Golden Entertainment, Inc. Q2 FY2024 earnings call

Financial Results

• Generated revenue of $167M and EBITDA of $41M in Q2. Continuing operations: property revenue down 1.4%, EBITDA down 4.9%.
• STRAT: Record Q2 hotel revenue, ADR up 8%, occupancy up 4% to 73%.
• Laughlin: Shifted to smaller-scale events for improved profitability, but saw revenue/EBITDA declines.
• Nevada Locals Casinos: Revenue/EBITDA declines from Arizona Charlie’s Boulder, but margins stable at ~45% over last 4 quarters.
• Taverns: Revenue up 3% year-over-year, 71 locations, anticipating 72nd in Q3; same-store revenue down 2.4% due to Golden Knights.

Balance Sheet

• Redeemed $276M senior unsecured notes, outstanding debt primarily $396M term loan. $89M cash, $240M revolver. Repurchased nearly 1M shares, $61M availability for repurchase by year-end.

STRAT Initiatives

• Focus on improving midweek occupancy, offensive approach for F1 weekend with entertainment events.
• Colorado River frontage property in Laughlin held for future non-gaming development.

Laughlin Strategy

• Shift to smaller-scale events in 1,500-2,000 seat showroom for improved profitability, focusing on player-driven events.

In the second quarter, Golden Entertainment generated revenue of $167 million and EBITDA of $41 million. For Nevada Casino Resorts, revenue declined 1.4% and EBITDA declined 2.3%. The STRAT achieved record Q2 hotel revenue with ADR up 8% and total occupancy up 4% to 73%. Laughlin experienced revenue and EBITDA declines due to reduced large-scale entertainment and increased labor costs. For Nevada Locals Casinos, revenue declined 4.9% and EBITDA declined 13%, primarily from Arizona Charlie’s Boulder. Nevada tavern revenue was up 3% with 71 locations, anticipating 72nd in Q3, but same-store revenue declined 2.4% due to Golden Knights playoff exit.

• Intend to use full $61M share repurchase authorization by year-end. Returned over $110M to shareholders in past 18 months.
• Expect midweek occupancy improvement to continue at STRAT.
• Anticipate normalizing STRAT margins as labor cost accruals stabilize.
• Plan to open 72nd Tavern in Q3.

• Labor cost increases related to union contracts.
• Event-driven market fluctuations affecting Laughlin profitability.
• Weakness in lower-tier customer visitation/spend impacting Locals and Tavern segments.
• Competition and promotional activity affecting market dynamics.

Q: Talk about Atomic Golf's progress and cross-sell to the STRAT?

A: Atomic Golf met/exceeded physical expectations, had rough rollout, right-sized staff, changed marketing, ramping up events, anticipating cross-traffic.

Q: Thoughts on 2 Strip property closures being a beneficiary?

A: More supply off, less supply helps from fall perspective.

Q: STRAT's F1 weekend plans?

A: Offensive mode with music/pop-up events, LVCVA participation, better weekend anticipated.

Q: Interest in Belle land for non-gaming?

A: Interest exists, no gaming reintroduction at this time.

Q: Strategies for midweek occupancy at STRAT?

A: Improved direct bookings, focus on casino headcount, seasonality and football to help.

Q: Taverns lower end database weakness?

A: Low end shows weakness, mid/upper tiers stable, taverns resilient, seasonality to improve.

Q: Laughlin event-driven market shift?

A: Shifted to smaller-scale events due to unprofitable large events, frequency issue, focusing on profitable smaller shows.

Q: STRAT margin and revenue mix?

A: Margin not happy, cost mitigation plans, revenue mix from Laughlin strategy, normalization expected.

Q: Share repurchases pace and revolver use?

A: Intend $30M spend per quarter, use revolver if opportunity bigger.

Q: Valley promotional activity?

A: Consistent/elevated, likely to continue with market tweaks.

Q: Midweek direct bookings at STRAT?

A: Can improve direct bookings through sales efforts, moving away from OTAs.