On earnings call, Golden Entertainment says The STRAT is well positioned for Fontainebleau, F1, Super Bowl

Golden Entertainment touted the strength of The STRAT during the third quarter and emphasized that the north Strip property is well positioned to capitalize on the F1 race and the Super Bowl, along with the opening of the nearby Fontainebleau in December and adjacent Atomic Golf in January.

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Golden Entertainment reported declines in revenue and adjusted earnings, but a gain in net income during the third quarter as it closed the $260 million sale of its Rocky Gap Casino Resort in July and the $109 million sale of its Montana distributed gaming business in September.

Net income for the third quarter was $241.2 million, or $7.83 per fully diluted share, compared to net income of $14 million, or $0.45 per fully diluted share, for the third quarter of 2022.

Third-quarter revenue was $257.7 million compared to $279 million for the third quarter of 2022. Third-quarter 2023 adjusted EBITDA was $53.2 million, compared to adjusted EBITDA of $61.1 million last year.

The Q3 results include only 24 days of operations for the Rocky Gap Casino Resort and not 18 days of operations for distributed gaming operations in Montana when compared to the prior year. In addition, earnings for the quarter include the impact of the $305.8 million gain on the sales of the Rocky Gap Casino Resort and the Montana distributed gaming business, as well as transaction costs of $8.6 million recognized during the quarter.

Blake Sartini, chairman and CEO of Golden, said during the third quarter, they saw improved performance in their Nevada Casino Resorts segment, driven primarily by increased occupancy and the recent completion of 537 rooms and pool renovations at The STRAT.

Charles Protell, president and CFO, said revenues in that segment increased 7%, while adjusted earnings rose 2%. Revenue rose 8% at The STRAT, with adjusted earnings up 16% based on improved occupancy, leading to higher spending on gaming and food and beverage. Occupancy was 75% during the quarter compared to 68% a year ago at The STRAT.

"With renovations to our 1,300 rooms, casino, pool, entertainment, and restaurants, we feel the property is well positioned to capitalize on the high-traffic events coming to Vegas over the coming quarters and beyond," Protell said. "In addition, Atomic Golf, a $75 million golf entertainment complex behind The STRAT, is on track to open in January, which will further drive visitation and spending at the property."

Protell said that though The STRAT received some spillover traffic from the cyberattack that impacted MGM Resorts International properties in September, it was for one weekend and not material.

The Nevada Locals Casinos segment maintained the same strong performance from throughout the year, while taverns experienced typical seasonality with lower summer volumes. Protell cited population migration from California that's not slowing down and a healthy local economy.

"Growth in our Las Vegas properties offset lower revenue and EBITDA at our Pahrump properties, which were largely impacted by summer monsoons that closed a major highway connecting California through Death Valley," Protell said. "The strength of the Las Vegas economy continues to support a healthy and growing database of core customers."

In Laughlin, revenue is up 6%, with a robust event calendar, while adjusted earnings fell 4% in a reflection of higher labor and other costs that are expected to moderate in the future, Protell said.

Golden remains on track to complete the sale of its Nevada distributed gaming business at the end of the year for $214 million. That revenue was down 9% compared to a year ago, while adjusted earnings were down 23%.

"The completion of these transactions significantly strengthens our balance sheet, enables return of capital to shareholders, and provides financial flexibility to enhance shareholder value," Sartini said.

Tavern operations were flat, while adjusted earnings were down 9% due to margins being impacted by Nevada's July minimum-wage increases, Protell said. The last eight taverns purchased or acquired have an average ROI of 25%, he said.

"We expect the growth of Las Vegas to support the expansion of our tavern portfolio and anticipate closing on four locations by the end of the year and two locations in the first quarter," Protell said. "In addition, we have two signed development sites and a robust pipeline of potential future locations."

The company allocated $175 million of the cash proceeds from the sale of Rocky Gap to repay its remaining borrowings outstanding under the original term loan. In addition, Golden paid a one-time cash dividend of $2 per share of its outstanding common stock and repurchased 252,395 shares of common stock for total consideration of $9.1 million in the third quarter.

As of September 30, the company's total principal amount of debt outstanding was $738.7 million, consisting primarily of $399 million in outstanding borrowings under the new term loan and $335.5 million of senior unsecured notes. As of September 30, the company had cash and cash equivalents of $295.9 million. There continue to be no outstanding borrowings under the company's $240 million revolving credit facility.

During October 2023, the company repurchased $49.3 million in principal amount of its senior unsecured notes in open-market transactions, thereby reducing the aggregate principal amount of the senior unsecured notes outstanding to $286.2 million.