Golden Entertainment, Inc. (NASDAQ:GDEN) 2023 Fourth Quarter Financial Report Transcript February 29, 2024
Golden Entertainment, Inc. missed earnings estimates. Reported EPS was $0.18, compared to estimate of $0.25. Golden Entertainment, Inc. was not one of the 30 most popular stocks among hedge funds as of the end of the third quarter (Please see here for the detail).
operator: Hello everyone. Thank you for your patience. Welcome to the Golden Entertainment, Inc. 2023 Fourth Quarter Earnings Conference Call. All participants are currently in listen-only mode. [Operator Instructions] Please note that today's call was recorded today, February 29, 2024. I'd like to turn the call over to Joe Jaffoni, who is in charge of investor relations. Please do.
Joe Giaffoni: Thank you very much, operator. And hello everyone. Today's caller is Blake Sartini, the company's founder, chairman and chief executive officer. Charles Protell President and Chief Financial Officer. During today's conference call, we will be making forward-looking statements pursuant to the safe harbor provisions of the federal securities laws. Actual results may differ materially from those contemplated in these statements. Additional information regarding the factors that could cause actual results to differ materially from these forward-looking statements is contained in today's press release and the Company's filings with the SEC. We undertake no obligation to update these statements as a result of new information or otherwise, except as required by law.
On today's conference call, we will also discuss non-GAAP financial measures as we discuss our operating results. Reconciliations for GAAP financial measures can be found in the press release available on our website. Charles begins the call by reviewing quarter details and business updates. Blake and Charles will then answer your questions. Now, I'm pleased to hand over the call to Charles Protell. Mr. Charles, please.
Charles Protell: Thank you, Joe. The fourth quarter capped off a transformative year for Golden Entertainment. During the year, we rationalized our portfolio by selling non-core businesses at attractive multiples, reduced leverage to favorably refinance our credit facilities, and increased shareholder value through special dividends and opportunistic share repurchases. Returned capital. To begin 2024, the Company completed the sale of its Nevada diversified business in January and established a quarterly dividend to begin regular capital returns to shareholders. In the fourth quarter, the Company had operating revenue of $231 million and EBITDA of $48.8 million, resulting in total annual revenue of $1.1 billion and annual EBITDA of $222.5 million. Our fourth quarter does not include our Rocky Gap Casino Resort operations and our Montana distributed operations, which we sold in the third quarter. This caused the majority of the decline in consolidated revenue and his EBITDA that we are reporting.
Adjusting for these sales, fourth-quarter revenue was down 1.6% and EBITDA was down 11%, with margins impacted by year-over-year increases in labor and other costs. Let's move on to the results of continuing operations. Nevada Casino Resort's revenue increased slightly year-over-year in the quarter, but EBITDA decreased 8.8%. Unfortunately, no benefit was gained from F1's first race in Las Vegas, with November EBITDA down approximately $800,000 year over year. Despite his F1 experience which was disappointing for us, his STRAT utilization in the fourth quarter was at his 79%, an increase of 2% over last year. Weekends were full and weekday occupancy improved, but still low compared to 2019. STRAT still has 125,000 rooms available. Comparisons to 2019 show a gradual recovery as facilities are completed with renovations and new equipment added.
In October, we completed the renovation of STRAT's original 118-room tower. This is the last major upgrade to the property, bringing the total number of renovated rooms to 1,300. Most recently, we saw a significant increase during the Super Bowl, with room revenue increasing by approximately $1 million that weekend. After several weeks of construction delays, Atomic Golf is scheduled to open in March. We look forward to welcoming this new amenity to his STRAT. At Laughlin, revenue increased slightly in the fourth quarter, even though there was one fewer large concert. Meanwhile, EBITDA decreased by 9%, mainly due to higher labor costs. Laughlin's revenue and EBITDA showed positive year-over-year growth in December, with continued signs of margin stabilization into 2024.
Entertainment is a major driver of performance at our Laughlin facilities, and we are working to optimize our services to create more cost-effective traffic diversions over the coming year. In addition, a new bingo room for local residents has been successful in increasing midweek revenue at the Edgewater facility. Nevada Locals Casino's fourth quarter revenue was down his 4% and EBITDA was down his 10%. The majority of the EBITDA decline occurred at the Charlie's Boulder, Arizona property, which experienced a decline in room nights due to the loss of a significant group contract compared to last year. As a result, profit margin decreased in the fourth quarter compared to the same period last year. However, local casino operating margins subsequently improved through the third quarter.
For Nevada Taverns, revenue increased 3% and EBITDA increased 4% year-over-year in the fourth quarter due to the acquisition of four new taverns under the new brand and stable same-store performance. At year's end, he had 69 taverns in Nevada, 66 of which were in Las Vegas. We believe we can build a portfolio of 90-100 izakayas without significantly increasing corporate overhead, and aim to add 3-4 more by 2024. This tavern model continues to generate attractive returns in the past eight taverns we have built or purchased. Generates an average ROI of over 25%. In January of this year, we completed the sale of our Nevada decentralized gaming business for approximately $240 million, including cash.
Considering that the divested Montana distributed gaming business was included in last year's results, the overall distributed business was down significantly in the fourth quarter. Between the sale of the Nevada Distributed Business in January of this year and the third quarter sale of the Rocky Gap Real Estate and Montana Distributed Operations, the Company received total proceeds of more than $600 million, before taxes and transaction costs. After that, we generated more than $500 million in liquidity. These gains significantly improved our leverage profile and enhanced our strategic flexibility. He reduced his debt by more than $60 million in the fourth quarter, bringing his total debt payments for the year to nearly $240 million. At year-end, our outstanding debt consisted primarily of $398 million of variable rate term loans and $276 million of fixed rate debt.
The company will repay its outstanding debt in April, leaving it with a simplified capital structure with less than 2x net leverage and full availability on a $240 million revolver. Given the Company's low leverage and liquidity profile, the Company has established a quarterly cash dividend of $0.25 per share, with the first payment to be made on April 4th. Additionally, the Company has more than $90 million remaining under stock repurchase authorizations, which he intends to use opportunistically. We will further strengthen the return of capital to shareholders. The divestiture of non-core businesses has focused our portfolio on wholly owned casinos and branded taverns in Southern Nevada, where we are seeing some of the most favorable macro trends in the country. Looking forward, our main organic opportunities will come from improved performance at STRAT and increased Tavern footprint, with the entire portfolio benefiting from the continued strength of Nevada's economy.
This concludes my prepared remarks. Blake and I will now take questions.
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