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spk03: which caters to our most value-oriented guests, while our perump casinos remain stable year over year. We expect stable year over year performance in Q4 for all our local properties, which will be helped by the Las Vegas promotional environment moderating. For the third quarter, Nevada Tavern revenue declined 2%, and EBITDA declined 29%, with margins negatively impacted, mostly as a result of the elevated initial operating expenses associated with our seven new taverns and the last mandated Nevada minimum wage hike in July. Our tavern customers were also impacted by extreme summer heat and less discretionary spending. We typically see our new taverns stabilizing within 9 to 18 months of opening or acquisition, and we expect these last seven to follow the same pattern. With regards to our capital structure, we continue to maintain one of the best balance sheets in the gaming industry, with our net leverage at approximately two times EBITDA and 240 million of availability under our revolving credit facility. Since selling our non-core assets at premium multiples last year, we have repaid over 500 million of debt and returned nearly 150 million to shareholders through a combination of share repurchases and dividends. Including over 80 million since the end of Q1. Between August and October, we have repurchased approximately 950,000 shares. Combined with the almost 1 million shares repurchased in Q2, we have repurchased nearly 2 million shares over the last six months, representing 7% of our outstanding shares and 9% of the free flow. After increasing our buyback authorization, we have 131 million of availability for share repurchases, which can be funded by cash from operations, as well as our undrawn revolving credit facility. We continue to believe that our portfolio of wholly owned casinos and local taverns will benefit from the favorable long-term demographic and economic trends in Southern Nevada, and we see significant value in continuing to acquire our own equity at this time. While we do evaluate strategic opportunities as they arise, it will be a high bar for acquisitions given our current valuation, and we anticipate continuing to meaningfully buy back stock absent more compelling alternatives. That concludes our prepared remarks. Blake and
spk04: I are now available for questions.
spk06: Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. The first question comes from the line of Barry Jonas from Truist Securities. Please go ahead.
spk10: Hey, guys. I appreciate the comments on A. Charles, I appreciate your comments on M&A, but maybe you could just talk about what you're seeing out there, how rich of an environment is there for assets you'd be interested in. And then I'd be curious to get your thoughts on the sale leaseback model. You have a slide on the deck as always, just curious if any updated thoughts given where evaluation sits today. Thanks.
spk03: Yeah, I'll take a bit of the first part, and Blake may want to comment on the second. I think from an M&A perspective, we haven't seen a lot out there that's compelling for us. I think when you look at the M&A landscape right now, there's still a bit of a disconnect between buyers and sellers around the bid-ask spread on not so much necessarily maybe the multiple, but more on what's the run rate even though. And I think that as we look into next year, I think there's going to be a lot more visibility around stabilization of operations, as well as the benefit of declining interest rates, which would help the M&A
spk01: environment. Yeah, in addition to that, look, I don't think it's overstating that we are in active mode right now looking at all of our potential strategic alternatives. And that includes, I think in our investor deck, we provide some math around the value of our real estate and how that may drive values, certainly in our share price, given that our math shows our opco is really free if you buy our shares. So again, we're in active mode. In regards to particularly, I'll tag on to Charles' comments in the M&A segment. You know, we're looking for whole-co assets. There aren't many of those out there. There's a limited inventory, I think, of whole-co assets. They are out there. But that would be our preference in terms of moving the needle for valuation at golden, given our strength of our balance sheet and so on. But we are considering all of, we're active in considering all alternatives at this point.
spk10: Great, that's helpful. Then just as a follow-up, you know, also appreciate the commentary on the consumer and certainly the summer heat and seasonality. But curious if you saw any impact from the election in any of your segments, and you know, now that that's over, have you seen or would you expect to see any, you know, any improvements related? Thank you.
spk01: Yeah, I think historically around these major federal elections, presidential elections every four years, we do see consumers in the short term prior to the election, you know, pulling back if that's the right term, but certainly cautiously spending before and a little bit after. So much like seasonality, these elections, these broad elections only come around every four years. We do see a pattern of consumers pulling back, certainly in the short term before the elections occur.
spk04: Great, thank you so much. Thank you.
spk06: Thank you. The next question comes from the line of David Bain from B. Riley Securities. Please go ahead.
spk02: Great, thank you. Hi Blake and Charles. I'm just hoping we can unpack the margin stability or opportunity from three Q results. It seems like multiple segments will improve to flat year over year in four Q, so I assume you meant EBITDA there. And is that a function of higher revenue and some rebound in margins? I understood the commentary on the Tavern with the seven coming online and those normalizing longer term, but maybe across the rest of the portfolio would be helpful.
spk03: Yeah, I think quite frankly, the only asset that from a margin perspective remains a bit challenged will be the strat as we look into Q4. And that really has to do with the latest Culinary Union contract that we signed earlier this year. As we look at the other assets, we see stabilization both on the revenues and the cost structures within that business. Some of it specific to changes we're making. If you look down in Laughlin, focusing a bit more on the locals in our strategy of going to smaller scale entertainment and in the locals that are here in Nevada, we really just see stabilization of the spend while we continue to manage costs in that business. You mentioned the Taverns already, and I think with respect to the strat, the strat will have inflow with the occupancy of the town and what's going on along the strip corridor. And so we're basically a derivative of that without any of our own direct group meeting space. The one thing we do have is we have an elevated cost structure. It's reflected in our views for Q4 that are generally out there with all of you right now. So we feel confident in our statements about Q3 being the low point for the portfolio.
spk02: Okay, and also the 4Q commentary was helpful for this, but maybe if you could speak to F1 and the Super Bowl comp in 1Q and how that translates, not just to the strat, but the Las Vegas portfolio generally.
spk01: Yeah, the F1 comp is, you know, we've made adjustments obviously to our approach last year, certainly on the spend side. So we're going to make significant improvements in regards to what we spent to try to drive traffic to the properties. That's going to result in a positive. I think generally citywide, we're hearing, you know, it's going to be a tough comp to have one last year, given ticket prices are low, we're hearing room rates are lower. We've gone out and partnered with the downtown folks to do a kind of a weekend festival that weekend to try and drive some of that customer inertia downtown with entertainment bands, pop-ups and those kinds of things. So we're well much better positioned for F1 this year than we were speaking for ourselves last year, certainly from a cost standpoint. And it is a tough comp in Q1 with Super Bowl. Super Bowl was big for us last year. I think it was big for the city last year. So we're going into Q1 knowing that that's going to be a tough comp.
spk03: And
spk01: to give
spk03: just a sense of magnitude of Super Bowl, it was worth about a million dollars in EBITDA to us. And so from my perspective, as we talk over the course of the quarter, we think there's many other drivers that overcome that, between the taverns stabilizing, between increased occupancy and things that are going on at the Strat, we feel fine in terms of fading that comp.
spk02: OK, great. Thanks, guys.
spk01: Thank you.
spk03: Thank
spk06: you. The next question comes from the line of Jordan Bender from Citizens JMP. Please go ahead.
spk12: Good afternoon, everyone. With Atomic Golf up and running, has there been any thoughts around if something else incremental could fit into the excess land between the Strait and Atomic Golf that could help drive more foot traffic, I guess, to both properties?
spk01: Yeah, look, Atomic, it's no secret we've been talking about Atomic Golf has been slow to ramp up. Before I talk about the additional potential development on property near us or adjacent to us, I still believe Atomic remains a modern competitive facility. It's a 70 million dollar facility. And regardless of the slow ramp, which it is ramping, it's still going to continue to be a relevant and significant asset next to our property. It's a world class asset in terms of physically what it offers. So we're long term bullish on that. In regards to the adjacent property, I think between the Strait and Atomic is too narrow. We tried to push that closer to the building to make it convenient for crosswalk traffic. But we do have five and a half acres of developable, asphalted flat land across the street, which is desirable. We're getting a lot of inquiries into what could possibly be put there. We're trying to fit a highest and best used concept in there that would drive more traffic to the property. So absolutely, we have we have adjacent property that with the ability to put some attractions on there that would benefit the Strait.
spk03: I'd say we're also
spk01: working
spk03: on development of extra amenities inside the building. So we have approximately 150,000 square feet of developable space on the mezzanine level of the Strait. And so we're working with some third parties to bring some experiential type attractions to the property that we think help drive traffic as well.
spk12: Great, thank you. And then Charles, just on the follow up, as we approach kind of year one of a dividend being paid, is there any cadence or parameters we should be thinking about in terms of, you know, does that go up? Is it based off of a payout, a yield, et cetera?
spk03: Yeah, I mean, look, we've we've talked and thought about it almost as constant dollars, a bit out the door with the fluctuation based on the amount of equity we could buy back into the company. In other words, when we get to this one year anniversaries, we'll take a look and see what's our projected cash flow going forward. How do we think about how much stock we've bought back and how that translates into overall cash outflow? But clearly, we the dividend to us is be a constant piece of our of our cash flows going forward. And we look to increase that as we get
spk04: in the next year. Thank you very much.
spk05: Thank
spk04: you.
spk06: The next question comes from the line of David Katz from Jeffries. Please go ahead.
spk08: Evening, everyone. Thanks for taking my questions. I just want to make sure that I'm processing, you know, all the commentary properly. We're talking about, you know, potentially activating some of the excess land one way or the other. And, you know, we're also potentially talking about a sale and lease back. And, you know, with the proceeds necessarily be used for capital returns or, you know, is there a range of potential uses just for the purposes of this exercise?
spk03: Yeah, so I think I think the purpose of, you know, highlighting the value of the real estate is to illustrate with Blake had discussed earlier, which is if you look at any reasonable multiple of a rent stream, that is in excess of the total enterprise valuation of the company as it sits here today.
spk00: Yeah,
spk03: from our perspective, clearly, clearly undervalued in terms of the combination of the op co, as well as the real estate. So that's why, quite frankly, we're confident in increasing the share buyback very meaningfully. We have 130 million of availability on that buyback.
spk09: It
spk03: represents a little bit over half of our revolving credit facility. And, you know, we could use that as we see the opportunity within the market to do so. We will have consistent buyback through Q4. And we're going to be doing that into the future. But I think you're not going to see us do a sale these back to fund other development that you're not going to see as a strategic alternative. I think to the extent that we are trading at levels that where the discount remains for a prolonged period. And I think some people might point out that it has. But we've been in a challenging interest rate environment, which I don't think has helped read multiples. It says we see the rate cuts that happen today and we anticipate rate cuts in the future. It's our belief that multiples get better and cap rates get better from a real estate perspective. And we're going to let that play out as we get through through next year.
spk08: Totally agree and totally sensible. You know, if I can follow that up and just, you know, I know we've talked about these things before, but, you know, does the field of field of play, you know, I assume it includes potential mergers or, you know, other. Right. When Blake says we're active, you know, does the field of play include, you know, corporate type activities like that?
spk01: Yes, yes, I mean, we are, you know, we are. It's frustrating and I'm sure it's frustrating to our investors and to those that follow the company. It's frustrating to see we get no credit for the real estate whatsoever. So within that context, we're frustrated with the valuation and we are sitting in a good position with a strong balance sheet, fully owned real estate and a well run company to look at all alternatives. So, yes, corporate merger, we're active in looking at all things that may potentially drive significant value to our current portfolio.
spk08: Great. I appreciate it and thank you for the camera.
spk04: Thank you. Thanks, David.
spk08: Thank
spk06: you. The next question is from the line of Chad Bannon from Macquarie Asset Management. Please go ahead.
spk07: Hey, good afternoon. This is Aaron on for Chad. Thanks for taking the question. I wanted to touch. Hey, how are you doing? I wanted to touch on the direct business at the strat, which has been a nice success story for you guys. How high do you think that can go? Or just how do you think about the optimal mix there? Thanks.
spk03: Yeah, so we've worked pretty hard and when we first took over the property, the OTA mix was about over 70 percent, 72 to 74, 75 percent. That's down now to between 60 and 65 percent. And we think we could keep moving that lower. I mean, ideally, we'd like it to be about 50 percent of the property. So we're doing a lot of things in terms of boosting our direct booking business, working more closely with the citywide conventions and filling blocks of rooms into this citywide and doing a little bit better job capturing customer data. Once they even though they may have booked up an OTA, once they get on the property, being able to send them return offers directly rather than through the OTA. So we are pretty excited about that journey. It's a slow journey. And but but it's a good one. And there's upside in the property from doing that.
spk01: Yeah, I would just add to that. That I think Charles said it very well. You know, we continue to see bright spots at the property. We are aggressively marketing the casino and seeing and seeing improvement in part and play. We're seeing improvement in revisitation, people revisiting the property, which prior to our ownership was pretty much nonexistent. We just for a metric that may or may not be relevant today's environment. But if you look at 19, you know, our ADRs are still up approximately 20 percent today over 19 levels. Our occupancy is down a bit. Weekend is up. But the midweek is where Charles continues to talk about our upside. So there's a lot of data points in the property that are going the right direction. We're kind of taking it an inch at a time, but it is going in a positive direction.
spk07: Understood. Appreciate the color there. Just turning to taverns in terms of growing the number of your taverns as we look to next year. Do you anticipate adding locations at the same rate as you have this year? Just any color on how you see the opportunities set there would be great.
spk03: No, I think we had some unique opportunities in the marketplace to acquire some brands and some locations that we think long term will be very beneficial to the portfolio. Going forward, we're more focused on developing ground up. And so we look to add one to two next year and then going forward after that, it's probably in a three to four range.
spk01: The only thing I would add to that for a little more color is we're bullish on that Greenfield Charles talks about one to two. We are solely looking for what we call five star or premier locations only to further grow the portfolio. We're having success in providing an inventory of these solid locations for us going forward. And those locations, as Charles said, one to two a year. And still those new locations versus the acquired locations, which admittedly have taken us longer to ramp up, those new build locations still provide a 25 percent cash on cash return when we build them. So we're very, very confident we will continue in that direction.
spk02: Thank you very much.
spk05: Thank you.
spk06: The next question is from the line of John degree from CBRD. Please go ahead.
spk09: Hey, guys, I think most of mine have been answered, but maybe one follow up on the Tavern discussion, particularly the new build and and properties. We've acquired the take, I think, up to about 18 months to stabilize. Can you give us a little bit more color on on that life cycle? I mean, when you when you bring a new property into the system and you Tavern or open new ones, you typically lose money and then and then break even and then moving into profitability. And I guess the follow up is, you know, given the seven or so that you've spoke about earlier, kind of came online at different times where we are kind of in that life cycle today. I think about kind of inflection to profitability and maybe margin enhancement across that that business overall.
spk03: Yeah, so when we typically open a ground up Tavern, we're spending between two and three million, and it's usually on the shorter end of that scale of ramp up, call it the nine to twelve month range. We usually have them in a location where we potentially don't have a lot of other locations and there's not the competition around. So they ramp faster and we staff them with people that came out of our existing Tavern. So they know the process. They know our methodology. They know our brands and they know our marketing. And we very quickly see those ramp to twenty five to thirty percent cash on cash ROI as Blake mentioned with the acquisitions, depending on the staff that we acquire that. Could either be shorter or longer in this case for these two brands. It's longer. So we have basically turned over the entire staff and the six locations we've acquired. Now we put in new staff and we're seeing the fruits of that in terms of that ramp up as we're getting into the into Q4 right now. So we're confident that those will get there. They're a little bit. There's some different brands from what we've had in the past. So we like that. We actually opened our new build with one of those brands. So it adds a little diversification to the portfolio, but it's just taking us a little bit longer to get them up up to our standard.
spk09: Understood. Thanks for that color. Charles. That's all for me. Appreciate it, guys.
spk06: Thank you. Ladies and gentlemen, we take the last question from the line of Carlos Santarelli from Deutsche Bank. Please go ahead.
spk11: Hey, Charles Blake. Thank you for taking my question. Charles. I just wanted to kind of. Understand a little bit when you when you talked about the Nevada casino segment, and I believe you also mentioned it with respect to the local segment. A for Q that you expected to be stable year over year. I just kind of want to understand what you meant with the stable comment. I'm assuming you don't mean you would anticipate they would be flat year over year, but maybe I'm misunderstanding.
spk03: Yeah, for Q for year over year flat. Right. Other than the stride within my commentary and in the commentary, my reference is really to the locals. So that's our local properties in our in our casinos out in Peru. Laughlin should be the same way. I think, you know, strats should be a little bit down year over year, given where we are from a labor expense perspective. But that's that's the call will be better than Q3. Yes.
spk11: Yes. Okay. Okay. And then just it might have been nuanced and it might not have. I might not have exactly understood it correctly. But when you talked about the disconnect between buyers and sellers, you made the point that it was not necessarily a a difference in pricing in bid ask. It was more of a difference in earnings or EBITDA or cash flows. Is the perception then from from a buyer's perspective that sellers are looking for a multiple off of a business that's flat or growing and buyers just just are kind of looking for things to continue to kind of slightly kind of erode or what exactly is that dynamic you were referencing? Yeah,
spk03: I would say the dynamic probably not as specific is that, you know, buyers are looking at like we would look at a more conservative EBITDA to underwrite in the future. You know, depending on what sellers may be offering, whether they're offering, you know, double digit growth rates. And we're saying we're not going to get there or they're offering more flat. We think we should be a little bit more conservative. I just think that there is more conservatism, at least from our perspective as as a buyer than what we're seeing in in the situations we've looked at from a seller perspective.
spk11: Okay, that makes sense. Thank you for the clarification. Thanks, guys.
spk01: Yep. Thank you.
spk06: Thank you. Dear members, we have a follow up question from David Bain from Beelight Riley Securities. Please go ahead.
spk02: Oh, great. Thank you. Sorry for this. This question may be a little off track, given the Tavern discussion that we're clearly centered around Las Vegas. But have there been any new thoughts around Tavern business expansion outside of Nevada? I believe you still have the J&J relationship, if I'm not mistaken, and you got the proven model and I would think, you know, the brand opportunity as well. That's actually
spk01: a very good question. So when we exited the route business, both in Montana and Nevada, I think on prior calls, I referenced the fact we have not exited our potential for remaining in the distributed business through operating the brick and mortars or brands, either that we have or new brands. We, I think that's an opportunity for us. Yes. And although nothing is eminent, I think there's a path for us to do that.
spk02: Okay, great. Thank you very much. Thank you.
spk06: Thank you. Ladies and gentlemen, this concludes the conference of Golden Entertainment, Inc. Thank you for your participation. You may now disconnect your line.
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