Good day and thank you for standing by. Welcome to the Golden Entertainment Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised today’s conference is being recorded. I’d like to hand the conference over to speaker today, Joe Jaffoni, Investor Relations. Please go ahead.

Thank you very much, Victor, and good afternoon, everyone. On the call today is Blake Sartini, the company'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 in 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 the website. We'll start the call with Charles, reviewing details of the 2021 fourth quarter and full-year results and a business update, and following that, Blake and Charles will take your questions. With that, it's my pleasure to turn the call over to your host, Charles Protell. Charles, please go ahead.

Thanks, Joe. Our record performance continued in the fourth quarter with revenue of $282 million and adjusted EBITDA of $68 million, which was over 70% higher than Q4 2020 and almost 60% higher than Q4 of 2019. All of our properties experienced increased visitation and customer spend, particularly at The STRAT. EBITDA margins continue to expand as they increased approximately 500 basis points from Q4 of 2020, reflecting the measures we have taken to maintain a streamlined cost structure over the last six quarters since reopening. The fourth quarter completed a year in which we generated more than $1 billion in revenues for the first time in our history, and we also achieved record annual EBITDA of $292 million. Despite our record performance, it could have been even better as our operations and customers were impacted by COVID restrictions, supply and labor shortages, and reduced visitation that our team successfully navigated during 2021. Before getting into more specifics in our press release this afternoon, we detailed new segment reporting that we believe provides investors with better visibility into the different types of properties in our portfolio. We now break out the results for Nevada casino resorts, which are comprised of The STRAT and our Laughlin properties; Nevada locals casinos, which represents our five local casinos in Las Vegas and Pahrump; our Rocky Gap Casino Resort in Maryland; and our consolidated distributed gaming operations, which combines Nevada and Montana. Revenue for our Nevada Casino Resorts in the quarter rose 62% year-over-year to $105 million and EBITDA improved 145% to $37 million. EBITDA margin also improved nearly 1,200 basis points from Q4 of 2020. We saw a dramatic improvement in performance from our strip property, with The STRAT revenue up 90% and EBITDA up more than five times from Q4 of 2020. The STRAT's occupancy improved to 77% for the quarter, up from 43% in Q4 last year. Omicron impacted property visitation late November and December, so our occupancy and performance could have been higher. In 2019, The STRAT averaged about 90% occupancy for the year. In 2021, we only averaged 67% occupancy. This translates into over 180,000 missing room nights, which is 30% more room nights than what we sold in all of 2021. Even missing these room nights, we still achieved record revenue and EBITDA at The STRAT. Despite the lower visitation I just mentioned, we continue to set record numbers at many of The STRAT's venues, particularly at our Top of the World restaurant, and our casino marketing program is having huge success attracting new players, which helped drive a 62% increase in gaming revenue at the property. We continue to make modest incremental investments in the property, such as refurbishing the theater lobby to support our revamped entertainment and new residencies, refreshing pool areas, and renovating some of the older suite room product to attract higher worth players. We believe the return of citywide conventions plus entertainment and sporting events will translate to a further recovery of room nights at the property as we move through 2022 and 2023, and drive EBITDA at The STRAT much higher than it is today. For our Laughlin properties, revenue was up almost 40%, and EBITDA improved over 54% compared to Q4 2020. We resumed concerts in Q4 with six shows in the quarter that drove 42,000 guests to our concert venues and increased occupancy and spend at our properties. We anticipate returning to a full concert schedule in the spring, with six concerts already booked in the market for March through June. While we have seen some of our older players start to return to Laughlin, we are still missing a meaningful portion of this demographic in the market, which we view as an opportunity going forward. For Nevada Local Casinos, revenue increased 20% to $40 million, and EBITDA rose 32% to $19 million for the quarter. EBITDA margin improved by over 400 basis points to 47%, and we are not concerned with the current competitive environment impacting margins in any meaningful way as we move through 2022. Our Las Vegas Arizona Charlie's properties are growing revenue and EBITDA while sustaining margins in excess of 49%. The promotional environment in the Las Vegas locals market remains rational. And while labor is tight, we have been able to maintain our high standards of guest experience. For our Pahrump casinos, revenue and EBITDA also improved meaningfully over Q4 2020, with sustained EBITDA margins in excess of 40%. Turning to Maryland. Our Rocky Gap Casino revenue was up 28% to $19 million, and EBITDA was up 34% to $6 million for the quarter, with stable margins at 31%. We've recently renovated all 200 rooms at the property, as well as revamped the food offerings and added a sports lounge where we are seeing good traffic flow and increased food and beverage revenues from our guests. For distributed gaming operations, revenue was up 27% to $118 million, and EBITDA rose 45% to $20 million for the quarter. The rapid recovery of Las Vegas has fueled revenue growth for our third-party and wholly-owned tavern operations in Nevada, while Montana has benefited from adding new third-party locations to the portfolio and relatively mild weather for the fourth quarter. We are seeing increased demand from the continued migration of California and others to Nevada, even to a greater degree than what we see in our Nevada Local Casinos. In fact, several of our newer wholly-owned taverns were purposely located in areas where we anticipate a new residential development, and now those taverns are generally our best performing locations in the portfolio. We haven't spent a lot of time focusing on new tavern development recently, but we are likely to target two to three new taverns a year going forward, provided we can establish A+ locations like our most recent openings. Moving to our balance sheet. In Q4, we continued to repay debt, reducing our term loan borrowings by $25 million in addition to buying back over $10 million of stock. In the last year, we have paid down $132 million of our outstanding debt, including $122 million of our term loan. We ended 2021 with plenty of liquidity with $221 million of cash and no outstanding borrowings on our $240 million revolver that we upsized in Q4 from $200 million. Currently, our total debt outstanding consists primarily of a $650 million term loan and $375 million of unsecured notes. Our net leverage is approximately 2.8 times, positioned as well to refinance our bonds, which we expect to do in the coming weeks. If we leverage below three times, we will also be able to accelerate returning capital to shareholders, and we intend to use the remaining $40 million of our current buyback authorization opportunistically over the course of this year. We continue to have a very straightforward investment thesis of growing cash flow primarily from wholly-owned gaming assets in Nevada, which we view as the most attractive gaming market in the world today with significant upside in the future. We are not pursuing greenfield development or unproven lines of business. We are solely focused on maximizing the performance from our current portfolio and generating free cash flow that could be returned to shareholders. That concludes our prepared remarks. Blake and I are available for questions.

Our first question comes from David Bain from B. Riley. You may begin.

Great, thank you, and thanks for the increased transparency with the segments and nice results. I guess if I could. I know that you mentioned several positives on Nevada and some growth opportunities with the taverns there. But if we look forward and see that Golden captures a lot of the near-term and long-term positives with the portfolio already on the strip and the super hyper local, could future growth opportunities increase in Nevada with other pockets, perhaps in other areas in Nevada, just given the balance sheet strength and overall opportunities to leverage assets?

Yes, David, this is Blake. I believe the answer to that is yes. We have some opportunities in Northern Nevada that could provide a growth chance for us, particularly along a certain route. As Charles mentioned, we are really focused on our current business and portfolio, and any moves outside of that would have to be significant transactions, which could also happen in Nevada. Given that we have designed our portfolio to be Nevada-centric, I think it's reasonable to expect future growth within this area, especially if it comes in a significant form.

Okay. Great. Sorry for the background noise. I just have one more. Looking at the increasingly higher valuations for real estate, arguably, your land is worth around your market cap. I mean, how do you weigh corporate action just given recent valuations there in Nevada and elsewhere?

Yes. Look, that's been top of mind, right, for everyone in the business recently as recent transactions have provided some pretty solid valuation metrics. As I've said in prior calls, I view our current real estate holdings as optionality for us as well as tangible and significant underlying value for our shareholders. And as you know, that underlying value continues to grow. With that, I'll say at this time, we're not considering anything other than maintaining our current real estate portfolio as it is. But that underlying value, I think, is significant, and I think it's getting more valuable as time goes on.

Yes, I would just add to that, I mean…

Okay. Go ahead.

You sorry, that asset class is becoming more accepted for REIT investors. And the last regional trade was at 17x, and the one before that was at 15 a few months earlier. And now you're seeing new entrants rather than the traditional gaming REIT. So over time, you're going to find that I think that the gaming REITs trade up more in line with their peers, which means their cost of capital is lower, and they can pay more for our real estate. So our thesis of owning real estate has so far paid out. I'd say never say never. But right now, we're going to be patient around the value and the backstop that provides for us relative to our current valuation in the market.

Awesome. Thank you, guys.

Thanks, David.

Our next question comes from the line of Carlo Santarelli from Deutsche Bank. You may begin.

Hey, guys, thanks. And good evening. I heard a little bit, Charles, in your prepared remarks; you talked a little bit about some of the impact of the variant in November and December. Obviously, some peers have talked about more so Strip peers have talked about the impact of the variants on the first quarter and things like that. Anything that you guys would flag as it pertains to your Las Vegas business or The STRAT, specifically in the first quarter?

Yes. We definitely saw that in the first two weeks in January. And so that's where we saw a little bit of softness relative to where we've been in the past; similar to others on the Strip, we did see a pretty packed Super Bowl weekend and beyond, and President's Day weekend looks to be the same. So we're encouraged about the balance of the year, but there is no doubt there is an impact in the beginning of January.

Okay. Great. And then just as it pertains to Laughlin and kind of the event calendar there, as you look out over the rest of the year, do you believe at some point this year, maybe in the second half, will get back to kind of the normal cadence of events at that asset or that asset base, I should say?

Yes, Carlo, I believe we're starting to see that now. The answer to your third question is yes. Our first major concept is scheduled for the first week in March. We're already establishing a significant entertainment rotation down there, which is expected to increase into the fall of this year. This is already happening, and we anticipate that it will yield positive results sooner than the fall of next year, starting in March of this year.

Yes. And we're excited about the first tick back that we have that are coming up in the spring. And then it's too early for the bookings for the fall, but obviously, we're working on those, and we expect to have a full slate heading into the fall as well.

Great, thank you, guys.

Thanks, Carlo.

Our next question comes from the line of Omer Sander from JPMorgan. You may begin.

Hey, Blake and Charles, thanks for taking the question. First, when you look across your portfolio, and here, you're encouraging commentary on The STRAT, if any customer segments or additional amenities that you're missing today, that you're looking in online?

Yes. So as we stated early on in our capital investment in that property, we wanted to provide an environment that enabled our guests to stay longer and spend more versus the prior property, which was essentially transitory in terms of people coming and staying and visiting other parts of the city. So as we built out, let's call it, this Phase 1 of, I think, $100 million to $110 million in investments so far, that stickiness is showing results. We're seeing higher spend. We're seeing higher time on property. And as we move forward, I think you'll see us target very efficient capital that will allow more of that stickiness, which may mean we're seeing right now more food outlets are something that we need on that property, which is a good thing. It keeps people around. You're seeing more entertainment and new entertainment that we're providing at that property where we just did a modest upgrade to the kind of the public area outside of our showroom to enable a better experience. We will continue to improve Top of the World. And over time, you'll see us continue to invest in a room product, including sleep, which we believe we can attract a little bit of a higher end customer now with the positives that we've seen with our early results out of our initial investments. So I would say food facilities, entertainment, you're aware of our atomic range golf program that we intend to put north of the property. We anticipate that coming or beginning in the second quarter of this year. So yes, we will continue to add on as we see that demand. And the good news is we're beginning to see that demand for these types of additions to the property.

And one thing that we're not going to chase is we're not going to chase building a big convention center adjacent to the property. So we feel that we're perfectly located next to the existing convention center. We feel that there's properties around us that could provide that. We're looking for more for the niche for the spillovers from that. And that's what we've seen, and that's where we've had a lot of success. So we're going to stick with that.

That totally makes sense. And one follow-up maybe on free cash flow. You generated $200 million of free cash flow for the year, about $6.50 per share, and you started buying back some of the stock, and it doesn't look like there's any major CapEx as evidenced by your convention commentary there. How do you think about potential interest savings from this refi and then more broadly about capital return priorities going forward?

Yes. I mean, look, we think we could target roughly $15 million of cash interest savings. So you could put whatever cap rate you'd want on that relative to that $6.50 a share, and it ends up being substantial for us. I think that in terms of how we think about capital allocation, that free cash flow going forward, we view it as a balance. We're investing in our own properties, we're going to be focused on, like we said, getting through the $40 million that we have in the buyback authorization, and we'll also delever. So I think that now we're in the fortunate position where we get to make those choices opportunistically based on where we think we have the best return.

Thanks so much.

Our next question comes from the line of David Katz from Jefferies. You may begin.

Hi, good afternoon. Candidly, I was going – I would like to pursue a little farther some of the prior questions, one of which is, how would you have us think about putting in some CapEx as a bogey, right? It sounds like there may be some more projects, whereas, we may have been thinking about pretty much a baseline maintenance number. before you mentioned something, right?

We concluded the year with approximately $30 million in capital expenditures, which mostly covered maintenance and was likely a bit lower than expected coming out of COVID, as we were uncertain about our situation. Looking ahead, we anticipate spending between $40 million and $45 million on capital expenditures. This will encompass the two to three taverns we previously discussed and some new slot investments as we progress through the year. However, it will not include any significant development projects, as those are not part of our current plans.

Yes, David, to provide more clarity on this, it's important to emphasize that we are dedicated to a disciplined and efficient approach to our capital. Regarding The STRAT, when I mentioned food facilities or modest upgrades to entertainment areas, those are projects in the range of $2 million to $3 million or $1.5 million that are included in the figures Charles just shared. The atomic range, for instance, is capital-light for us because we aren't investing any capital; we are simply using our real estate as collateral. We are maintaining a disciplined approach to our capital, and aside from rooms, which won't be addressed this year, we are doing some design work and possibly some modest remodeling. However, a full room remodel would require more capital investment. To reiterate, the items I mentioned earlier fall within the capital framework that Charles discussed. The projected capital expenditure of $40 million to $45 million is comprehensive and includes new taverns, among other things. Yeah, our maintenance, our maintenance is $30 million to $35 million depending on what's going on in the year.

Got it. So, look, if I, just whatever I might reasonably have in a model based on that. I mean, the cash really starts to pile up pretty quickly throughout this year and certainly into next year. I mean, $40 million seems like an eyedropper fall at the end of the day.

Yes.

Okay. I think we're both looking at the same thing. And so then the options become what, what, what to do with it and or when to do it?

Yes, that's correct. There are many ways to return capital to shareholders, mainly through buybacks or dividends. We don't have a specific timeframe for going back to the Board for buyback authorization; it's not a necessity to wait until the end of the year. We currently have authorization and plan to pursue refinancing, and our goal is to optimize that process. We intend to take a balanced approach by investing in our existing properties, returning capital to shareholders, and keeping a low leverage position. We believe this is the best way to create value.

Agreed one last one if I may, I mean we'd never be talked about these things in absolute terms. But, the prospect of some meaningful acquisition, that may redirect what we just talked about, my impression has always been that those probabilities are relatively low. Would you – is that still true?

Yes. I mean, look, we feel – I mean, the path we outlined is really the highest risk-adjusted return we could create for shareholders. There's a lot of execution risk in those other paths. And quite, so the bar has to be very high, almost to the no-brainer level for us to pursue those types of things.

Perfect. Thank you very much.

Thank you.

Our next question comes from the line of Chad Beynon from Macquarie. You may begin.

Good afternoon. Thanks for taking my question. Charles, you gave us some statistics on occupancy at The STRAT, just wanted to dig into that a little bit more. Is that still a mid-week versus weekend bifurcation? And we've heard some positive commentary from some of the other Strip property operators just in terms of when the convention business and some international could pick up. But I just wanted some clarification on that. And then when you think you can really start to get some good compression room nights midweek? Thanks.

Yes. It is predominantly the lack of midweek business that is creating that deficiency. We're still seeing the visitation that's on the weekend at the same or roughly the same rates. So I think that what we're looking forward to as we get into March and into April, NAV being the first major citywide convention that's coming to town. What that does for us in terms of being able to compress rates, not only during the week and sell more rooms and also as people stay over through the weekend. So I think it'll get this pretty visible here, as we get into Q2, what the attendees are for those conventions and what the impact is on the city, combined with what we're seeing is continued very strong retail demand, particularly when there are events that are happening in the city.

Gotcha. Thanks. And then on margins, sounds like you're pretty crystal clear in terms of the stability of that, but just wanted to ask about inflation, mainly from the labor side, full-time employees, is that under control, kind of within your portfolio, understanding that it's a dynamic situation, given where the service industry has been over the past 3 to 6 months.

Yes, Chad, I believe that will remain constant moving forward. As volume and occupancy increase, we will incur additional costs. However, we will also generate more revenue. Therefore, we are quite confident that we can maintain our significantly higher margins compared to historical figures from 2019 and earlier. To borrow a phrase I can't quite recall the source of, we're not on a diet; we've made a lifestyle change. This change will persist through increased visitation, as Charles mentioned, and we are assured that we can sustain these superior margins in comparison to the past.

Yes. We experienced big labor cost increases in June, July, we saw that through, and that's really been reflected fully in Q3 and Q4 numbers. I think you've got to keep in mind that pre-pandemic, we had 8,000 employees, and now we have 6,300. So we're down over 20% in the labor force, doing more revenue and more EBITDA. So while those increases have been there, our overall labor costs in aggregate are down.

Thanks, Charles. Thanks, Blake. Appreciate it.

Our next question comes from the line of Edward Engle from Roth Capital. You may begin.

Hi, thank you for taking my question. We look at spending from how's it going? When you look at spending from your older demographics in the fourth quarter, call it ages 60 plus, is there any way to quantify how much room is left for that segment to recover versus 2019?

Yes. I'd say it varies by property. It's where we see that the most noticeably is in our Laughlin assets. So we're probably down, I'd call it, in a 10% to 15% of rated gaming revenue for the asset, most of that being attributed to that older demographic. So that's why we see it just as a huge opportunity for us going forward as they get more comfortable and begin to come back. I mean, most of the other properties, we look at the local, you look at our taverns, distributed business, those are generally back. I think there's pockets and times you could point out to. But there's a real missing piece of real worth customers and business to us out of Laughlin that is starting to trickle back in. And we just see that accelerating through the year.

Great, thank you. That's helpful. And then if I kind of shift to your refinancing, and I guess, I know, focus on the term loan you currently have, what's the cost sensitivity for that on rising interest rates, and that gets with any upcoming refinancing? Would you kind of use that to maybe as an opportunity to lock in some longer fixed rates?

Like most term loans, including ours, they have a LIBOR floor. Even though they're a floating-rate debt instrument, they have a floor in it, and our floor is 75 basis points. So it's in excess of where LIBOR is trading at right now by at least a 25 basis point margin. I think when you do a refi, you move to a new indicative rate, and that rate is actually lower from what we're getting from those indicative perspective and a floor perspective. So again, net-net, that's why I'm comfortable talking about targeting that $15 million of cash interest savings. And the bank market and the leveraged loan market right now is actually fairly strong in a rising rate environment versus the bond market. But look, we're working on that. We're working to get out as soon as we can, and there'll be more to report on that when we're done.

Terrific. Thanks and congrats on a good quarter.

Appreciate it.

And I'm not showing any further questions in the queue. I’d like to turn the call back over to Mr. Protell for any closing comments.

Okay. Thanks, everyone, for joining us, and we look forward to updating you next quarter.

And this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.