Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to the Golden Entertainment First Quarter 2022 Earnings Conference Call. Please note that this call is being recorded today, May 5, 2022. Now, I’d like to turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead, sir.

Thanks, Kevi, and good afternoon, everyone. On today’s call 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 in our filings with the Securities and Exchange Commission. 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. We’ll start today’s call with Charles, reviewing the details of the 2022 first quarter results and 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. Our record performance in 2021 continued into the first quarter 2022, with Q1 revenue up $274 million and adjusted EBITDA at $67 million, up 14% and 13%, respectively, from last year. These results reflect increased visitation to our destination properties, continued strong levels of customer spending at our local casinos and distributed gaming locations, and our ability to maintain margins well in excess of pre-COVID periods. Revenues for Nevada Casino Resorts rose 29% year-over-year to $96 million and EBITDA improved 26% to $34 million. Margins were down slightly, primarily due to increased volume at The STRAT, which has a higher cost structure, the return of concerts to our large-scale entertainment venue in Laughlin, as well as overall higher labor costs. The STRAT’s revenue and EBITDA were up significantly from last year, despite the impact of COVID in January and the continued lack of midweek occupancy. We saw very strong weekend demand from mid-February on, driving occupancy to over 70% of The STRAT for the quarter compared to 45% in Q1 last year. Although midweek business is recovering, we are still missing almost 20 points of occupancy at The STRAT, which we expect to return over the rest of the year. In Laughlin, the return of live entertainment helped drive increased visitation with nearly 16,000 concert tickets sold for various events in the quarter. We’ve also seen our core older demographic return to our properties. We have great entertainment lined up for the remainder of the year, with upcoming concerts in Q2 having already sold over 30,000 tickets. For Nevada Locals Casinos, revenue increased 4% to $40 million and EBITDA rose 3% to $20 million for the quarter. Increased employment in Las Vegas, the continued influx of new residents from out of state, and appreciating home equity have created sustained demand at our local properties. We continue to see a rational promotional environment in the locals market, which has contributed to our success in maintaining margins despite increasing costs. Turning to Maryland, in our Rocky Gap Resort, revenue was up 11% to $18 million and EBITDA was up 14% to $5.6 million for the quarter, with margins up slightly on increased gaming volume. We recently renovated all our rooms at Rocky Gap, revamped the food offerings, and added a sports lounge. So, the property is ready for the summer season when EBITDA is typically 50% higher than the winter quarters of Q1 and Q4. For our Distributed Gaming operations, revenues were up 9% to $119 million and EBITDA rose 7% year-over-year to $22 million for the quarter. Similar to our casinos, margins were modestly impacted by increased labor costs relative to Q1 of last year. Our Montana Distributed Gaming operations were affected by weather in January and February, but rebounded nicely in March. In Nevada, the same macro drivers for our locals casinos are driving revenue and EBITDA growth for our distributed business, particularly for 65 owned taverns, most of which are located in Las Vegas. The continued recovery of the Strip has led to increased midweek as well as late-night business, which helped drive record win per unit metrics at our taverns this quarter. This February, we opened a new tavern in the northwest part of Las Vegas. Based on early results, this has quickly become one of our top performers. Moving to our balance sheet, in Q1, we continued to return capital to our stakeholders, repaying $25 million of our term loan in addition to repurchasing $15 million of our stock. Since the beginning of 2021, we have paid down approximately $160 million of our debt, and since December, we’ve repurchased more than $25 million of our common stock. We ended the first quarter with plenty of liquidity, with more than $200 million of cash and no outstanding borrowings on our $240 million revolver. Currently, our total debt outstanding is approximately $1 billion. Given our low net leverage at 2.7 times and the continued strength across all our properties, we expect to remain focused on returning capital to shareholders opportunistically over the course of this year. To support that, this week, our Board of Directors reauthorized a $50 million share repurchase program. Our strong operational performance in Q1 has continued into Q2, and we see no signs of slowdown at any of our properties. As we have said before, our cash flow is primarily generated from wholly-owned gaming assets in Southern Nevada, which we view as the most attractive and stable gaming market in the world today. We remain focused on optimizing our core business, capturing the upside from our destination resorts, while maintaining the performance of our local properties and Distributed Gaming locations. That concludes our prepared remarks. Blake and I are now available for questions.

Thank you. First question is from Omer Sander with JPMorgan. Please go ahead.

Hey Charles, Blake, thanks for taking my question. A question on EBITDA and margins. Your margins were very strong for the 1Q and up nicely on a sequential basis. When you think about the aggregate of, one, any COVID impacts early on in the quarter; two, any labor inflation pressure, is there any pockets of consumer weakness some of your peers have talked about? How do you think about 1Q EBITDA on an absolute dollar basis and your margins versus a 'clean quarter' without those impacts?

Yes. I mean, look, I think if you just look in the January and early February, CES was not impactful to the town at all. And that was largely due to Omicron and lack of international travel. So if you thought on a normalized basis, could we be $3 million to $4 million in EBITDA higher? The answer is yes. And obviously, that would benefit our margins.

Awesome. Thanks. And maybe pivoting to just a different topic. You have some more real estate expertise under your Board now. Does that change how you think about your owned real estate portfolio?

Yes, Omer. This is Blake. Andy is a great addition to our Board, obviously, with his background, but no, I don’t think that portends or signals anything in the short term regarding how we are viewing our real estate, which continues to provide significant underlying value for our shareholders. So, the short answer right now is, we welcome Andy, but our approach to our real estate remains the same.

Awesome. Thanks so much. Nice quarter.

Next question is from Carlo Santarelli with Deutsche Bank. Please go ahead.

Hey Blake, hey Charles. Charles obviously, you talked a little bit about some of the margin slippage in the first quarter year-over-year. With standing open, will it lead to a mix of The STRAT’s EBITDA contribution in the period? With STRAT, you are kind of under-punching, I think where you guys think it will end up and when that occupancy comes back and what not. From a mix of revenue perspective, does The STRAT ultimately get to margins that are comparable with the rest of that portfolio?

I think it gets closer, not comparable because the labor costs there are much higher. We have more categories of employees there than we do in our other properties. We have actually more employees and we have more products that we’re servicing there from entertainment to food and beverage outlets. So, I think it – ultimately when The STRAT gets busier, it’s accretive to EBITDA, but it will be dilutive a little bit to the overall margins as we get through the year.

Those are – as Charles mentioned, those are bigger numbers, Carlo. And under-punching is a relative term, right? We’ve said we’re very happy with the returns we’re getting on our current recent capital investment at the property and even with the white space in capacity that we’re experiencing midweek. We’re seeing significant year-over-year growth at the property. So, I just wanted to back into that, that we are punching over our weight in terms of return on the capital we invested. But I think Charles is accurate regarding the margin discussion going forward.

Great. Thank you, Blake and Charles. Thanks for that answer. Just one follow-up. It was probably 18 months ago, one of your peers mentioned to me anecdotally, like, look, all the events and things like that, that we do, they are generally going to degrade margins. With all of that stuff shut down, group gatherings and stuff like that were not allowed, et cetera, that was all very helpful for margin. So, you guys obviously mentioned bringing the concerts back in Laughlin and the driver that they’ve always been. From an EBITDA standpoint, dollar standpoint, I understand from a margin standpoint; they could be a little bit dilutive. But from a dollar standpoint, does that stuff still make sense in an environment right now where the gaming dollar is a little bit more competitive with other forms of entertainment that are out there?

Look, for us, we can only speak to Laughlin, which is clearly an event-driven market on the weekends. We have a 10,000 seat outdoor amphitheater that drives those bodies right into our properties after those events, which are directly across the street. So from our perspective, the answer is yes. I mean, we have acts that are already sold out in the upcoming months, and we’ll have a good lineup going into the fall as well. So, we’ve seen that. It’s actually pulled back some of our core demographic that’s been missing. It’s giving us the excuse to get back out and reach out to them and drive them back into the market. So absolutely, if the entertainment is diluted for a margin perspective, it’s absolutely accretive from an EBITDA perspective.

Yes. There is a direct correlation between entertainment, attendance, and gaming revenue in that market.

Great. Thank you, guys.

Thanks, Carlo.

Next question is from Cassandra Lee with Jefferies. And your line is open.

Hi, good afternoon. Thank you for taking my question. And just one for the team, can we talk about The STRAT for a moment? I remember a few quarters ago, when the occupancy was running around low-to-mid 70, I think you guys were pushing $7 million of EBITDA per month. Just wondering what that looks like today? And also, I think the commentary from other operators; they’ve been pretty bullish for the Strip for the rest of the year on the convention and entertainment side. So, wondering whether The STRAT could potentially push above like $100 million in EBITDA week. I think we or a few people have it before.

Yes. So The STRAT is clearly in our portfolio and in our minds poised for significant EBITDA growth going forward. I think, I might challenge your memory a little bit. We were running significantly lower midweek occupancies in prior quarters. We are now approaching, I think, an overall occupancy run rate of around 70% to 75%, and that’s resulting in that $7 million to $8 million a month run rate currently. We are pretty confident, both in our budgeting process and what we’re seeing now, that we can achieve those results. The hurdle to get to that $100 million will come with the town experiencing kind of all the ships rising in the high tide of additional international travel and attendance and conventions and the convention center being fully utilized, along with some additional targeted capital at that property where we see the returns. We believe the returns would mimic what we’re seeing now. I think that marks towards that $90 million to $100 million as very realistic going forward.

Got it. Thank you very much.

Thanks, Cassandra.

Next question is from Chad Beynon with Macquarie. Please go ahead.

Hi, this is Aaron on for Chad. Thanks for taking my question. I just wanted to touch on sequential monthly trends for a second. You noted the Omicron effect in Jan and it seems like based on other operators that there was sequential improvement with March being the strongest. I’m curious if that’s a trend you saw as well and how trends have gone from March into April?

Like I said, I mean, our Q2 is picking up, right where Q1 left off. So, we saw that same trend, January growing into February, February growing into a big March, and April is right there. We’ve seen The STRAT continue to show meaningful improvement month-over-month. Again, with no slowdown and no anticipated slowdown in our mind. So that trend has continued for us, like it has with others. I’d say that if you look at our portfolio, it is a little bit different because we have exposure both to the locals. We have taverns and we have the Strip asset. So from that perspective, if you look, our destination properties are showing the most growth with the most upside as people get back to traveling, not only to the Strip, but to Laughlin and into our Rocky Gap property, while local spend here in town has been very strong and that has continued steadily since reopening seven quarters ago.

Great. Perfect. Last one for me. Just on Maryland Sports Betting, looks like they could launch online later this year, potentially next year. Is there any color you can share on how you’re thinking about that potential opportunity? Thanks.

Look, for us, we really don’t think about it, quite frankly, much as an opportunity for our company. We do have a sports lounge at the property, which is unbranded and untethered to any of the sports wagering or online operators. But really for us, it’s an amenity for our guests to be able to have a place to sit, watch games and use what they have already from a wagering perspective. Many of our guests are coming from out of state, where they may already have an account established. Even if they can’t use it, they placed the bet before they came to our property. So, I know Maryland has been a little bit slower out of the gate, and I think everyone in the state has hoped. But for our property, which is a little bit smaller, we don’t view it as a big driver to us directly to that asset. But it is something that our customers, they do engage in when they come and visit us from other states.

Okay, thank you. Congrats on the quarter.

Appreciate it.

Thanks.

Next question is from Edward Engel with Roth Capital. Please go ahead.

Hi, thank you for taking my question. It looks like visitation to Laughlin on a market-wide basis is still down significantly versus pre-COVID, even kind of lagging Las Vegas? I guess, how quickly could you ramp up some of those events in the market? Is the schedule for the summer pretty jam-packed, or could it take a couple of quarters to kind of get back to where you were from an event slate perspective?

Yes. Hey, Ed. Yes, just keep in mind, part of that is because of us. So, we had three properties open pre-COVID. Now, we have two that are opened. What we’ve really seen is if you were to just look at the market from a gross gaming revenue perspective, it’s that the lower end of our database that we have purposely called out of that business. So to us, that was an unprofitable segment of the business, but even though it is generating gross gaming revenues. From that perspective, we think the market is very healthy. Our properties right now are very healthy. The concerts are bringing back our core customer that was higher worth, higher frequency, and higher spend that has been on the sidelines due to COVID or other reasons because they did enjoy the entertainment and other things. Now they’re coming back. So, we’re anticipating – we are already seeing it now. Like I mentioned, we have a lot of tickets sold already for upcoming events in Q2, almost double what we had in Q1. We think that momentum is just going to continue throughout the year.

And part of that entertainment cadence, in fact, a large part of it is seasonal driven. As you know, the summers down there are very warm. We tend – it tends to be the high season also for visitation. So, we have a smaller venue down there that’s enclosed for about 2,000 seats that we keep entertainment rolling through there during the summer. But our larger venue, the 10,000-seat to 12,000-seat venue will pick back up in the fall and we’re seeing good momentum for good acts coming. I just wanted to make a point that during the summer, it’s somewhat our own management of what we provide in entertainment due to the climate. Once that cools down, it will pick right back up.

Great. Thanks for the color. And then there has been some talk, I guess, recently about just softening in the lower end consumer segment. I know you just talked about how you kind of phased or you’re kind of phased out of that part. But I guess any theme just commentary you could give about that kind of lower tier customer?

Yes. I don’t think there’s much more commentary. I think Charles made the point that we have limited our reinvestment into that lower end of the database. Any change that we’re experiencing at that level, I think, is due to that marketing approach from what we’re seeing. In addition, though, I would add that we are seeing robust new sign-ups in our rewards program, significant new sign-ups coming from new residents moving into this community into the Valley. That’s providing a lot of fuel for growth going forward, while we retool that lower end of the marketing database. So, that lower end of the database has kind of been called out by design, and we’re seeing significant pickup in our new sign-ups as this Valley continues to grow with residents.

Great. Thank you.

There are no further questions. I’ll turn it back to Charles Protell for closing comments.

Okay. Thanks, everyone, for joining our call. We look forward to updating you next quarter.

And that does conclude our call for today. We thank everyone for participating and you can now disconnect.