Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Golden Entertainment First Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. Please note that this call is being recorded today, May 6, 2021. Now, I’d like to turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead, sir.

Thank you, Adrian, and good afternoon, everyone. On the call today is Blake Sartini, Golden Entertainment’s Founder, Chairman, and Chief Executive Officer, and Charles Protell, the company’s President and Chief Financial Officer. On today’s 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. Additional information concerning factors that could cause actual results to materially differ from these forward-looking statements is contained in today’s press release and our filings with the SEC. Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise. During today’s 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. On this afternoon’s call, Charles will first review details of recent results and provide a business update. Following that, Blake and Charles will take your questions. With that, it’s my pleasure to turn the call over to Charles Protell. Charles, please go ahead.

Thanks, Joe. We are starting the year strong, as we generated nearly $240 million of revenue and quarterly adjusted EBITDA of $59.5 million. This is the highest quarterly EBITDA in the company’s history. Q1 of 2020 is not a relevant comparison to this quarter given property shutdowns that started last March. That said, it is worth noting that our record EBITDA for Q1 is 23% higher than our Q1 2019 EBITDA and 50% higher than our EBITDA we just reported for Q4, demonstrating the continued momentum across all our businesses. Q1 showed continued strength in our local and regional properties, even with the STRAT underperforming compared to Q1 2019, with only $1 million of EBITDA per month for January and February. As more people return to Las Vegas, our Strip asset is getting its fair share, and we are now seeing the flow-through to EBITDA. Occupancy improved throughout the quarter from 30% in January to over 60% in March, and we saw occupancy reach over 90% for March weekends, with sellout every weekend in April. Our two Las Vegas locals casinos are outperforming historical results, with Q1 EBITDA increasing almost 80% compared to Q1 of 2019 and up over 40% compared to Q4. In Laughlin, EBITDA improved by 9% compared to Q1 of 2019 and almost 60% compared to Q4. For our Pahrump casinos, EBITDA improved more than 50% compared to Q1 of 2019 and 25% compared to Q4. Looking at all our Nevada Casino operations, EBITDA was up 8% compared to Q1 of 2019 and over 58% from Q4 even without the STRAT operating at their historical levels. Our Rocky Gap operations in Maryland generated nearly $5 million EBITDA for the quarter, up 29% from Q1 of 2019 and 11% from Q4. When looking at our combined casino operations, even with the STRAT underperforming, casino property level EBITDA grew 10% compared to Q1 of 2019 and over 50% compared to Q4. Combined casino EBITDA margin was approximately 40%, up 870 basis points from Q1 of 2019 and up almost 1,000 basis points from Q4. Turning to our distributed business. In Nevada, first quarter EBITDA improved to $17.5 million, up over 50% from Q1 of 2019 and Q4. EBITDA margin improved almost 500 basis points, mostly driven by increased gaming revenues and lower operating costs within our wholly-owned tavern portfolio. Our Montana distributed operations showed similar improvement, growing EBITDA to $3.4 million, up 56% from Q1 and up over 40% from Q4. We see the current performance being sustained for both our Nevada and Montana distributed businesses in Q2, with our Nevada taverns benefiting the most from expanded capacity that started May 1. We also remain focused on expansion of distributed gaming in new jurisdictions and, almost as important, educating state legislators on the dangers of unregulated illegal gaming that is currently happening in many states. Moving to our balance sheet, we generated approximately $42 million of cash in the first quarter based on the strength of our operating performance, increasing our cash on hand to over $145 million. We continue to have no outstanding borrowings on our $200 million revolving credit facility. Given our current liquidity position, we anticipate meaningful debt repayment over the remainder of the year. With limited CapEx requirements, our primary capital allocation for the balance of the year will be to reduce leverage and evaluate returning capital to shareholders. Looking forward, the trends we saw across our businesses in the first quarter are continuing, which reinforces our confidence that 2021 EBITDA is on track to exceed 2019 levels. We only see sustainability and upside from our current performance as we progress through 2021, and our operating momentum continues. We are still missing over 35% of our 55 and older database across all our properties, which is starting to return. We’re excited for our fall concert lineup at the Lawson Event Center, the biggest driver of weekend visitation in that market, and the Strip is rapidly recovering with conventions and events being booked for the fall. That concludes our prepared remarks. Blake and I are available for questions. Operator, please open the line.

And our first question comes from David Bain from B. Riley. Your line is open.

Thank you. Phenomenal results. I guess my first question would be, outside of potential high return, lower CapEx opportunities, like the new route or route expansion, Charles, that you spoke to in prepared remarks, is there a focus on acquisitions or new projects? Or are we laser-focused on cash flow harvesting, paying down debt, looking to return capital to shareholders over the next several quarters?

Definitely in the latter, David. So for this year, we are solely focused on deleveraging the balance sheet, generating cash on hand, and looking at ways to return that capital to shareholders. I think that deleveraging gives us more flexibility for the future, and we can look at some of those opportunities as we get into 2022 and beyond.

Okay. Fantastic. And then we read a lot about the new demographic coming from California to Las Vegas on migrating. Have you identified the demographic in terms of like do they have higher spend, frequency of visitation versus the historical core? Is there an opportunity for even greater crossover promotion with the new demographic for either the STRAT or Laughlin visitation? So can we get any kind of color? Or is it a little early out of the gates to start bifurcating the California to Nevada?

Yes, David, this is Blake. I mean, frankly, it is a little bit early for us to have that kind of granular data. I can tell you that we are seeing, particularly in our hyper-local businesses, our distributor business, a lot of new faces in our 66 locations around town and the third parties with which we deal. There are a lot of brand new faces that have not been seen. We believe a lot of those people are the new residents moving into Nevada. We are also seeing a lot of that in the local casinos. But in terms of that intrinsic data, I think it’s a little bit too early in terms of how we can benefit from your crossover standpoint in regards to marketing or attracting those customers on a long-term basis.

Okay. Great. Congratulations again.

Thanks, David.

And our next question comes from Carlo Santarelli from Deutsche Bank. Your line is open.

Hey, guys, thank you. Charles or Blake, whoever kind of wants to take this one. I was just kind of curious, as you guys exit March. Obviously, March, Charles, just based on your comments, drove the bulk of the EBITDA in the quarter, something that, obviously, I think we’ve seen through the GGR results and clearly have heard from others. When you think about kind of the cost extracted from the business and think about your ability to leverage that as revenues heated up in March, is there a sustainable run rate of cost extraction perhaps relative to 2019 that you guys are kind of benchmarking right now across the Nevada casino business? Or is it just kind of the casino business in aggregate that you’d be comfortable sharing?

Yes, Carlo, this is Blake. The sustainability question is definitely a key topic right now. In response to your question, I'll break it down into two parts. Charles can also provide some insights. Regarding the current margin trend, our short answer is yes, we believe our business can maintain higher margin expectations. These expectations moving forward will be significantly above our historical averages. While adding necessary costs back as revenues grow might dilute margins to some degree, we think that's a reasonable assumption. However, we fundamentally believe that we have transformed our operations, and our higher margin expectations will persist beyond historical levels. As for revenue sustainability, our portfolio is somewhat unique because, even with the numbers we reported, we operated at only half or three-quarters capacity in the first quarter due to the STRAT significantly underperforming compared to the rest of our portfolio. In Laughlin, the business was not as strong as it could have been because we couldn't hold live events or concerts, which are major drivers in that market. Despite this, we see embedded growth within our current portfolio, particularly in those two areas. Looking ahead, we are optimistic about conventions, concerts, and sporting events scheduled for later this year, which should bolster a strong revenue trajectory for our businesses.

Yes. And I just would add to that. The two biggest costs, as you know, in the business, are on the marketing side and the labor side. And we are not seeing an increase in the promotional environment, and we rightsized that spend across our entire portfolio at this point. Even we still see that going down. On the labor side, we probably expect a little uptick in labor at the STRAT, which would be a good thing because we’d have more GRAs hopefully on board with the increased occupancy as we sell more rooms, and you’re presuming that you’re doing that on an accretive basis to the property. For our regional and local assets, that staffing is pretty much set. So we’ve been operating at the same levels we have for the last two quarters within those assets. So again, I just think if you see any uptick from a labor perspective, it would be at the STRAT. But again, that would be in the revenue-generating categories from room sales and restaurants, etc.

Thank you both. I have a follow-up question. Charles, you addressed this in your prepared remarks. Considering the first quarter EBITDA run rate of nearly $60 million, with a credit size of $400 million on an annual basis, I’m not implying that's the only perspective. If we take into account cash interest and maintenance capital, you might estimate an additional $80 million to $85 million. This would leave approximately $150 million in free cash flow or nearly $5 per share on an annualized basis, which is certainly strong and places you in a good position for various options. I understand you mentioned the focus will primarily be on paying down debt, but as we look ahead to deployment strategies for next year, with the current flow being relatively small in terms of trading flow, how do you view dividends, special dividends, and buybacks? How do you prioritize these options, or more broadly, how do you conceptualize your approach?

Yes, I mean, look, conceptually, as we sit here right now, I mean, there are obviously significant shareholders in this room. We like the concept of returning capital to all shareholders equally, which leads towards the construct of special dividends. I would say we’d have to take a look at that at the time, depending on where we’re trading, what the prices are, and the liquidity of the company. But if you had to pick a path now, that’s probably the more optimal one as we sit here today and we look at the future.

Great, thanks very much, guys.

Thank you.

And our next question comes from Chad Beynon from Macquarie. Your line is open.

Hi, good afternoon. Thanks for taking my question.

Hi, Chad.

How are you doing? Just wanted to ask about STRAT again, kind of a two-part question on that. One, just wanted to focus on some of your non-gaming establishments like Top of the World? Are you starting to see covers come back? And I guess just broadly, what’s the rough split between locals and visitors? Will it really take conventions and events to kind of get back to those levels? And then the second part of that is on the room side? Charles, you mentioned that you’ve had some weekends where you’re at 90%. Can you get compression EDR rates during that time period, or you and some of your competitors still being a little conservative, just in terms of pushing price? Thanks.

Hey Chad. On the first part of your question, specific to the property on Top of the World. We are seeing significant business at that restaurant; we believe right now it’s the highest grossing restaurant in Las Vegas. We’re doing 600 to 700 covers a night in that restaurant. Our average checks are up 20%. It has become – we’ve retooled the room entirely from the menu to the look and feel of the entire venue. And it is, it’s producing significant results. I mean, we’re basically full up there every evening. As far as the local traffic, there’s between 10% and 20%. We believe at this point, so the majority of that business is either staying, or a significant amount of that business is making a trip from South Strip or elsewhere to go up to that venue. So we are very excited about the continuing growth of that venue. And we continue to improve the offerings up there. As far as the compression and the room rates on the weekends, I think the short answer is yes. As we go forward, we’re seeing more and more ability to drive those rates as the high watermark rises in the rest of the community. But the rest of the Las Vegas Strip, if you will, but as I think it’s important, a couple of things. As you recall, we completed our approximate $100 million capital investment into the property around February of 2020, which was right before the lights went out, and we were forced to close. So the last year has been pretty choppy for that property like it has been for every other operator in town. So we had talked about the targeted return on the $100 million prior to the unforeseen event of COVID. And now beginning this past March, we’re hitting the high watermark in terms of EBITDA at that property. And that is while running only 60% to 70% occupancy at that property. We’re achieving these high water EBITDA marks. Customer spend is increasing, guests are staying longer, spending more. We’re seeing more direct bookings and casino bookings through our casino marketing program, which are displacing OTA reservations. All these metrics indicate we believe a material return on our $100 million investment is underway. And again, we were running anemic occupancies here in March and April while achieving these good EBITDA numbers. And lastly, just a reminder, the city is well underway with its roadways and pedestrian walkways improvements to make that South to North Strip a seamless experience for guests that the Resorts World opens June 24. The Drew was just sold to very strong investors, which we believe at some point will be built. And all of that growth coming North will benefit that property.

Thanks, Mike. Appreciate it. And then secondly, just on the tavern side in Nevada, can you just remind us on the restrictions that occurred during the quarter where that sits right now? And if that has been, a slight impediment to the results that you’ve put up? Thank you.

Yes, it has probably more than any other type of gaming operations, certainly within our portfolio. So there are occupancy restrictions within Clark County, which had been at 50%, and now as of May 1, have been moved up to 80%. So you could imagine with a smaller restaurant venue, that’s actually a lot more material than when you’re talking about a large casino floor. So look, we’re pretty excited about that. And we’re hopeful that, the Governor here has said that we’d be prepared to get to 100% June 1, which would be another lift for us.

Thanks, Charles. Thanks, Blake. Nice quarter.

And our next question comes from David Katz from Jefferies. Your line is open.

Good afternoon, everyone.

Hi, David.

Hi, look, I wanted to go back to the STRAT, which is sort of fairly prominent within the portfolio. At one time, there certainly wasn’t formal guidance about it. But notionally, we were thinking about getting that property to call it the $60 million neighborhood of EBITDA. And I just wonder, the last time we discussed those kinds of numbers was pre-COVID. How do we think about where the neighborhood or where the ceiling on that? Could it ultimately be either qualitatively or as much detail as you can offer?

Well, I would say, David, we’re at that run rate right now. So we’re not focused on there being a ceiling with that property. Given the dynamics that Blake mentioned, relative, to the inertia that’s coming down to the North side of the Strip, and the things that we’re doing with the property. Look, we’re very bullish on it. We think that this trajectory continues certainly for the balance of this year and into next year. So we’re excited to see how high we can push it without a ceiling.

Yes, David, I think that’s, as I mentioned in my earlier comments. I think that ceiling gets raised as we continue to realize more of our people directly booking to the property, which means they’re choosing that property versus a particular rate on a website. We’re seeing more casino bookings, given a very robust casino program we’ve instituted at that property, which prior to our ownership didn’t exist. As Charles mentioned, we’re achieving those targeted results that we had talked about earlier right now, running 60% to 70% occupancy at the property. Given some of the fixed cost, fundamental changes we’ve made, we believe that we don’t want to put a ceiling on it. We think the property is well positioned, given the development coming North that we’ve already talked about the Circa and downtown development and the city’s Art District improvement coming south towards us. The property is in a great area and a great zone right now to capitalize on not only our investment but the growth coming in the city, both North and South.

Understood, so the natural follow-up is since there’s so much discussion about capital allocation, what would it take for you to consider putting more into it? Right, because some of the plans earlier on, I think did have a broader scope than what ultimately got done?

Yes, I think the piece that was broader was really about putting convention space. But, we’re fortunate that the convention center is very close to the property and they spent a billion for and that should be opening shortly. So, we think we’ve got it right now. I mean, we’ll continue to do room renovations in the ordinary course. I think you could see us looking at ways to use the excess real estate on the property in a capital-light fashion where we could partner with people to add on to amenities to the property where we’re not contributing capital, other than land. We’ll talk about some of those things with folks who approach us but in terms of doing more large scale CapEx, which $100 million for us is large. That’s not on the radar for us at this point.

Yes, between our investment, I think we did some 600 and 650 rooms, we’ve renovated prior to our ownership, there was another 500 or 600, so roughly half the property, and the room product has been renovated within a reasonable amount of time. Certainly, ours is within the last year. And as Charles mentioned, I think the rooms are probably any focus that we would have going forward but the catalyst to answer your question on what would be the catalyst for us to invest more money would be getting the balance sheet where we want it.

Sounds good to me. Thank you.

And this concludes the question-and-answer session. I’ll now turn the call back over to Mr. Protell for final remarks.

Thanks, everyone for joining, and we’ll talk to you on our next quarterly call.

Thank you, ladies and gentlemen. This concludes today’s conference call. Thank you for participating, and you may now disconnect.