Golden Entertainment, Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Golden Entertainment second quarter 2024 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. Please go ahead, sir.

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 Pertell, 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 and 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 second 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.

Thanks, James. Starting with our financial results, we generated revenue of $167 million and EBITDA $41 million in the second quarter. Note our prior year period includes the results from our divested Maryland casino and distributed gaming businesses in Nevada and Montana. Comparing the results of the continuing operations, total property revenue declined 1.4% and consolidated EBITDA declined 4.9% in the second quarter. For Nevada casino resorts, revenue declined 1.4% and EBITDA declined 2.3%. At the Strat, we achieved record Q2 hotel revenue with ADR up 8% and total occupancy up 4% to 73% for the quarter. Weekend occupancy at the Strat was 97% and midweek occupancy improved 2% to 64%. We see opportunity in continuing to improve midweek occupancy as we are still missing nearly 18% of occupancy compared to 2019. Strat revenue and EBITDA increased in Q2 despite higher labor costs related to our new union contract. Last July, we started accruing for increased labor expense, so we expect more moderate cost increases in the second half of this year. Atomic Golf, which opened at the end of March, continues to build its customer base, which we anticipate will drive additional visitors and locals to the Strat in the fall, with cooler weather and more convention visitors. In Laughlin, we experienced declines in revenue and EBITDA, primarily due to our decision to reduce large-scale entertainment acts, as well as increased labor costs compared to last year. In Q2, we focused on bringing more cost-effective entertainment options to our smaller showroom, which allowed us to achieve higher profitability on each act, although it resulted in lower related gaming and F&B revenue due to decreased patron volume. Lower entertainment-related revenue was partially offset by our Locals Initiatives and Bingo program that improved our market share in Laughlin during the quarter. For our Nevada local casinos, revenue declined 4.9% and EBITDA declined 13%, primarily due to decreased visitation and spend from our lower tier customers. The largest revenue in EBITDA declines came from our Arizona Charlie's Boulder property, which caters to our most value-oriented guests. In addition, road construction negatively impacted entry to our Arizona Charlie's Decatur property in April and May. We also started modest renovations to the 259-room hotel at Decatur, which should be completed in 2025. Despite lower margins year-over-year, our local segment has operated at approximately 45% margins over the last four quarters, which we expect to continue. For the second quarter, Nevada tavern revenue was up 3% over last year, supported by the purchase of six new taverns compared to the prior year period. This brings our total locations to 71 at the end of June, and we anticipate opening our 72nd tavern in Q3. On a same-store basis, total revenue declined 2.4%, driven by a 10% decline in food and beverage revenue, partially offset by a 6% increase in same-store gaming revenue. Lower F&B revenue was largely attributed to the Golden Knights' exit in the first round of the playoffs compared to last year's Stanley Cup championship. During the regular season, we observed meaningful increases in F&B and gaming revenue throughout our taverns when the Golden Knights play. Additional costs associated with adding six acquired locations, in addition to increased labor costs across the portfolio, resulted in EBITDA declines for our tavern business. Turning to the balance sheet, we started the quarter by redeeming our $276 million senior unsecured notes with proceeds from the sale of our Nevada distributed business in January. This results in our outstanding debt at the end of the quarter primarily consisting of only a $396 million term loan. We also closed the quarter with $89 million of cash and access to $240 million of additional liquidity from our unfunded revolver. In May, we repriced our term loan, reducing our interest rate by 60 basis points to SOFR plus 225, which created $2.4 million of annual interest savings. Since the beginning of 2021, we have repaid over $750 million of debt and are positioned today with the strongest balance sheet in our history and net leverage below two times. Our balance sheet strength facilitates our ability to accelerate returning capital to shareholders, which includes our regular quarterly cash dividend of $0.25 per share and the repurchase of nearly 1 million shares in Q2. At the end of the quarter, we had 61 million of availability on our share repurchase authorization, and we intend to use this full amount by the end of the year. Over the last 18 months, we've returned over 110 million to shareholders through a combination of share repurchases and dividends. While we continue to evaluate strategic opportunities as they arise, We still have not reviewed any opportunities that would offer a better return than investing in our own equity through our buyback program. With our low net leverage and excess liquidity, we can return capital to shareholders and prudently reinvest in our own properties. Our cash flow from continuing operations is generated from wholly owned casinos and the market-leaning tavern portfolio in Nevada, where we continue to see long-term trends of increased visitation and population growth that will support the future performance of our business. That concludes our prepared remarks. Blake and I are now available for questions.