Golden Entertainment Reports 2019 Fourth Quarter and Full Year Results

Fourth Quarter and Recent Highlights:

Record fourth quarter net revenues and Adjusted EBITDA

The Strat rebranding and renovations completed; property positioned for long-term growth

Improved performance from all legacy businesses year over year

Launched new loyalty program, True Rewards, available in over 140 casino resorts and distributed locations

LAS VEGAS–(BUSINESS WIRE)–Golden Entertainment, Inc. (NASDAQ:GDEN) (“Golden Entertainment”, “Golden” or the “Company”) today reported financial results for the fourth quarter and full year ended December 31, 2019.

Blake Sartini, Chairman and Chief Executive Officer of Golden Entertainment, commented, “Golden generated record fourth quarter revenue and Adjusted EBITDA as we again achieved growth across our Casinos and Distributed Gaming operations. In the fourth quarter, total revenue rose approximately 15% and Adjusted EBITDA increased more than 25%. The strong operating results reflect contributions from the Laughlin properties that we acquired last January as well as year-over-year growth at all of our other properties and distributed gaming operations.

“During the fourth quarter, we focused on completing our renovations and rebranding initiatives for The Strat. Since beginning our remodel mid-2018, we have created an entirely new and modern guest experience at the property. In the fourth quarter we completed the renovations of the main casino, the front desk and the VIP check in, as well as the remodel of an additional 126 rooms. With almost 600 rooms now remodeled, we have updated approximately 25% of the hotel’s room base and will continue regular room updates as part of our ongoing capital plan. In addition, we have made significant upgrades to our F&B offerings, created new experiences in the iconic SkyPod, added award-winning entertainment and completely updated the property’s exterior. We have been able to make all of these renovations with an investment of approximately $110 million. The Strat is now positioned to better service its existing customers as well as compete for future customers.

“True Rewards, our new loyalty program, has been introduced across more than 140 of our casino resorts and distributed locations which will give us new opportunities to drive customer retention and wallet share. With the largest location network of any casino loyalty program in the industry, Golden now offers a unified rewards program across our casino, tavern and third-party operations. This provides us a unique opportunity to reward our customers across a range of activities from a Strip experience to a local tavern happy hour.

“In addition, both our Nevada and Montana distributed gaming operations continue to generate attractive organic growth. Our long operating history and expertise across multiple markets allows us to maintain our leadership in Nevada and Montana which we believe will also provide Golden opportunities for potential expansion into new jurisdictions.

“In 2020, our focus will be on optimizing business operations and generating cash for our balance sheet which will allow us to reduce leverage and provide strategic flexibility as we evaluate future opportunities.”

Consolidated Results

The Company reported record fourth quarter revenues of $242.1 million, up 15.2% from $210.1 million in the fourth quarter of 2018. Net loss for the fourth quarter of 2019 was $7.7 million, or a loss of $0.28 per share, compared to a net loss of $25.3 million, or $0.90 per share, in the fourth quarter of 2018. Adjusted EBITDA increased 25.1% to $43.1 million for the fourth quarter of 2019 compared to $34.4 million for the fourth quarter of 2018. Results for the fourth quarter of 2019 include the operations of the Edgewater and Colorado Belle Casino Resorts acquired by the Company on January 14, 2019.

Casinos

Casino revenues grew 21.4% to $150.2 million in the fourth quarter of 2019 compared to $123.7 million in the fourth quarter of 2018. Casino Adjusted EBITDA grew 19.2% to $41.7 million compared to $35.0 million in the same quarter of 2018.

Year over year casino segment growth in the fourth quarter was driven by the Company’s acquisition of Edgewater and Colorado Belle Casino Resorts in Laughlin, Nevada in January 2019, as well as by revenue and Adjusted EBITDA growth at each of Golden’s legacy casino operations.

Distributed Gaming

Distributed Gaming revenues increased 6.3% to $91.7 million from $86.3 million in the fourth quarter of 2018. Distributed Gaming Adjusted EBITDA grew 14.4% to $13.2 million from $11.6 million in the same period of 2018.

In Nevada, continued growth from the Company’s wholly-owned tavern portfolio, which added six new locations since the prior-year period, as well as stabilized performance from the Company’s chain store locations, contributed to improved results. In Montana, the Company continued to add new locations and benefited from ongoing exclusive access to high-performing slot products.

The Strat Renovations Update

As of December 31, 2019, all of the significant renovations planned for The Strat were completed. In the fourth quarter of 2019, Golden completed the renovation of the casino floor and the front desk as well as the renovation of 126 hotel rooms. Since the beginning of The Strat renovation work in June 2018, Golden has renovated 574 hotel rooms (which are in addition to the approximately 300 hotel rooms that were renovated immediately prior to the Company’s acquisition of the property in October 2017), has opened a new tap house, lounge and sports book, and has completed renovations to the SkyPod at the top of the Tower. These renovations include a remodeled gift shop and food and beverage outlets, improvements to the SkyJump experience, and renovations to the Top of the World Restaurant. Golden also upgraded other food and beverage outlets (including the Strat Café and Starbucks) and updated exterior lighting and landscaping surrounding the property.

As of December 31, 2019, the Company had invested a total of approximately $90 million on The Strat renovations since June 2018, including $21 million in the fourth quarter of 2019. An additional $20 million is anticipated to be spent in the first quarter of 2020 related to renovations primarily completed in 2019, bringing the total project cost to approximately $110 million.

Balance Sheet Highlights

As of December 31, 2019, the Company had cash and cash equivalents of approximately $112 million and total outstanding debt of $1.15 billion consisting primarily of a $772 million first lien term loan maturing in October 2024 and $375 million of senior notes due April 2026, with no borrowings outstanding under the Company’s $200 million revolving credit facility.

Investor Conference Call and Webcast

The Company will host a webcast and conference call today, March 12, 2020 at 5:00 p.m. Eastern Time, to discuss the fourth quarter 2019 results. The conference call may be accessed live by dialing (844) 465-3054 or (480) 685-5227 for international callers and entering the passcode 5974829. A replay will be available beginning at 8:00 p.m. ET on March 12, 2020 and may be accessed by dialing (855) 859-2056 or (404) 537-3406 for international callers; the passcode is 5974829. The replay will be available until March 15, 2020. The call will also be webcast live through the “Investors” section of the Company’s website, www.goldenent.com. A replay of the audio webcast will also be archived on the Company’s website, www.goldenent.com.

Forward-Looking Statements

This press release contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. Forward-looking statements can generally be identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “potential,” “seek,” “should,” “think,” “will,” “would” and similar expressions, or they may use future dates. Forward-looking statements in this press release include, without limitation, statements regarding: future financial and operating results; future leverage reductions; anticipated additional expenditures on The Strat renovations; proposed future capital expenditures, investments and property improvements; and the Company’s plans, strategic priorities, objectives, expectations, intentions, including with respect to its growth prospects and growth opportunities and potential acquisitions. Forward-looking statements are based on our current expectations and assumptions regarding the Company’s business, the economy and other future conditions. These forward-looking statements are subject to assumptions, risks and uncertainties that may change at any time, and readers are therefore cautioned that actual results could differ materially from those expressed in any forward-looking statements. Factors that could cause actual results to differ materially include: the Company’s ability to realize the anticipated cost savings, synergies and other benefits of the American and Laughlin transactions and its other acquisitions, and integration risks relating to such transactions; changes in national, regional and local economic, political and market conditions; legislative and regulatory matters (including the cost of compliance or failure to comply with applicable laws and regulations); increases in gaming taxes and fees in the jurisdictions in which the Company operates; litigation; increased competition; the Company’s ability to renew its distributed gaming contracts; reliance on key personnel (including the Company’s Chief Executive Officer, President and Chief Financial Officer, and Chief Operating Officer); the level of the Company’s indebtedness and the Company’s ability to comply with covenants in its debt instruments; terrorist incidents; natural disasters; severe weather conditions; the effects of environmental and structural building conditions; the effects of disruptions to the Company’s information technology and other systems and infrastructure; factors affecting the gaming, entertainment and hospitality industries generally; the impact of coronavirus (COVID-19) on our business; and other risks and uncertainties discussed in the Company’s filings with the SEC, including the “Risk Factors” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 and most recent Quarterly Reports on Form 10-Q. The Company undertakes no obligation to update any forward-looking statements as a result of new information, future developments or otherwise. All forward-looking statements in this press release are qualified in their entirety by this cautionary statement.

Non-GAAP Financial Measures

To supplement the Company’s consolidated financial statements presented in accordance with United States generally accepted accounting principles (“GAAP”), the Company uses Adjusted EBITDA, which measure the Company believes is appropriate to provide meaningful comparison with, and to enhance an overall understanding of, the Company’s past financial performance and prospects for the future. The Company believes Adjusted EBITDA provides useful information to both management and investors by excluding specific expenses and gains that the Company believes are not indicative of core operating results. Further, Adjusted EBITDA is a measure of operating performance used by management, as well as industry analysts, to evaluate operations and operating performance and is widely used in the gaming industry. Other companies in the gaming industry may calculate Adjusted EBITDA differently than the Company does.

The presentation of this additional information is not meant to be considered in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP. Reconciliations of Adjusted EBITDA to net income (loss) are provided in the financial information tables below.

The Company defines “Adjusted EBITDA” as earnings before interest and other non-operating income (expense), income taxes, depreciation and amortization, acquisition and severance expenses, loss (gain) on disposal of property and equipment, share-based compensation expenses, preopening and related expenses, change in fair value of derivative, and other gains and losses. Adjusted EBITDA for a particular segment or operation is Adjusted EBITDA before corporate overhead, which is not allocated to each segment or operation. The Company defines “Preopening and related expenses” as inclusive of rent, organizational costs, non-capital costs associated with the opening of tavern and casino locations, and expenses related to The Strat rebranding and the launch of the True Rewards loyalty program.

About Golden Entertainment, Inc.

Golden Entertainment owns and operates gaming properties across two divisions – casino operations and distributed gaming. Golden operates approximately 17,500 slots, 150 table games, and 7,318 hotel rooms, and provides jobs for approximately 8,000 team members. Golden owns ten casino resorts – nine in Southern Nevada and one in Maryland. Through its distributed gaming business in Nevada and Montana, Golden operates video gaming devices at over 1,000 locations and owns over 60 traditional taverns in Nevada. Golden is also licensed in Illinois and Pennsylvania to operate video gaming terminals. For more information, visit www.goldenent.com.

Golden Entertainment, Inc.

Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)

 

 

 

 

 

 

 

 

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming

 

$

146,197

 

 

$

131,003

 

 

$

578,803

 

 

$

525,176

 

Food and beverage

 

 

49,962

 

 

 

42,429

 

 

 

202,933

 

 

 

170,453

 

Rooms

 

 

30,045

 

 

 

25,068

 

 

 

132,193

 

 

 

106,805

 

Other

 

 

15,930

 

 

 

11,625

 

 

 

59,481

 

 

 

49,360

 

Total revenues

 

 

242,134

 

 

 

210,125

 

 

 

973,410

 

 

 

851,794

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gaming

 

 

84,787

 

 

 

78,994

 

 

 

334,941

 

 

 

311,657

 

Food and beverage

 

 

40,278

 

 

 

34,663

 

 

 

159,728

 

 

 

138,114

 

Rooms

 

 

15,457

 

 

 

12,164

 

 

 

62,510

 

 

 

49,129

 

Other operating

 

 

4,924

 

 

 

3,876

 

 

 

21,333

 

 

 

15,332

 

Selling, general and administrative

 

 

55,560

 

 

 

48,712

 

 

 

225,848

 

 

 

183,892

 

Depreciation and amortization

 

 

29,740

 

 

 

23,035

 

 

 

116,592

 

 

 

94,456

 

Acquisition and severance expenses

 

 

393

 

 

 

633

 

 

 

3,488

 

 

 

3,740

 

Preopening expenses

 

 

175

 

 

 

313

 

 

 

1,934

 

 

 

1,171

 

Loss on disposal of assets

 

 

320

 

 

 

2,267

 

 

 

919

 

 

 

3,336

 

Total expenses

 

 

231,634

 

 

 

204,657

 

 

 

927,293

 

 

 

800,827

 

Operating income

 

 

10,500

 

 

 

5,468

 

 

 

46,117

 

 

 

50,967

 

Non-operating income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(18,174

)

 

 

(16,928

)

 

 

(74,220

)

 

 

(64,028

)

Loss on extinguishment and modification of debt

 

 

 

 

 

 

 

 

(9,150

)

 

 

 

Change in fair value of derivative

 

 

(79

)

 

 

(4,109

)

 

 

(4,168

)

 

 

1,786

 

Total non-operating expense

 

 

(18,253

)

 

 

(21,037

)

 

 

(87,538

)

 

 

(62,242

)

Loss before income tax benefit (provision)

 

 

(7,753

)

 

 

(15,569

)

 

 

(41,421

)

 

 

(11,275

)

Income tax benefit (provision)

 

 

81

 

 

 

(9,745

)

 

 

1,876

 

 

 

(9,639

)

Net loss

 

$

(7,672

)

 

$

(25,314

)

 

$

(39,545

)

 

$

(20,914

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

27,841

 

 

 

27,992

 

 

 

27,746

 

 

 

27,553

 

Dilutive impact of stock options and restricted stock units

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

27,841

 

 

 

27,992

 

 

 

27,746

 

 

 

27,553

 

Net income (loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.28

)

 

$

(0.90

)

 

$

(1.43

)

 

$

(0.76

)

Diluted

 

$

(0.28

)

 

$

(0.90

)

 

$

(1.43

)

 

$

(0.76

)

Golden Entertainment, Inc.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

(Unaudited, in thousands)

 

 

 

Three Months Ended December 31, 2019

 

 

 

Casino Segment

 

 

Distributed Gaming Segment

 

 

 

 

 

 

 

 

 

 

 

Nevada Casinos

 

 

Maryland Casino

 

 

Nevada Distributed Gaming

 

 

Montana Distributed Gaming

 

 

Corporate

and Other

 

 

Consolidated

 

Total revenue

 

$

133,852

 

 

$

16,346

 

 

$

72,776

 

 

$

18,955

 

 

$

205

 

 

$

242,134

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

13,288

 

 

$

3,873

 

 

$

7,005

 

 

$

621

 

 

$

(32,459

)

 

$

(7,672

)

Depreciation and amortization

 

 

22,774

 

 

 

949

 

 

 

3,764

 

 

 

1,757

 

 

 

496

 

 

 

29,740

 

Preopening and related expenses

 

 

61

 

 

 

 

 

 

67

 

 

 

 

 

 

135

 

 

 

263

 

Acquisition and severance expenses

 

 

51

 

 

 

 

 

 

 

 

 

 

 

 

342

 

 

 

393

 

Asset disposal and other writedowns

 

 

363

 

 

 

(1

)

 

 

19

 

 

 

(61

)

 

 

 

 

 

320

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,223

 

 

 

1,223

 

Other, net

 

 

95

 

 

 

 

 

 

52

 

 

 

 

 

 

475

 

 

 

622

 

Interest expense, net

 

 

264

 

 

 

1

 

 

 

15

 

 

 

1

 

 

 

17,893

 

 

 

18,174

 

Change in fair value of derivative

 

 

 

 

 

 

 

 

 

 

 

 

 

 

79

 

 

 

79

 

Income tax benefit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(81

)

 

 

(81

)

Adjusted EBITDA

 

$

36,896

 

 

$

4,822

 

 

$

10,922

 

 

$

2,318

 

 

$

(11,897

)

 

$

43,061

 

 

 

Three Months Ended December 31, 2018

 

 

 

Casino Segment

 

 

Distributed Gaming Segment

 

 

 

 

 

 

 

 

 

 

 

Nevada Casinos

 

 

Maryland Casino

 

 

Nevada Distributed Gaming

 

 

Montana Distributed Gaming

 

 

Corporate

and Other

 

 

Consolidated

 

Total revenue

 

$

107,852

 

 

$

15,847

 

 

$

69,577

 

 

$

16,744

 

 

$

105

 

 

$

210,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

12,658

 

 

$

2,708

 

 

$

5,104

 

 

$

752

 

 

$

(46,536

)

 

$

(25,314

)

Depreciation and amortization

 

 

16,566

 

 

 

962

 

 

 

3,694

 

 

 

1,491

 

 

 

322

 

 

 

23,035

 

Preopening expenses

 

 

170

 

 

 

 

 

 

56

 

 

 

 

 

87

 

 

313

 

Acquisition and severance expenses

 

 

16

 

 

 

 

 

 

 

 

 

 

 

 

617

 

 

 

633

 

Loss (gain) on disposal of property and equipment

 

 

1,634

 

 

 

209

 

 

 

507

 

 

 

(83

)

 

 

 

 

 

2,267

 

Share-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,603

 

 

 

2,603

 

Other, net

 

 

28

 

 

 

 

 

 

39

 

 

 

7

 

 

 

20

 

 

 

94

 

Interest expense, net

 

 

35

 

 

 

1

 

 

 

(5

)

 

 

5

 

 

 

16,892

 

 

 

16,928

 

Change in fair value of derivative

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,109

 

 

 

4,109

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,745

 

 

 

9,745

 

Adjusted EBITDA

 

$

31,107

 

 

$

3,880

 

 

$

9,395

 

 

$

2,172

 

 

$

(12,141

)

 

$

34,413

 

 

 

Year Ended December 31, 2019

 

 

 

Casino Segment

 

 

Distributed Gaming Segment

 

 

 

 

 

 

 

 

 

 

 

Nevada Casinos

 

 

Maryland Casino

 

 

Nevada Distributed Gaming

 

 

Montana Distributed Gaming

 

 

Corporate

and Other

 

 

Consolidated

 

Total revenue

 

$

545,231

 

 

$

70,170

 

 

$

285,012

 

 

$

72,227

 

 

$

770

 

 

$

973,410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

64,034

 

 

$

16,145

 

 

$

25,536

 

 

$

2,829

 

 

$

(148,089

)

 

$

(39,545

)

Depreciation and amortization

 

 

89,056

 

 

 

3,862

 

 

 

15,322

 

 

 

6,713

 

 

 

1,639

 

 

 

116,592

 

Preopening and related expenses

 

 

2,708

 

 

 

15

 

 

 

1,482

 

 

 

 

 

 

343

 

 

 

4,548

 

Acquisition and severance expenses

 

 

529

 

 

 

46

 

 

 

22

 

 

 

13

 

 

 

2,878

 

 

 

3,488

 

Asset disposal and other writedowns

 

 

1,026

 

 

 

98

 

 

 

96

 

 

 

(296

)

 

 

385

 

 

 

1,309

 

Share-based compensation

 

 

11

 

 

 

 

 

 

5

 

 

 

 

 

 

 

10,108

 

 

 

10,124

 

Other, net

 

 

405

 

 

 

 

 

 

52

 

 

 

 

 

 

1,759

 

 

 

2,216

 

Interest expense, net

 

 

576

 

 

 

5

 

 

 

68

 

 

 

5

 

 

 

73,566

 

 

 

74,220

 

Loss on extinguishment and modification of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,150

 

 

 

9,150

 

Change in fair value of derivative

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,168

 

 

 

4,168

 

Income tax benefit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,876

)

 

 

(1,876

)

Adjusted EBITDA

 

$

158,345

 

 

$

20,171

 

 

$

42,583

 

 

$

9,264

 

 

$

(45,969

)

 

$

184,394

 

 

 

Year Ended December 31, 2018

 

 

 

Casino Segment

 

 

Distributed Gaming Segment

 

 

 

 

 

 

 

 

 

 

 

Nevada Casinos

 

 

Maryland Casino

 

 

Nevada Distributed Gaming

 

 

Montana Distributed Gaming

 

 

Corporate

and Other

 

 

Consolidated

 

Total revenue

 

$

446,507

 

 

$

67,442

 

 

$

273,326

 

 

$

63,741

 

 

$

778

 

 

$

851,794

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

67,359

 

 

$

15,197

 

 

$

23,124

 

 

$

2,746

 

 

$

(129,340

)

 

$

(20,914

)

Depreciation and amortization

 

 

68,252

 

 

 

3,990

 

 

 

14,883

 

 

 

5,721

 

 

 

1,610

 

 

 

94,456

 

Preopening expenses

 

 

170

 

 

 

 

 

 

365

 

 

 

 

 

 

636

 

 

 

1,171

 

Acquisition and severance expenses

 

 

289

 

 

 

 

 

 

38

 

 

 

 

 

 

3,413

 

 

 

3,740

 

Loss (gain) on disposal of property and equipment

 

 

2,680

 

 

 

213

 

 

 

512

 

 

 

(69

)

 

 

 

 

 

3,336

 

Share-based compensation

 

 

12

 

 

 

25

 

 

 

3

 

 

 

 

 

 

9,948

 

 

 

9,988

 

Other, net

 

 

188

 

 

 

 

 

 

401

 

 

 

7

 

 

 

492

 

 

 

1,088

 

Interest expense, net

 

 

103

 

 

 

7

 

 

 

84

 

 

 

9

 

 

 

63,825

 

 

 

64,028

 

Change in fair value of derivative

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,786

)

 

 

(1,786

)

Income tax provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,639

 

 

 

9,639

 

Adjusted EBITDA

 

$

139,053

 

 

$

19,432

 

 

$

39,410

 

 

$

8,414

 

 

$

(41,563

)

 

$

164,746

 

 

Contacts

Golden Entertainment, Inc.

Charles H. Protell

President and Chief Financial Officer

702/893-7777

Investor Relations

Joseph Jaffoni, Richard Land, James Leahy

JCIR

212/835-8500 or gden@jcir.com

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