Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Golden Entertainment Third 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, 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 differ materially 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. We'll start the call with Charles reviewing details of the third quarter results and a business update. Following that, Blake and Charles will take your questions. With that, I will turn the call over to Charles Protell. Charles, please go ahead.

Thanks, Joe. For the third quarter, we generated revenue of $258 million and EBITDA of $53.2 million. When compared to last year, this quarter is missing almost $6 million in EBITDA from our Maryland property that we sold on July 25th and is also missing approximately $800,000 in EBITDA from our Montana distributed operations that we sold on September 13. In the quarter, we received $260 million from the sale of our Rocky Gap Casino Resort in Maryland and $109 million from the sale of our Montana distributed gaming business. The net proceeds from these transactions increased our liquidity by nearly $300 million, which allowed us to repay $175 million of our term loan that remained outstanding after our May refinancing, pay a special cash dividend of $2 per share in August and fund $9 million of stock buybacks in September. Our previously announced sale of our Nevada distributed gaming business for $214 million plus cash remains on track to close around year-end, subject to regulatory approvals and will provide additional proceeds to enhance our capital structure and strategic flexibility. The sale of our Maryland Casino and distributed businesses accomplishes our goals of divesting non-core businesses at attractive valuations, increasing our financial and strategic flexibility and leaving us with a portfolio of owned casino assets and the largest gaming tavern footprint in Nevada. Moving to the results of our continuing operations. Revenue at our Nevada Casino Resorts increased 7%, while EBITDA improved 2%. Revenue for the STRAT was up 8% with EBITDA up 16%, reflecting improved occupancy, which led to higher food and beverage spend and gaming revenue at the property. Occupancy increased to 75% for the quarter compared to 68% last year. We also completed the renovation of 537 rooms during the quarter and started on an additional 119 rooms that we finished in October. These room renovations created some disruption, which we estimate to be about $1 million of EBITDA for Q3. With our 1,300-room casino pool, entertainment, and restaurant renovations, we feel that the property is now well positioned to capitalize on the high traffic events like F1 and the Super Bowl coming to Vegas over the coming quarters and beyond. In addition, Atomic Golf, a new $75 million golf entertainment complex behind the STRAT is on track to open in January, which will further drive visitation and spending at the property. In Laughlin, revenue was up 6%, supported by a more robust event calendar, while EBITDA declined 4%, reflecting higher labor and other operating costs, which we expect to moderate going forward. During this quarter, we had more entertainment events that drove more revenue compared to last year and our new bingo room at the Edgewater continues to have success at targeting local visitation from Arizona that has helped increase midweek business. Additionally, we are using third parties to bring new branded food outlets to our Laughlin properties, which will provide enhanced dining options for our guests, while preserving capital for us to redeploy in our core operations. Q3 revenue and EBITDA for Nevada locals casinos were in line with last year, continuing their stable performance year-to-date. Growth at our Las Vegas properties offset lower revenue and EBITDA at our Pahrump properties, which were largely impacted by summer monsoons that closed a major highway connecting to California through Death Valley. The promotional environment for our locals properties remains stable and the strength of the Las Vegas economy continues to support a healthy and growing database of core customers. For our Nevada tavern operations, third quarter revenue was flat compared to last year, while EBITDA was down 9% as our tavern margins were more impacted by Nevada's July minimum wage increase in our casinos. Despite increased costs, the tavern model continues to generate attractive returns on investment for new builds and unit acquisitions. For the last eight taverns, we have built or bought, the average ROI is over 25%. We expect the growth of Las Vegas to support the expansion of our tavern portfolio and we anticipate closing on the purchase of four locations by the end of the year and two locations in Q1. In addition, we have two signed development sites and a robust pipeline of potential future locations. Nevada third-party distributed revenue was down 9% compared to last year, while EBITDA decreased 23%. The Nevada third-party distributed operations has a strong pipeline of new locations, which will begin to replace the volume loss from certain chain store contracts we did not renew based on the future economics of these locations. Moving to our balance sheet. After using $175 million to repay our old term loan, our outstanding debt at the end of the quarter consisted primarily of a new $400 million first lien term loan and a $335 million of senior unsecured notes. At the end of the quarter, we also had full availability on our $240 million revolver and $296 million of cash on the balance sheet, which includes cash reserves of approximately $74 million for taxes and fees related to our recent divestitures. After the quarter, we repurchased $49 million of our unsecured notes in the open market at par or less, reducing the outstanding balance to $286 million at the end of October. Given the strength of our balance sheet and the confidence in our future cash generation, we accelerated our return of capital initiatives in the quarter. We distributed $58 million to shareholders in the form of a $2 per share special dividend in August, and we repurchased approximately 252,000 shares for $9 million during our brief open window after closing our Montana distributed sale in September. We intend to be opportunistic with future buybacks and have $91 million remaining under our repurchase authorization. Our pro forma net leverage at the end of the quarter was 2.5x after adjusting for the sale of Rocky Gap and the Montana distributed business, which we anticipate being reduced to less than 2x after the close of the sale of our Nevada distributed business. Our pro forma leverage obviously gives us a lot of flexibility to invest in our own assets, return capital to shareholders and take advantage of potential opportunities to grow our existing portfolio. With operations that range from local gaming taverns to a strip property, our company remains uniquely positioned to capture growth from the increasing visitor volume and population of Las Vegas. Our core portfolio remains stable and our rated customers are healthy as we look forward into Q4 and next year. Further, we believe our investment in STRAT will support improved results through higher occupancy and spend at the property with new amenities like Atomic Golf and the absence of construction disruption going forward. That concludes our prepared remarks. Blake and I are now available for questions.

We will now begin the question-and-answer session. The first question comes from Jordan Bender with JMP. Please go ahead.

Great. Thanks for taking my question. Just looking at some of the market data, the driving data has been weak in the last couple of quarters, that might just be coming off the all-time highs. And this might pertain more to Laughlin, but are you guys seeing any weakness coming from that California customer that might be driving into the STRAT?

No. I would say we haven't. I would say that maybe a bit of an untold story is there is significant disruption on I-15 right now, just south of the strip probably all the way through the state line, which I'm sure is dissuading some people. But in terms of material impact at our property driving, we have not seen that.

Okay. And then just for my follow-up, did you guys benefit any from the cyber hack in the quarter just picking up business at the STRAT?

Yes. I mean I think we got a little spillover from that. But I mean, obviously, it's not something that you want to see to anybody in the industry, but it was a little bit not material, maybe for a weekend or so.

Thank you.

The next question comes from Carlo Santarelli with Deutsche Bank. Please go ahead.

Hey, guys. Just in terms of, Charles, I know you talked a little bit about what you're seeing kind of in the tavern business. I was wondering, just in general, what you're seeing from the Las Vegas locals consumer. I know some of it is location driven and whatnot. But just in general, the temperature of the locals gaming patron at this stage?

Yes, our local market is performing well, with our properties showing better results compared to last year's third quarter. While we did experience some weakness in Pahrump, it was balanced out by the strong performance of our Vegas property. Overall, our database is robust. We continue to see a constant influx of people moving to Vegas from California, and this trend isn't slowing. Employment rates are high, and unemployment is low, which means people have more disposable income. This is contributing to a vibrant local economy, and we are experiencing the positive effects in our properties.

Thank you. Charles, you mentioned the leverage and position regarding the sale execution. In terms of the M&A environment, there are definitely activities taking place. It appears to be a challenging market for both buying and selling deals. Could you share your insights on M&A at this time?

Yes. I mean I think if you look at our transactions, we got some good deals executed at attractive prices from a valuation standpoint. To us, I think given where interest rates are, that makes the environment a little more challenging between buyers and sellers. And I think for public companies, our clearest path to acquiring value if we're trading below 7x on a forward basis is our own stock. And so we'll look to do that. At the same time, if there are things that may be strategic that come up, we will take a look at it. Our focus will be narrow. It will be an opportunity where we could own the real estate properties that are in the West and where we see strategic value with our existing footprint.

I appreciate it. Thank you.

Thanks, Carlo.

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

Hi, evening everyone. Nice quarter. Thank you for taking my questions. I just wanted to pick up right where you left off, which is, we're thinking the Western half of the United States, are we thinking Nevada? Are we exclusive to Las Vegas? Where are you seeing opportunities? Where would you consider that?

Yes, David, I think you're spot on. From our perspective, we've spent the last couple of years setting ourselves up with a wholly-owned portfolio here in Nevada, particularly Southern Nevada. So obviously, Nevada certainly is a primary target for us, meaning west of Colorado, let's say, probably as a primary target, but mostly we're focused on Nevada and where, as Charles described, we're looking for things that would move the needle within our portfolio and where we can drive potentially some synergies from taking on assets that would be in that close proximity to where we're at. So, we've proven ourselves in Southern Nevada. I think is the best gaming market in the country. We now have an established portfolio here. And as I said, I think that's our primary target.

And if I go back far enough, I do recall there were some strategies to enhance the STRAT. It's one of the alternatives that potentially go back and look at some of those and expand what you have there, particularly in view of the fact that there's another major property opening not too far away and whether that north end of the strip thesis starts to come to life again?

Yes, I’ll respond this way. The major renovations and disruptions at the STRAT are now complete. With updates to the casino, hotel rooms, restaurants, bars, and pool, we are well-positioned to compete given the growth north on the strip. This growth, which we've mentioned since acquiring the property, should benefit the STRAT due to its proximity. Recently, despite some minor disruptions in September and no disruptions in October, the property performed very well. October was our highest month for hotel revenue and EBITDA since we took over the property. We plan to focus on maximizing this property now that we’ve made a significant investment. Any future investments, which will be short-term, will likely involve smaller projects like renovations to the North Casino, a slot area, and a bar to leverage incoming traffic from Atomic Golf. These projects will be in the $2 million to $4 million range and won’t be major capital investments. You can expect to see some of these initiatives in the upcoming year, but significant disruptions and large capital projects are not currently on our agenda.

Okay. Thanks very much.

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

Good afternoon, Charles and Blake. Thanks for taking my question. I wanted to ask about that lowest end tier of the database or the unrated customer that we've been focusing on here. Did you see any degradation, I guess, in your Nevada casino operations or in the tavern business? Any change versus kind of what you've been seeing for the past couple of quarters? Thanks.

No, that’s not the case for us. If you compare our database for Q3 to last year, we have actually seen an increase in distinct players, distinct gaming days, and actual slot and table revenue from those players. We consider our database to be very healthy. While we do expect some decline in retail revenue and un-carded play, this has been anticipated for a long time, and it continues to follow the trend we've observed throughout the year. Overall, our database remains in very good shape.

There was no movement that we would attribute to the economy, housing, or macro factors. This is simply a return to a more normal environment.

Yes, I mean look at our local properties. I mean those are flat on a year-over-year basis. We just talked about the Las Vegas assets being up. That's where most of our rated play is between our locals market. So for us, the database, again, very healthy and we don't see this trend slowing down.

Outside of the STRAT, because I think that's kind of a one-off situation that we can model. Charles, you talked about Laughlin, the locals market, the tavern, slightly lower margins, given some higher expenses. Has that kind of plateaued in terms of expense creep? And if we're kind of thinking about, let's just assume a flat revenue environment, what does that do to margins or asked a different way, what do we need to see from a revenue growth standpoint to hold margins from a same-store basis going forward? Thanks.

Yes. So, I think if you look, I think we have to break ours out by segment. So from a local perspective, we think we're pretty flat in that regard. We think we've gotten to that point. I think on the tavern side, in the tavern this quarter, we faced with a 7% increase in labor largely due to minimum wage. There is one more increase in minimum wage through Nevada next year. That will be at a lower rate because it's at a higher base. So, there'll be a little bit of pressure there, but we're adding six taverns into the portfolio that we're acquiring at the end of this year, beginning the next plus two developments. So, we expect growth from an overall EBITDA basis within that segment. And then if you look at the STRAT, I'd say, in general, it's been fairly stable there. If you think about the potential pressures around union labor there, we have 1,800 total employees. Out of that, only 850 or so are union. So, is not a big piece of our portfolio, having union labor, but it is some piece of our portfolio. We feel like we have good union relationships. So, we expect that to go fairly smoothly for us once that contract is ironed out with the bigger guys in the strip.

And in terms of impact there, Chad, to Charles' point, we've been accruing for the potential added union expense since June. So, we're pretty confident that we've mitigated that to this point obviously. And then once we have the conversations as Charles said, we've had a good relationship with them. So, we anticipate that going forward.

Great. Appreciate it. Thank you both.

The next question comes from John DeCree with CBRE Securities. Please go ahead.

Good afternoon, Blake and Charles. Thank you for taking my questions. I wanted to follow up on previous discussions. Regarding the occupancy recovery at the STRAT, it seems to be progressing well. In light of what you've observed in October, Blake, your insights were beneficial. Is it correct that weekends are fully booked while midweek occupancy still needs improvement? If that's the case, is there a chance to further enhance pricing and customer mix on weekends, considering the strong demand for entertainment on the strip during that time?

I believe that's a good perspective on the property. We still have a notable shortfall in midweek occupancy compared to previous periods. When that midweek occupancy increases, it will significantly enhance the property’s performance. The limited banquet space means the property's performance will fluctuate more with citywide events than with other properties. Regarding October, despite no disruptions and with additional amenities being introduced, such as a $70 million Atomic Golf facility expected to attract significant traffic, we see a positive trend starting in September. This upward trajectory is anticipated to continue without interruptions, although it will still vary with citywide events. Another important point, John, is that when we initially acquired the property, we relied on OTAs for around 80% of our occupancy. That dependency has now decreased to about 65%. We have significantly reduced our reliance on OTAs and aim to keep that trend going, which will give us more control over pricing and the type of guests we attract. Considering all these factors positively aligning, we are very optimistic about the property’s future potential.

Thanks, Blake. I think you took my follow-up there on OTA mix. So, maybe I'll look into November a couple of weeks away from F1. There hasn't been that much discussion this quarter with your peers. But as we kind of look at that as being a major event for the city or you still feel good about that? And given your position on the strip and even locals, is that still a net positive impact? Or as we get closer, can you give us a little bit of extra color as to how you're thinking about that event for you?

Yes, it's clearly going to benefit the city and will also have a positive impact on us. We're noticing it shift towards being more of a high-end event and a significant attraction on the south strip in terms of the scale of its impact. This ripple effect will certainly benefit everyone involved during that time frame. Additionally, we have New Year's and the Super Bowl coming up, for which we are currently seeing much stronger sell rates and demand compared to F1. This is great news for the next few months. Nevertheless, F1 is still expected to contribute positively.

That's helpful. Thanks, Blake. Thanks, Charles. Congratulations on the quarter.

Thanks, John.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference over to Charles Protell for any closing remarks.

Thanks all for joining. We'll talk to you at the next quarterly call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.