Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Golden Entertainment First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode, a question-and-answer session will follow the formal remarks. Please note that this call is being recorded today. Now I'd like to turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead, sir.

Thank you very much, operator, 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 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 the 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 the call with Charles reviewing the details of the first quarter results and the 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. For the first quarter, we generated revenue of $278 million and EBITDA of $62 million, with revenue up over last year, but EBITDA impacted by cost pressures as well as disruption of the STRAT from ongoing room renovations we are undertaking to be ready for the strong Las Vegas calendar later this year. Before getting into the operations, we have a few updates on our previously announced M&A activity. At the end of April, the Maryland Lottery Commission approved Century Casinos to acquire a Rocky Gap resort. We have one more step in Maryland, the approval of VICI's lease with the state, and then we will be able to close, which we still anticipate by the end of June. In March, we announced the sale of our Nevada and Montana distributed businesses to J&J Gaming, the largest distributed operator in Illinois, which will become the largest distributed operator in the country after closing. We remain confident both transactions will close by year-end, and we look forward to having J&J as our gaming partner in our Nevada taverns. Importantly, both these transactions accomplished our goal of divesting non-core businesses at attractive valuations, leaving us with a Nevada portfolio of owned casino assets and the largest gaming tavern footprint in the state. Collectively, these transactions will generate over $500 million of net proceeds, which will allow us to reposition our balance sheet, more effectively invest in our core assets, return capital to shareholders, and evaluate strategic opportunities. Within our segment results, revenue at Nevada Casinos resorts increased 4%, while EBITDA declined 5.5%. Revenue for the STRAT increased 9% and EBITDA rose 6% despite having about 15% fewer rooms available given the ongoing renovations. Disruption from having rooms offline during the quarter cost us about $2 million in EBITDA, and we expect similar disruption in Q2 before the renovations are completed. We initially planned to renovate the rooms throughout the year, but we were able to accelerate construction and are willing to live with a little disruption now to get these 537 rooms renovations finished before the 4th of July and in advance of the fall citywide event calendar. Atomic golf construction is also progressing nicely, and we expect our development partner to open this new amenity by the end of the year. We had a challenging comparison in Laughlin as this year we had one less Laughlin Event Center concert, resulting in 4,000 less event attendees this quarter. Laughlin revenue was down 1%, and EBITDA was down 13% as labor and utilities increased more than 10% from last year. For Q2, we have a stronger event calendar in Laughlin, which is expected to drive increased visitation over the coming months. Our Nevada local casino has maintained strong year-over-year performance for the quarter with increased revenue and EBITDA. Within our Locals segment, Las Vegas outpaced our Pahrump properties. Our overall Nevada Casino margins were down compared to Q1 of last year but up sequentially from Q3 and Q4. As we said on recent calls, cost increases began to moderate in Q3 of last year, so going forward, we expect our casino margins to be roughly in the range of this quarter. At Rocky Gap, revenues were up, but higher payroll costs impacted EBITDA for the quarter compared to last year. As the summer season gets started, Rocky Gap will capitalize on higher visitation, and we expect the property to perform very well for Century Casinos after closing. For Nevada tavern operations, first quarter revenue and EBITDA was down from last year, reflecting one less tavern in the portfolio and lower same-store revenue. Total tavern revenue was down 3%, with margins impacted meaningfully by labor and other operating expenses that were up 10% over last year. This is partially the result of wage inflation for our back-of-the-house employees primarily due to increased labor demand on the Strip. Despite current revenue and margin pressures, we expect the long-term demographic trends in Las Vegas to support our tavern growth strategy. With the sale of our third-party distributed businesses, we are turning our focus to expanding our leading tavern market share. And to that end, we now have six locations under contract to be acquired and agreements for two future development sites. In addition, we opened our newest tavern in April, which is performing well and ramping up in line with our expectations. We expect the signed tavern acquisitions to close at the end of the year or early 2024, depending on regulatory approval, and anticipate that they will add about $4 million of annual EBITDA to our results. Our acquisition development pipeline represents about 14% unit growth, and we will continue to add premier sites in the Las Vegas Valley. Total third-party distributed revenue was flat compared to last year, while EBITDA decreased 13%. We saw some weakness in Nevada across our third-party tavern partners, which was similar to our own Nevada tavern performance for the quarter. We are seeing improved performance in April and May as the Golden Knights playoff run has helped tavern visitation and spend. In Montana, we grew revenue and EBITDA with the addition of new accounts, and our business remains a leader in the market. Moving to our balance sheet, our total debt outstanding is approximately $910 million, and we ended the quarter with $161 million of cash and cash equivalents. Our net leverage remains at 2.9 times, and we intend to maintain our net leverage below 3 times going forward. We will use $175 million of the proceeds from the sale of Rocky Gap to reduce our first lien term loan, which we plan to refinance in Q2. On a pro forma basis, our leverage will be approximately 2.4 times after the sale of Rocky Gap. Looking forward, after the closing of the sale of our distributed business, our pro forma net leverage moves down to 1.4 times. With a target net leverage of less than 3 times, we will have significant room in our capital structure to pursue value-creating initiatives, whether investing in our own assets, pursuing acquisitions, or more aggressively returning capital to shareholders. That said, in the near term, we will be primarily focused on closing our previously announced transactions, executing on modest reinvestment in our core businesses, and maintaining our low leverage profile. After the sale of Rocky Gap in our distributed businesses, we will have transformed the company to being 100% focused on Nevada with owned Strip and local casinos, as well as the leading Las Vegas gaming tavern platform. These assets will continue to benefit from the long-term visitor and population growth of Las Vegas, which will also remain the most stable regulatory and competitive environment in the country. Regardless of the future economic outlook, we will have one of the most pristine balance sheets in our industry, enabling us to take advantage of potential acquisition opportunities in our core markets and to establish a more regular return of capital to our shareholders. That concludes our prepared remarks. Blake and I are now available for questions.

Your first question will come from David Bain with B. Riley. Please go ahead.

Thank you. Hi, Blake and Charles. My first question is around the completion of Atomic golf since it's coming up. I was hoping to get a little bit more detail on how you look to maximize its value in terms of potential cross-pollination with your casino strategies around promotion, coupons, awards, or anything around signage or ingress to the casino. I understand it has a separate driver that's very high margin, but I'm trying to understand the strategic opportunity to the casino?

Yes, David. I mean, the short answer is all of the above. We meet with those folks regularly. And after touring the facility, we believe there are significant potential cross-marketing opportunities even beyond what we had originally contemplated. But we have a very willing ownership group on that side to combine the two properties. I think we've shared in the past that we’re looking at roughly 500,000 to 600,000 visitors potentially that will be driven by that facility. The main thing to consider here is we have plenty of capacity within our current parking garage, which our anticipation is that those people will have to transition through the property to get to Atomic golf, the majority of them. Let's say, there is a rideshare drop-off, and there is some adjacent parking to the facility. But we intend to combine marketing efforts with that property and our property, primarily there are various strategies we can implement. We are confident that we can get those people to stick in the casino, particularly as we renovate what we call the South Casino. As we go forward, we will renovate that north end casino with more food and beverage offerings and additional gaming, which we anticipate will capitalize on that foot traffic. So all of the above, as you said, without getting into granular detail, we are very focused on ensuring that those people within the Atomic golf facility have many reasons to visit our properties while they are here.

Okay. Perfect. And then I guess my second one would be on the tavern expansion strategy. Could that include a broader focus outside of Las Vegas with the Sierra Gold and PT's brand still in Nevada, Reno, Laughlin? Or is the focus only on Las Vegas expansion?

That's a great question, David. I would say we, by divesting, as Charles mentioned, our non-core, what we believe are non-core routes or third-party business, does not forgo our ability to continue to operate within the distributed platform, not only in Nevada but in other states. We performed better with our brick-and-mortar assets where we control the environment. So there are brick-and-mortar opportunities in other states potentially, and with J&J being our partner who is broadening their footprint, there may be a lot of synergies there as we look to open other markets. We could potentially participate on the brick-and-mortar side versus the third-party route side.

Thank you so much. Thanks, Blake. Thanks, Charles.

Your next question comes from David Katz with Jefferies. Please go ahead.

Hi, afternoon everyone. Thanks for taking my questions. I wanted to just follow on that line a little bit. Just talk about any parameters qualitatively that might be willing to share in terms of size, and where you would take leverage back up to those kinds of issues other than just kind of where it's located? Thank you.

Yes. I think from a leverage perspective, we've been pretty clear. We're going to keep our net leverage below 3 times. Like I said on the call, there's a lot of capacity within the existing capital structure. I think our time this year needs to be spent on focusing on closing these transactions and keeping the balance sheet leverage low, so we can think about those opportunities that may come up in the future. With respect to the specifics around taverns, we have data in our investor deck. We track all of the ROIs on our recent tavern openings, remodels, and new builds. It's about a 30-plus percent ROI is where those are tracking to. To us, that means that the new tavern build is probably the most attractive ROI opportunity in the portfolio. They're just small in terms of quantum of EBITDA, but it's still something that we should be doing when we find premier sites or acquisition opportunities to pursue.

Perfect. Then just a follow-up, and I know this is all after and available. Can you remind us what excess land you may have available in Las Vegas and whether that's an area of attention for you at this point in terms of activating it in some way?

Yes. That's actually very clear, great question. If you take each of our wholly owned assets here in Nevada and add up the contiguous and/or adjacent property that we have to develop, in addition to our current core assets that already sit on the property. If you include the Colorado Belle, which is approximately 22 acres, which is a blank canvas on the Colorado River with 1,000 feet of river frontage. We have approximately 95 additional acres if you add them all up between our existing properties to develop to provide ancillary amenities that would benefit those properties, whether they're high-density third-party investments, hotel rooms, additional casino space, or whatever. So to answer your question, if you include the Colorado Belle, it's about 95 acres. If you exclude the Colorado Belle just for perspective, it's about 74 acres of additional real estate between the STRAT, Arizona Charlie's, our Laughlin properties, and Pahrump that we would have to invest in to generate additional returns at those facilities.

Thank you very much.

Your next question comes from Edward Engel with ROTH MKM. Please go ahead.

Hi, thanks for taking my question. Could you please maybe just remind us at the Stratosphere in terms of the investments going on there other than maybe some of the fit room renovations? I guess, what other projects are also being completed in the first half of this year? Thanks.

Yes. Of course, as you know, the rooms, which we talked about. We also have embarked on our main mezzanine level, our H4 pool, which is the main pool for the property. We began in January that should be completed by Memorial Day. We also have opened Chi restaurant, which is in our new Asian facility, which is doing extremely well at the moment. Those are the things that are going on currently. We have plans, as I mentioned in my prior comments, for our north casino, and other amenities coming on later. But the pool, the rooms, and the food facility that we just opened are our primary investments at this point in time.

Thanks. And I guess on that, the future projects related to the casino floor, is that within this year's budget? Or is that more of a longer term?

No, I mean, look, I think those are all things that we look at and say, if the property is performing, we're doing well, we're showing the growth and return on investment we've made. Those are things that we think that we could do. I think if you look at where we're going to be when we get to the end of Q2, we'll have renovated over half of the rooms, where we're seeing right now currently a $20 ADR premium in those rooms. We will have touched up all of the pool space. We will have touched up on the main casino and done some light work in the north casino, and we've refreshed all the food and beverage offerings. And by the way, we're adding a $75 million amenity in the form of Atomic golf that is not coming off of our balance sheet. So when you look at all of that, I think that we're going to be in a position to see what the property could really do as we get into the fall to see its performance when it aligns with key events, such as the Super Bowl, and then we'll be able to evaluate the trajectory of further investment in the property.

It's helpful. Thank you.

Your next question comes from Chad Beynon with Macquarie. Please go ahead.

Afternoon, Charles, Blake. Thanks for taking my question. Charles, I wanted to just hit on kind of your last comment, but ask with respect to the quarter, your rooms revenues were up significantly, I think about $5 million year-over-year. Can you just kind of talk about what you saw in the quarter with some compression on the weekdays? And then roughly what your gap is to the average Strip ADR right now? Obviously, this will kind of help inform what you're going to be able to charge for the renovated rooms? Thanks.

Yes. I mean, look, I'd say relative to where we were in 2019 is kind of how we think about looking at it, how do we get that back. If you look at this quarter's performance relative to '19, occupancy is still down 16%. All of that is really midweek occupancy for the most part. I think that while we had this construction going on, there was some displacement that happened during the weekend, which cost us a little bit. So from a Strip performance perspective, you look at our improvement in EBITDA and revenue relative to others who, by the way, have group meeting space and larger facilities, we aren't quite there. But again, when you have 15% of your room base offline, we expect that. So from our perspective, we're pretty encouraged at the STRAT showing EBITDA up and revenues up despite having 15% of the rooms that are offline.

Great. Thank you. And then within your database or maybe within the different tiers of your taverns, have you seen any meaningful change in trends with the different levels of customers that you cater to?

Yes. I mean, look, I think when you look over the past, if you go back a year plus ago, which was the comp clearly for Q1, we had very strong tavern performance across all of the demographics within the database. We have seen that tail off a little bit, and we've seen a little more volatility at the higher end of that database. I think as you've had more things that are opened up in town, there's more alternatives for spend. Those folks are traveling more; we just see a lot more volatility within the tavern top end. Now that's in Q1. I think when events like the Knights' deeper playoff run happen, we see that pick up the tavern business also across the entire spectrum of the player database.

Okay. Thanks for the additional color. Nice quarter.

Thank you. Your next question comes from John DeCree with CBRE Securities. Please go ahead.

Hey, Blake, Charles. Thanks for taking my question. Charles, I'm not sure I caught in the prepared remarks, but you had mentioned about potentially refinancing the term loan in 2Q and using proceeds from Rocky Gap to pay that down. I'm not sure if I caught that, and if you were thinking about doing anything with the bonds as well. So maybe the question is capital structure plans as we get closer to Rocky Gap closing in June?

Yes. I mean I think if you just fast forward, in the near term, we'd like to refinance the existing $575 million of term loan that we have outstanding. We would use, as we said in the remarks, $175 million of the Rocky Gap proceeds to do that. And I think at this point, our view is to leave the bonds outstanding, which are unsecured and at a fixed rate that, quite frankly, is lower than our secured debt from a cost perspective right now until we close on the distributed sale and then use the proceeds from the distributed sale to pay off the bonds after their call protection is up in April of next year. Now if you fast forward through all of that, we are a $200 million EBITDA entity that's 1.5 times levered. We just have a $400 million term loan on a net basis, along with a $240 million unfunded revolver that provides us plenty of liquidity to explore opportunities.

Thank you all for that. You addressed my follow-up question, so I’ll ask one about operations. You mentioned various aspects of cost inflation that you've faced this quarter; I believe Laughlin indicated it was up 10%, and labor costs for taverns were similarly affected. Could you elaborate on that for us and clarify when you expect the cost inflation to start to stabilize? I recall you mentioned it may begin to lessen after that point and that a significant portion of it is absorbed. If you could provide some additional insight into your cost outlook for the remainder of the year, that would be appreciated.

Yes. I think, I mean, look, if you look over the last nine months, that was Q3, Q4, Q1, the margins have been fairly consistent within this range. So it's our view that we're at the margin point going forward. Despite some of the continued cost increases that we saw year-over-year from Q1, you'll still see some of that in Q2. If you look back, again, historically over the last nine months we've been saying we think margins have kind of settled in at this point.

Got it. Thanks, Charles, thanks, Blake.

Thank you. This concludes our question-and-answer session and today's conference call. Thank you for attending today's presentation. You may now disconnect.