took over for various reasons and so you know that those operations now have trended positive from an EBITDA perspective.
Speaker Change: And we expect them to continue to grow but we've completely revamped how they've traditionally those location for traditionally reinvesting in customers.
Speaker Change: As well as the employee base I think we've had to turn over every single employee that created some disruption, but now we're thinking we're back on a cadence that we expect those to be ramped in line with the rest of the portfolio into at the end of 2025 for the balance of the company I think it continues to be labor is a headwind.
Speaker Change: And so if you look at what we've been doing we've been managing through a new culinary union contract at the Strat, which this is the first year of that or this will be the anniversarying of the first year of that where most of the cost increases occurred. So we expect those to moderate but there will still be mid single digit labor and.
Speaker Change: Place within the portfolio that will be we'll be working to mitigate as we go through the year.
Speaker Change: Let me just add to that I think thats exactly right.
Speaker Change: Our major initiatives just to put it another way.
Speaker Change: Going into 2025 for all of our ops are focused around our cost control efforts and as Charles just mentioned, we're making significant progress already in those efforts.
Speaker Change: Our revenues were up or excuse me down modestly quarter over quarter, plus or minus 3%.
Speaker Change: So we are we are laser focused on our cost opportunities.
With our broader portfolio with the most.
Speaker Change: Most of our upside being there this year, particularly at the strat.
Speaker Change: In regards to.
Speaker Change: Being tangible and us being able to manage that so we're off to a great start in that regard.
Speaker Change: Thank you very much.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Zachary Silverberg with Wells Fargo. Please go ahead.
Speaker Change: Good evening. Thanks for taking my question, Adam you touched upon it a bit in the prepared remarks, but you mentioned how you are.
Speaker Change: Are you seeing the consumer stabilizing or improving post election can you maybe just double click on those trends and what you guys are kind of seeing on the ground that gives you confidence to make the statement.
Yeah, I think we've seen more health in the database, so, particularly within the locals market.
Speaker Change: So as we look at the database the top tier of our database continues to be strong in both in terms of visitation and spend but the trend in Q3 that we really saw was the lower end of the database seemed to be continuously declining almost a double digit rate that has moderated and we tried to give some cadence.
Speaker Change: Of within the quarter within the fourth quarter, how we've seen again those overall database decline that was mostly driven October by the lower and the database a little less in November again in the low end of the database.
Speaker Change: <unk>.
Speaker Change: Stable year over year to growing in January.
Absent the Super Bowl comp, yes, we're very confident and in growth in the health of within the database as we look into 2025.
Speaker Change: Additional micro example to that I think it's important to point out it's a threat given the cost challenges that we've had and are currently.
Speaker Change: Making great efforts to mitigate and having success with that.
Speaker Change: We are having.
Speaker Change: The scrap slot for example continue to show sequential year over year improvement.
Speaker Change: Even with the mid week challenges our gaming.
Speaker Change: Situations of Stratus, improving particularly in the swaps.
Speaker Change: We are approaching I think around 55% carded play at the Strat, which when we took that property over was nonexistent.
Speaker Change: So a huge upside for us to be able to target and market to our gaming customers, which we're seeing benefits from.
Speaker Change: And the direct bookings at the property continue to improve.
Speaker Change: So all of that I think is maybe a bit in the weeds, but in particularly for that property. We are seeing green shoots and we are making progress.
Speaker Change: In the gaming side of that property get even given the occupancy challenges, which we believe is very positive going forward.
Speaker Change: Thanks for the color and just for a follow up no tax on Capes and overtime seems to have some real momentum can you give any color on how this would benefit your assets or maybe not just your assets, but the Las Vegas in general.
Speaker Change: It would obviously be huge for Las Vegas, given given the workforce I think as it directly relates to us that's about matching that is about $2 million for me.
Speaker Change: Tax perspective around the ships.
Speaker Change: So maybe not as meaningful but certainly for our workforce it would be meaningful and we see those as just direct discretionary spending dollars. They end up back in the pool for for allocation to gaming as their entertainment.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Chad Beynon with Macquarie. Please go ahead.
Chad Beynon: Hi, Good afternoon, Blake and Charles Thanks for taking my question.
Chad Beynon: And the last couple of calls I know you guys have addressed some of the promotional activity, particularly in the Las Vegas.
Chad Beynon: <unk>.
Chad Beynon: Market as that seemed to abate at this point and Charles given your comments around the rated play improving.
Chad Beynon: Are you willing to kind of.
Chad Beynon: Let go more of some of that lower tier unrated play maybe something that's more interested in promos in the market. Thanks.
Chad Beynon: Yeah, I think Chad we've seen stability I think it was a little bit promotional over the summer months and now we've seen that level off and we view it as stable in the markets, where we're competing here here in the local segment I do think there is a reevaluation of how people look at reinvestment at the.
Chad Beynon: The database that should obviously be a constant.
Chad Beynon: I think for us, it's a balance of how much you're investing in the existing players that low into the database as well as reactivation of players that we maybe haven't seen back so a lot of our campaigns are focused on.
Chad Beynon: Both of that the reactivation of players and evaluation of what we have so that we're not over investing in the in any one segment, yes, Chad promotional activity I think is Russia.
Chad Beynon: <unk> in the category or is now in the category of rational I think what we're seeing if there is any.
Anything that we're seeing in the market, it's rational food and beverage oriented.
Chad Beynon: It's reasonable.
Chad Beynon: We arent seeing at least from the major local operators, including ourselves.
Chad Beynon: Lead to anything that we think could be inflationary.
Speaker Change: Okay. Thank you.
Speaker Change: And then on the back on the strategic question that you addressed earlier in the call is there a particular size of a portfolio.
Speaker Change: <unk>.
Speaker Change: Or maybe a leveraged target if you do proceed down the M&A route.
Speaker Change: Should we think about maybe the regions of the country that you'd be interested in and then maybe more importantly, the financial implications in kind of a target.
Speaker Change: Leverage goal that would obviously come down overtime.
Yes, John I think it's easier to outline what we would not be doing we would not be looking at any greenfield.
Speaker Change: <unk> development and I don't think we'd be looking at any single acquisition asset acquisitions that are sub.
Speaker Change: $40 million to $50 million of EBITDA I'd say outside of that we are open to all types of avenues.
Speaker Change: And say you know I don't have to walk you through what those would be but.
Speaker Change: I think that when we when we look at how we think about leverage in our pro forma entity. We said our target long term is three times or less which is obviously, where we are now I think we'd be comfortable going higher than that.
Speaker Change: But I wouldn't want to give you a number around that right now, but we'd want to have a quick deleveraging path either if we're in a combination with another company or we're an actual acquirer of another company chat.
Speaker Change: <unk> said in the past I've mentioned on these calls in another.
Speaker Change: Conversations that if we do if and when we do something that's something is Charles put.
Speaker Change: We want to move the needle.
We don't want to we don't want to do.
Speaker Change: Go regionally into small operations that are capital deferred or ignored.
Speaker Change: Disperse our management.
Speaker Change: To a point that doesn't make sense.
Speaker Change: Given where we sit with our capital structure.
Speaker Change: With our current.
Speaker Change: Organic growth opportunities.
Speaker Change: We can we can continue to be pretty patient, what we're not patient with as our share price continuing to lag in these ranges. So that's motivation for us to as I said to be proactive, but it's going to be I think a transformational.
Speaker Change: Type of.
Speaker Change: Of an activity that would that we would pursue it's not going to be kind of a piecemeal approach.
Got it. Thank you both I appreciate all the extra detail.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Next question comes from Max Marsh with C. B R. E Securities. Please go ahead.
Max Marsh: Hey, guys. Thanks for taking my questions.
Max Marsh: Alright, 72, taverns now I know some of those are still ramping but do you have any idea of what that cadence of new acquisitions might look like in Las Vegas Valley, and whether or not you guys have thought about expanding that business geographically outside of Las Vegas.
Max Marsh: Yeah, we definitely have thought about spanning it outside of Las Vegas. We obviously, we have a few that are up in Reno right now like Fitbit gaming component to the tavern as long as theres opportunities to continue to grow in Nevada, which we think that there are that that will be the focus.
Max Marsh: And given that aspect of it.
Max Marsh: And within that context of acquisitions versus Greenfield, we're much more focused on greenfield developments right. Now we have two sites signed up for this year and we'll look for others, but I don't think Youll see us in the acquisition mode.
Max Marsh: And for the near future, we're going to be much more focused on adding a plus sites or is our existing portfolio in Las Vegas.
Max Marsh: Yeah.
Max Marsh: Great great. Thanks for that and just quickly as a follow up here. If you guys have any update of the ramping of the iconic golf facility at the strat, whether that might be helping drive midweek demand and I believe you also have some additional excess land. There. If you could just update us on your thoughts or plans for that.
Max Marsh: Yes.
Max Marsh: I think atomic continues to move forward in terms of.
Max Marsh: Continuing to attract additional business.
Max Marsh: I was at the property yesterday, and we are seeing some.
Max Marsh: Bookings.
Max Marsh: As a package between our room product.
Max Marsh: <unk> they are.
Max Marsh: Our improving from what I understand really in their group business. We do see some crossover from that we continue to believe that as they improve we will refine our ability to drive cross traffic from that facility, which I mentioned before is a world class $80 million facility. So we are very.
Max Marsh: Continue to be bullish on that on that particular activity moving business into our property as they continue to grow the excess property things will probably approximate acre adjacent to that but more importantly, there is five five to six acres directly across the street on Las Vegas Boulevard, we continued to be very.
Max Marsh: Active.
Max Marsh: And have.
Max Marsh: In depth conversations.
Max Marsh: A lot of different uses for that particular piece, we see that as a great opportunity for the <unk> going forward with a blank canvas, we want to make the right decision, but there is a lot of optionality.
Max Marsh: We are discussing on that additional acreage.
Max Marsh: Yeah.
Max Marsh: Okay.
Max Marsh: Great. Thank you guys.
Max Marsh: Thank you our.
Speaker Change: Our next question comes from David Katz with Jefferies. Please go ahead.
David Katz: Hi, good evening, Thank you for <unk>.
Speaker Change: Okay.
Speaker Change: It sounds like the geography.
Speaker Change: You know where your potential consideration markets, maybe expanding and I want to be clear that that.
Speaker Change: Is that something outside the state of Nevada, or should we still be thinking within it and of course going outside.
Speaker Change: Talk about sort of what.
Speaker Change: What kinds of markets.
Speaker Change: It would be I guess, nonstarters or inbounds are out of bounds anything would help thanks.
David Katz: Yeah. Thanks, David I think if we're looking out of state it would be in the context of multiple properties and as Blake was alluding to a more transformative.
David Katz: Type of deal for US I think we would only look really for single assets within the state.
Speaker Change: So I don't really want to go into it much more beyond that but we won't go by a one off river boat in Ireland, it's doing $15 million to $20 million.
Speaker Change: EBITDA, but things that are part of a larger portfolio, we certainly look at that.
Speaker Change: And.
Speaker Change: And again I think we'd be.
Speaker Change: Not interested in pure Greenfield development projects.
Speaker Change: But certainly if there is an aspect of future growth and development with existing cash flowing operations, we would look at those opportunities.
Speaker Change: Understood.
Speaker Change: Should we be thinking.
Speaker Change: No as broadly.
Speaker Change: <unk> historical racing markets or other kinds of gaming machine facility markets that may be classified as adjacencies to the traditional.
Speaker Change: Commercial casino market.
We would expect except for the distributed gaming business. So as part of our divestiture of that business and we do have a noncompete.
Speaker Change: To re enter into that business. So we would not look at that but to the extent that there.
Speaker Change: Growing cash flow with any adjacencies, we would look at that obviously, we don't have an online presence that we would not be looking on the digital landscape will be purely focused on brick and mortar opportunities were.
Speaker Change: Where we could use our expertise and incorporate infrastructure to help grow and improve those businesses.
Speaker Change: Very helpful. Thank you.
David Katz: Thanks, David.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, as there are no further questions that concludes today's teleconference.
Speaker Change: May disconnect your lines at this time, thank you for your participation.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].