Earnings call transcript: Golden Entertainment Q4 2024 misses EPS forecast

Golden Entertainment (NASDAQ:GDEN) Inc. reported its fourth-quarter 2024 earnings, revealing a shortfall in earnings per share (EPS) compared to analyst forecasts. The company’s revenue also came in below expectations, impacting its stock performance in after-hours trading. According to InvestingPro analysis, the stock appears slightly undervalued at current levels, though it has experienced significant volatility with a beta of 2.21. Despite these results, the company remains optimistic about its future growth prospects and strategic initiatives.

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Key Takeaways

• Golden Entertainment’s Q4 2024 EPS was $0.10, missing the forecast of $0.22.
• Revenue for the quarter was $164.2 million, below the expected $168.83 million.
• After-hours trading showed the stock price decreased by 1.85%, closing at $30.83.
• The company repurchased 2.9 million shares, returning $190 million to shareholders.
• Strategic focus includes development opportunities in Las Vegas and improving tavern performance.

Company Performance

In Q4 2024, Golden Entertainment reported revenue of $164 million, contributing to a full-year revenue of $667 million. The company achieved an EBITDA of $39 million for the quarter and $155 million for the year. InvestingPro data shows the company maintains a solid financial position with a current ratio of 1.11 and an Overall Financial Health score of "FAIR." It also successfully reduced its net leverage to 2.3 times EBITDA, despite a total funded debt of approximately $400 million. The company divested its Nevada distributed business for over $600 million, which has strengthened its balance sheet.

Financial Highlights

• Revenue: $164 million for Q4 2024
• Full Year Revenue: $667 million
• EBITDA: $39 million for Q4 2024
• Full Year EBITDA: $155 million
• Share Repurchase: 2.9 million shares, returning $190 million to shareholders

Earnings vs. Forecast

Golden Entertainment’s EPS of $0.10 fell short of the forecasted $0.22, marking a significant miss. The revenue of $164.2 million also did not meet the expected $168.83 million. This performance contrasts with previous quarters where the company met or exceeded expectations, highlighting a challenging end to the fiscal year.

Market Reaction

Following the earnings announcement, Golden Entertainment’s stock price declined by 1.85%, closing at $30.83 in after-hours trading. This movement places the stock closer to its 52-week low of $27.42, reflecting investor disappointment. InvestingPro data reveals the stock has experienced a significant 7.86% decline over the past week, with analyst price targets ranging from $32 to $40. The broader market trends have shown resilience, suggesting that the company’s specific challenges may have driven this decline.

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Outlook & Guidance

Looking ahead, Golden Entertainment anticipates organic growth in 2025, with a focus on cost control and operational efficiency. The company expects improvements at The Strat and is exploring potential mergers and acquisitions, targeting transformational opportunities. Long-term leverage is aimed at 3 times or less.

Executive Commentary

Blake Sartini, CEO, emphasized the company’s proactive approach: "We continue to be proactive in pursuing opportunities." CFO Charles Bertel expressed confidence in future prospects, stating, "We are confident in our business prospects for 2025."

Risks and Challenges

• Economic fluctuations in Nevada could impact gaming revenues.
• Increased competition in the Las Vegas market may pressure margins.
• Execution risks associated with new developments and M&A activities.
• Potential regulatory changes affecting gaming operations.
• Volatility in consumer spending patterns.

Golden Entertainment remains focused on leveraging its strategic initiatives to drive future growth, despite the current challenges reflected in its Q4 2024 results.

Full transcript - Golden Entertainment Inc (GDEN) Q4 2024:

Conference Operator: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Golden Entertainment Fourth Quarter twenty twenty four Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal remarks.

Please note that this call is being recorded today. Now, I’d like to turn the conference over to James Adams, the company’s Vice President of Corporate Finance and Treasurer. Please go ahead, sir.

James Adams, Vice President of Corporate Finance and Treasurer, Golden Entertainment: Thank you very much, operator, and good afternoon, everyone. On the call today is Blake Sartini, the company’s Founder, Chairman and Chief Executive Officer and Charles Bertel, the company’s President and Chief Financial Officer. On this call, we will make forward looking statements under the safe harbor provisions of the federal securities laws. Actual results may differ materially from those contemplated in these statements. Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise.

During the call, we will also discuss non GAAP financial measures in talking about our performance. You can find the reconciliation of GAAP financial measures in our press release, which is available on our website. We will start the call with Charles reviewing details of the fourth quarter results and a business update. Following that, Blake and Charles will take your questions. With that, I will turn the call over to Charles.

Charles Bertel, President and Chief Financial Officer, Golden Entertainment: Thanks, James. The fourth quarter concluded a transformative year for Golden Entertainment. During 2024, we streamlined the portfolio by closing on the sale of our Nevada distributed business, the last of our non core divestitures at attractive multiples, which collectively generated over $600,000,000 of proceeds. We use these proceeds to optimize our capital structure, reducing our leverage as well as lowering our cost of capital by repricing our term loan. Also in 2024, we accelerated capital returns to our shareholders by instituting a regular quarterly dividend and repurchasing 2,900,000.0 shares of our common stock, representing 14% of the free float outstanding.

Turning to our financial results. In the fourth quarter, our operations generated revenue of $164,000,000 and EBITDA of $39,000,000 bringing our full year revenue and EBITDA in $20.24 $667,000,000 and $155,000,000 respectively. When looking at Q4 for our continuing operations compared to prior year, our results were lower year over year, but up meaningfully from Q3, which we noted on our last call would be the low point in our quarterly financial performance. In Q4, we saw material sequential EBITDA improvements in all of our properties excluding Laughlin, which as a market is seasonally weaker in Q4 compared to Q3. As we start 2025, we saw broad strength in January offset in February given the tough comp related to Las Vegas hosting the Super Bowl last year.

However, when we look at the monthly cadence of our rated gaming revenue compared to prior year, October was down seven percent, November was down 4%, December was flat to prior year and January was up 4% with January 2025 EBITDA up meaningfully over prior year. As mentioned, without the lift from Super Bowl, February will be down year over year, but our forecast for March currently shows better trends over 2024, which reinforces our anticipation of improving performance for our properties throughout 2025. Now for some additional color on our specific properties. At The Strat, for Q4, our weekend occupancy was flat to prior year at 95%, but our mid week occupancy was down 6%, bringing overall occupancy to 75% for the quarter, which contributed to declines in our Nevada Casino (EPA:CASP) Resorts segment. Las Vegas citywide occupancy and ADR were weaker in October and November, particularly for mid to lower tier properties impacted by the election and a softer second year of F1.

However, both December and January were strong and we see opportunity for growth in 2025 from returning mid week occupancy and increased spend from our core consumer. In Laughlin, we increased market share in Q4 and reduced operating expenses. Our riverfront bingo room continue to help drive increased local business. We have programmed our smaller entertainment venue with more frequent acts on weekends to offset lower visitation from reduced large scale entertainment. For our Nevada locals casinos, we saw increased revenue and EBITDA over last year as well as sequentially from Q3.

We also saw the same trend in margins with our locals casino EBITDA margin improving to 46%. Our biggest improvement within the local segment came from our smaller Arizona Charlie’s Boulder property, which caters to our most value oriented guests and has been the most pressured over the last few quarters. This property’s recent performance is a positive sign for continued stability and growth in the locals market in 2025. For the fourth quarter, Nevada Tavern performance continued to be negatively impacted by our seven most recent tavern additions, six of which were acquisitions where we are revamping prior ownerships, operations and reinvestment strategy. Although a slower start than anticipated, these new taverns continue to improve performance month over month and should stabilize at expected levels by the end of the year.

On a same store basis, we have seen sequential improvement in the taverns with revenue up 6% from Q3 to Q4. Moving on to our capital structure, we continue to maintain one of the best balance sheets in the gaming industry with total funded debt of approximately $400,000,000 net leverage of 2.3 times EBITDA and $220,000,000 of remaining availability under our revolving credit facility. Since selling our non core assets over the last two years, we have repaid over $500,000,000 of debt and returned nearly $190,000,000 to shareholders through a combination of share repurchases and dividends, including $113,000,000 in 2024. In Q4, we repurchased approximately 1,100,000.0 shares at an average price of $32.65 totaling $36,000,000 We have $99,000,000 of capacity on our current buyback authorization and we will continue to pursue opportunistic share repurchases, which can be funded from our free cash flow and availability on a revolving credit facility given our low leverage profile. Our wholly owned casino and branded tavern portfolio is well positioned to benefit from the favorable long term economic trends in Nevada, which remain some of the most favorable in the country.

Nevada continues to be one of the fastest growing states in terms of population, employment and discretionary income, which is anticipated to continue well into the future. Last year also marked the fourth straight year of Las Vegas visitation growth reaching nearly 42,000,000 people. This is still below twenty nineteen’s visitor volume highlighting room for continued recovery to pre pandemic visitation and beyond supported by billions of dollars of future development projects to drive growth in Las Vegas. We are confident in our business prospects for 2025 with expected organic growth to come from improved performance of The Strat, stabilized revenues in our new taverns and the rest of our portfolio benefiting from the continued strength of Nevada’s economy. We remain committed to exploring all options to maximize value for our shareholders, including traditional M and A as well as monetization of our real estate holdings.

In the meantime, we will continue to focus on operational efficiency, investing our own assets and returning capital to shareholders. That concludes our prepared remarks. Blake and I are now available for questions.

Conference Operator: Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. Our first question comes from Barry Jonas with Truist Securities. Please go ahead.

Patrick Keough, Analyst, Truist Securities: Hey guys, it’s Patrick Keough on for Barry. Thank you for taking my question. First one for me, has your thinking or the general environment around M and A changed since the last time we spoke?

Blake Sartini, Founder, Chairman and Chief Executive Officer, Golden Entertainment: No, Patrick, this is Blake. As we outlined on our last call, we continue to be proactive in pursuing all options really to grow shareholder value as Charles I think mentioned in his prepared remarks. We continue to believe we’re well positioned for various strategic alternatives and between potential share repurchases with value dislocation and other strategic alternatives, we have plenty of capacity going forward to do both. So our situation is exactly the same as it was last quarter and we are continuing to be proactive in pursuing opportunities.

Patrick Keough, Analyst, Truist Securities: Okay, that’s great. Thank you for the color. As my follow-up, you’d previously stated that you’ve ramped promo for F1 this time around. Could you give any color on how that weekend trended for you in year two? And either way, do you have any conviction you could benefit further as the event carries on in years to come?

Thank you.

Charles Bertel, President and Chief Financial Officer, Golden Entertainment: Yes, Patrick K, it’s Charles. So I don’t think anyone expected the dramatic fall off in F1. So where we saved, and it was, I would say, less bad for us was around our investment in tickets and direct expenses related to the event. Where we did suffer a little bit was just that we weren’t able to compress our rate at all given the low occupancy in the town relative to the prior year.

Patrick Keough, Analyst, Truist Securities: Okay. Appreciate the color guys. Thank you again.

Conference Operator: Thanks. Thank you. Our next question comes from Jordan Bender with Citizens. Please go ahead.

Jordan Bender, Analyst, Citizens: Good afternoon everyone. A strip operator noted the expectation that an uplift in you’ll see an uplift in group and convention business in 2025 and 2026. So can you just remind us where you stand in terms of the recovery or your positioning at The Strat and what that means for the property as citywide continues to come back?

Charles Bertel, President and Chief Financial Officer, Golden Entertainment: Yes. Hey, Jordan, it’s Charles. So if you look at 2019, we ran that property at almost 92% occupancy and we just noted for Q4, we’re at 75%. So all of that is really mid week that for us, we are the overflow of others’ convention business. So when the town is more full with that, that in urge disproportionately to our benefit.

And when you look particularly into 2026, you will have the convention center finished off with a third phase of their expansion, which is about $600,000,000 that they could finish off in Q4 of this year. So once the convention center gets more use and more full with their new amenities, we’re very close to that and we see The Strat benefiting from that increased traffic.

Jordan Bender, Analyst, Citizens: Thanks for that. And on my follow-up switching to taverns, you noted expense growth in 2024 was fairly elevated. Without getting into any guidance, are you able to just help us with OpEx growth in that segment in 2025? And then maybe just more broadly the major buckets or swing factors that we should be thinking about for the total company? Thank you.

Charles Bertel, President and Chief Financial Officer, Golden Entertainment: Yes. I would just say specifically without getting too much into it, you’ll see sequential growth in the taverns as we move forward through 2025 other than Q3, which is seasonally lower. So as we highlight in the call, we’ve basically had to revamp the entire operations of six taverns that we took over for various reasons. And so those operations now have trended positive from an EBITDA perspective and we expect them to continue to grow, but we’ve completely revamped how they’ve traditionally those locations are traditionally reinvesting in customers as well as the employee base. I think we’ve had to turn over every single employee.

So that created some disruption, but now we’re thinking we’re back on a cadence that we expect those to be wrapped in line with the rest of the portfolio into at the end of twenty twenty five. For the balance of the company, I think it continues to be labor as a headwind. So if you look at what we’ve been doing, we’ve been managing through a new culinary union contract at The Strat, which this is the first year of that or this will be the anniversary of the first year of that where most of the cost increases occurred. So we expect those to moderate, but there will still be mid single digit labor inflation within the portfolio that we’ll be working to mitigate as we go through the year.

Blake Sartini, Founder, Chairman and Chief Executive Officer, Golden Entertainment: Yes. Let me just add to that. I think that’s exactly right. Our major initiatives, just to put it another way, going into 2025 for all of our ops, are focused around our cost control efforts. And as Charles just mentioned, we’re making significant progress already in those efforts.

And our revenues were up or excuse me, down modestly quarter over quarter plus or minus 3%. So, we are laser focused on our cost opportunities with our broader portfolio with the most of our upside being there this year, particularly at Strat in regards to being tangible and us being able to manage that. So we’re off to a great start in that regard.

Jordan Bender, Analyst, Citizens: Thank you very much.

Conference Operator: Thank you. Our next question comes from Zachary Silverberg with Wells Fargo (NYSE:WFC). Please go ahead.

Patrick Keough, Analyst, Truist Securities: Good evening. Thanks for taking my question. You touched upon it a bit in the prepared remarks, but you mentioned how you’re you see in the consumer stabilizing or improving post election. Can you maybe just double click on those trends and what you guys are kind of seeing on the ground that gives you confidence to make the statement?

Charles Bertel, President and Chief Financial Officer, Golden Entertainment: Yes. I think we’ve seen more health in the database, so particularly within the locals market. So as we look at the database, the top tier of our database continues to be strong in both in terms of visitation and spend. But the trend that in Q3 that we really saw was the lower end of the database seemed to be continuously declining almost to double digit rates. That has moderated and we tried to give some cadence of within the quarter, within the fourth quarter, how we’ve seen again those overall database declines that was mostly driven October by the lower in the database, a little less in November, again in the low end of the database to stable year over year to growing in January.

So absent the Super Bowl comp, we’re very confident in growth in the health of within the database as we look into 2025.

Blake Sartini, Founder, Chairman and Chief Executive Officer, Golden Entertainment: An additional micro example to that, I think it’s important to point out at the Strat given the cost challenges that we’ve had and are currently making great efforts to mitigate and having success with that, we’re having a Strat the Strat slots for example, continue to show sequential year over year improvement. Even with the midweek challenges, our gaming situation with the Stratos improving particularly in the slots, We are approaching I think around 55% carded play at The Strat, which when we took that property over was non existent. That’s a huge upside for us to be able to target and market to our gaming customers, which we’re seeing benefits from. And the direct bookings at the property continue to improve. So all of that I think is maybe a bit in the weeds, but in particular for that property, we are seeing green shoots and we are making progress in the gaming side of that property, even given the occupancy challenges, which we believe is very positive going forward.

Patrick Keough, Analyst, Truist Securities: Thanks for the color. And just for a follow-up, no tax on tips and overtime seem to have some real momentum. Can you give any color on how this would benefit your assets or maybe not just your assets, but the Las Vegas in general?

Charles Bertel, President and Chief Financial Officer, Golden Entertainment: It would obviously be huge for Las Vegas given the workforce. I think as it directly relates to us, that’s about our match in that is about $2,000,000 from a tax perspective around those tips. So maybe not as meaningful, but certainly for our workforce, it would be meaningful. And we see those as just direct discretionary spending dollars that bend up back in the pool for allocation to gaming as their entertainment.

Conference Operator: Thank you. Thank you. Our next question comes from the line of Chad Beynon with Macquarie. Please go ahead.

Chad Beynon, Analyst, Macquarie: Hi, good afternoon, Blake and Charles. Thanks for taking my question. In the last couple of calls, I know you guys have addressed some of the promotional activity, particularly in the Las Vegas locals market, has that seemed to abate at this point? And Charles, given your comments around the rated play improving, are you willing to kind of let go more of some of that lower tier unrated play, maybe some that’s more interested in the promos in the market? Thanks.

Charles Bertel, President and Chief Financial Officer, Golden Entertainment: Yes. I think, Chad, we’ve seen stability. I think it was a little bit promotional over the summer months and now we’ve seen that level off and we view it as stable in the markets where we’re competing here in the locals segment. I do think there is a reevaluation of how people look at reinvestment at the lower end of the database that should obviously be a constant. I think for us it’s a balance of how much you’re investing in the existing players at low end of the database as well as reactivation of players that we maybe haven’t seen back.

So a lot of our campaigns are focused on both of that, the reactivation of players and evaluation of what we have, so that we’re not over investing in this in any one segment.

Blake Sartini, Founder, Chairman and Chief Executive Officer, Golden Entertainment: Yes, Chad, promotional activity I think is rational remains in the category or is now in the category of rational. I think what we’re seeing if there is anything that we’re seeing in the market, it’s rational, it’s food and beverage oriented, it’s reasonable. We aren’t seeing at least from the major local operators including ourselves a lead to anything that we think is could be inflationary.

Chad Beynon, Analyst, Macquarie: Okay. Thank you. And then on the back on the strategic question that you addressed earlier in the call, is there a particular size of a portfolio or maybe a leverage target. If you do proceed down the M and A route, how should we think about maybe the regions of the country that you’d be interested in? And then maybe more importantly, the financial implications and kind of a target leverage goal that would obviously come down over time?

Thanks.

Charles Bertel, President and Chief Financial Officer, Golden Entertainment: Yes, Chad, I think it’s easier to outline what we would not be doing. We would not be looking at any greenfield developments. And I don’t think we’d be looking at any single asset acquisitions that are sub $40,000,000 to $50,000,000 of EBITDA. I’d say outside of that, we are open to all types of avenues of M and A. And so I don’t have to walk you through what those would be.

But I think that when we look at how we think about leverage in a pro form a entity, we said our target long term is three times or less, which is obviously where we are now. I think we’d be comfortable going higher than that. But I wouldn’t want to give you a number around that right now, but we’d want to have a quick deleveraging path either if we’re in a combination with another company or we’re an actual acquirer of another company.

Blake Sartini, Founder, Chairman and Chief Executive Officer, Golden Entertainment: Chad, in the past, I’ve mentioned on these calls and in other conversations that if we do if and when we do something and something as Charles put, we want to move the needle. We don’t want to go regionally into small operations that are capital deferred or disperse our management to a point that doesn’t make sense. Given where we sit with our capital structure, with our current organic growth opportunities, we can continue to be pretty patient. What we’re not patient with is our share price continuing to lag in these ranges. So that’s motivation for us to, as I said, to be proactive, but it’s going to be, I think, a transformational type of an activity that we would pursue.

It’s not going to be kind of a piecemeal approach.

Chad Beynon, Analyst, Macquarie: Thank you, both. Appreciate all the extra details.

Charles Bertel, President and Chief Financial Officer, Golden Entertainment: Thanks, Geoff.

Conference Operator: Thank you. The next question comes from Max Marsh with CBRE (NYSE:CBRE) Securities. Please go ahead.

Max Marsh, Analyst, CBRE Securities: Hey guys, thanks for taking my questions. We’re at 72 taverns now, I know some of those are still ramping, but do you have any idea of what the cadence of new acquisitions might look like in Las Vegas Valley and whether or not you guys have thought about expanding that business geographically outside of Las Vegas?

Charles Bertel, President and Chief Financial Officer, Golden Entertainment: Yes, we definitely have thought about spending it outside of Las Vegas. We obviously we have a few that are up in Reno right now. I think that the gaming component to those taverns as long as there’s opportunities to continue to grow in Nevada, which we think that there are that that will be the focus given that aspect of it. And within the context of acquisitions versus greenfield, we’re much more focused on greenfield developments right now. We have two sites signed up for this year and we’ll look for others, but I don’t think you’ll see us in the acquisition mode for the near future.

We’re going to be much more focused on adding A plus sites towards our existing portfolio in Las Vegas.

Max Marsh, Analyst, CBRE Securities: Great. Thanks for that. And just quickly as a follow-up here, if you guys have any update of the ramping of the Atomic Golf facility at The Strat, whether that might be helping drive midweek demand? And I believe you also have some additional excess land there. If you could just update us on your thoughts or plans for that?

Blake Sartini, Founder, Chairman and Chief Executive Officer, Golden Entertainment: Yes. So Atomic I think Atomic continues to move forward in terms of continuing to attract additional business. I was at the property yesterday and we are seeing some bookings that are as a package between our room product and Atomic. They are improving from what I understand greatly in their group business. We do see some crossover from that.

We continue to believe that as they improve, we will refine our ability to drive cross traffic from that facility, which I mentioned before as a world class 80,000,000 facility. So we are very continue to be bullish on that particular activity moving business into our property as they continue to grow. The excess property, things are probably approximately an acre adjacent to that. But more importantly, there’s 5.5 to six acres directly across the street on Las Vegas Boulevard. We continue to be very active and have in-depth conversations with a lot of different uses for that particular piece.

We see that as a great opportunity for the Strat going forward with a blank canvas. We want to make the right decision, but there is a lot of optionality that we are discussing on that additional acreage.

Max Marsh, Analyst, CBRE Securities: Great. Thank you guys.

Conference Operator: Thank you. Our next question comes from David Katz with Jefferies. Please go ahead. Hi, good evening. Thank you for working me in.

Look, it sounds like the geography of where your potential consideration markets may be expanding. And I want to be clear that that’s is that something outside the state of Nevada or should we still be thinking within it? And if we’re going outside, to talk about sort of what kinds of markets would be, I guess, non starters or inbounds or out of bounds, anything would help? Thanks.

Charles Bertel, President and Chief Financial Officer, Golden Entertainment: Yes. Thanks, David. I think if we’re looking out of state, it would be in the context of multiple properties. And as Blake was alluding to a more transformative type of deal for us. I think we would only look really for single assets within the state.

So I don’t really want to go into it much more beyond that, but we won’t go buy a one off riverboat in Iowa that’s doing $15,000,000 to $20,000,000 of EBITDA. But things that are part of a larger portfolio, we’d certainly look at that. And again, I think we’d be not interested in pure greenfield development projects, But certainly if there’s an aspect of future growth and development with existing cash flowing operations, we would look at those opportunities.

Conference Operator: Understood. And should we be thinking as broadly as historical racing markets or other kinds of gaming machine facility markets that may be classified as adjacencies to the traditional commercial casino markets?

Charles Bertel, President and Chief Financial Officer, Golden Entertainment: We would except for the distributed gaming business. So as part of our divestiture of that business, we do have a non compete to reenter into that business. So we would not look at that. But to the extent that there is growing cash flow with any adjacencies, we would look at that. Obviously, we don’t have an online presence, so we would not be looking on the digital landscape.

We’d be purely focused on brick and mortar opportunities where we could use our expertise and corporate infrastructure to help grow and improve those businesses.

Conference Operator: Very helpful. Thank you.

Charles Bertel, President and Chief Financial Officer, Golden Entertainment: Thanks, David.

Conference Operator: Thank you. Ladies and gentlemen, as there are no further questions, that concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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