Yahoo Finance Golden Entertainment Inc (GDEN) (Q1 2024) Earnings Call Transcript Highlights: Navigating ...
Revenue: $174 million in Q1 2024, down less than 1% year-over-year.
EBITDA: $41 million in Q1 2024, down over 15% primarily due to increased labor costs.
Net Debt Repayment: Over $0.5 billion repaid, including redemption of bonds.
Dividend: Initiated a recurring dividend post-debt repayment.
Share Repurchase: $91 million authorization available for stock repurchase.
Occupancy Rates: The Strat's total occupancy improved by almost 8% to 78%.
ADR: Average Daily Rate down about 8% for the quarter.
Nevada Taverns: Revenue up 1% with 69 locations at end of March; same-store sales down 4%.
New Taverns: Two additional taverns purchased in April, total now 71.
Debt and Liquidity: $397 million in term loans, $276 million in unsecured notes, $400 million cash on hand, and $240 million additional liquidity available.
Net Leverage: Less than two times, indicating strong financial flexibility.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Golden Entertainment Inc (NASDAQ:GDEN) successfully completed the sale of its Nevada distributed business, using the proceeds to repay over $0.5 billion of debt and establish a recurring dividend.
Despite a slight revenue decline, total occupancy at The Strat improved by almost 8% to 78% for the quarter, with significant improvements in midweek occupancy.
The opening of Atomic Golf at the end of March is expected to drive additional visitors and locals to The Strat, enhancing the entertainment experience.
Golden Entertainment Inc (NASDAQ:GDEN) has expanded its Tavern portfolio to 71 locations, with plans to grow to over 90 locations in the coming years, indicating strong growth in this segment.
The company maintains a strong liquidity profile with about $100 million in cash and access to $240 million of additional liquidity, providing flexibility for future investments and shareholder returns.
Negative Points
Total revenue was down less than 1% and EBITDA decreased by over 15% in the first quarter, primarily due to increased labor costs and weaker revenues from Nevada locals casinos.
The company experienced higher labor costs due to a new union contract, which increased wages by about 11% year-over-year.
Revenue and EBITDA from Nevada locals casinos declined by 5% and 13% respectively, driven by decreased visitation spend among low and mid-tier rated players.
Same-store revenue in the Nevada taverns declined by 4%, attributed to declining retail demand and less frequent visitation from lower-tier rated players, resulting in an 11% decline in EBITDA for this segment.
The current market environment and macroeconomic backdrop have made it less conducive for mergers and acquisitions, limiting strategic growth opportunities through acquisitions.
Q & A Highlights
Q: Are you looking at doing something different strategically promotionally directed at groups or FIT? A: Blake Sartini, Chairman, President, CEO of Golden Entertainment, mentioned that the company is seeing growth in midweek and overall occupancy. They have launched a regional ad campaign to reintroduce The Strat and its new amenities. They are also improving their visibility on OTA sites to enhance room bookings and leveraging the high convention traffic in Las Vegas to boost occupancy, despite challenges with rates.
Q: Can you provide more details on how Atomic Golf is expected to drive traffic and augment awareness? A: Blake Sartini explained that Atomic Golf, a CAD80 million project, is expected to contribute significantly to EBITDA through a revenue share agreement and increased traffic. Golden Entertainment is promoting stay-and-play packages and using the new amenity to attract locals and guests to The Strat, enhancing foot traffic and room bookings.
Q: How are you preparing for the next minimum wage hike in July, and do you think it will have a smaller impact than last year? A: The company is implementing expense mitigation programs, particularly around labor, to prepare for the minimum wage increase. These efforts are expected to show full benefits from the middle of the current quarter onwards, helping to offset the wage hike impact.
Q: How are you viewing potential increased competition in the taverns business and the M&A environment there? A: The company sees itself in a strong position due to its large footprint and brand strength, which provide a competitive advantage. They are not observing significant M&A activity in the taverns market and believe regulatory complexities make it challenging for new entrants to scale quickly.
Q: What are the broader trends affecting the top-line performance in Nevada's local casino markets? A: Charles Protell, CFO, noted that persistent inflation and higher interest rates are impacting consumers, including their own customer base. This macroeconomic environment is contributing to top-line headwinds and increased promotional activities by competitors.
Q: How do you view the strategic options available given the current M&A environment and market conditions? A: Charles Protell discussed the challenges in finding appealing M&A opportunities due to market size, deal structure, and financing costs. The company plans to focus on investing in its own assets and utilizing its buyback authorization as the most accretive use of capital, while also acknowledging the need for the company to be valued appropriately for both its real estate and operations before considering further strategic actions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
