Golden Entertainment, Inc. Q3 FY2024 earnings call

• Financial results: Generated $161 million revenue and $34 million EBITDA in Q3; total revenue declined 5% and consolidated EBITDA declined 21% vs prior year continuing operations. - Segment details: Nevada Casino Resorts, Locals Casinos, and taverns had various declines due to factors like summer heat, lower discretionary spending. - Balance sheet: Strong balance sheet with net leverage at ~2x EBITDA and $240 million availability under revolving credit facility; repaid over $500 million debt and returned ~$150 million to shareholders. - Share repurchase: Increased share repurchase authorization by $100 million, now with over $130 million buyback capacity. - M&A: Active in considering strategic alternatives, with limited compelling M&A opportunities currently; looking for holdco assets for valuation. - Consumer impact: Election had short-term impact on consumer spending; summer heat affected visitation. - Events: F1 and Super Bowl comps in Q1, with efforts to position better for F1 this year. - Atomic Golf: Modern competitive facility, with potential for additional development on adjacent land. - Taverns: New builds and acquisitions have different ramp-up times; new builds ramp faster, acquisitions take longer but expected to stabilize.

For Nevada Casino Resorts, revenue declined 6% and EBITDA declined 20%, with most of the decline from the STRAT. Weekend occupancy at STRAT was slightly up year-over-year, but midweek occupancy was down almost 6% and spend per guest trended lower. In Laughlin, despite lower visitation and revenue, properties increased market share and reduced operating expenses, with the riverfront bingo room helping drive local business. For Nevada Locals Casinos, revenue declined 7% and EBITDA declined 15%, with increased seasonality and decreased spend from lower-tier customers; Arizona Charlie's Decatur was impacted by room renovations, and the Arizona Charlie's Boulder had the largest revenue and EBITDA percentage declines. Nevada tavern revenue declined 2% and EBITDA declined 29%, with margins negatively impacted by initial operating expenses of 7 new taverns and a minimum wage hike.

• Q3 was the lowest level of financial performance for the portfolio, with Q4 expected to be stronger; STRAT Q4 looks stronger than Q3. - Anticipate stable year-over-year performance in Q4 for all local properties, helped by moderating Las Vegas promotional environment. - Taverns expected to stabilize within 9-18 months of opening/acquisition, with last 7 taverns following this pattern. - Increased share repurchase authorization with over $130 million buyback capacity.

• Challenges from summer heat and lower discretionary spending impacting visitation and revenue. - Disconnect in M&A bid-ask spread between buyers and sellers regarding run rate EBITDA. - Impact of interest rate environment on REIT multiples, though anticipating rate cuts will improve multiples in the future.

Q: Barry Jonas asked about M&A environment and sale-leaseback model.

A: Charles Protell said M&A landscape has bid-ask spread disconnect; Blake Sartini said active in considering all strategic alternatives including corporate activities.

Q: David Bain asked about margin stability and F1/Super Bowl comps.

A: Charles Protell said only STRAT margin challenged in Q4; Blake Sartini talked about F1 adjustments and Super Bowl comp being tough.

Q: Jordan Bender asked about Atomic Golf and dividend.

A: Blake Sartini talked about potential development near Atomic Golf; Charles Protell said dividend to be considered with cash flow and stock buyback.

Q: David Katz asked about sale-leaseback proceeds and corporate activities.

A: Charles Protell said sale-leaseback not for other development; Blake Sartini said active in looking at all corporate alternatives.

Q: Aaron Lee asked about STRAT direct business and tavern growth.

A: Charles Protell talked about reducing OTA mix at STRAT; Charles Protell and Blake Sartini talked about tavern growth with 1-2 new builds next year.

Q: John DeCree asked about tavern life cycle.

A: Charles Protell talked about new builds ramping faster, acquisitions taking longer but expected to stabilize.

Q: Carlo Santarelli asked about Q4 stability.

A: Charles Protell said Q4 expected stable year-over-year for locals; Blake Sartini said all will be better than Q3.

Q: David Bain asked about tavern expansion outside Nevada.

A: Blake Sartini said potential for distributed business expansion outside Nevada.