Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Golden Entertainment First Quarter 2024 Earnings Conference Call. Please note that this call is being recorded today.

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 this 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. We'll start the call with Charles Protell 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. We started the quarter by completing the sale of our Nevada distributed business, the last of three non-core businesses that we divested over the past nine months. The proceeds from these transactions were used primarily to repay over $0.5 billion of debt including the redemption of our bonds in April that were outstanding at the end of the quarter. The financial flexibility created by reducing leverage and maintaining liquidity has allowed us to establish a recurring dividend at an attractive yield and positions us to fully utilize our current $91 million share repurchase authorization. Turning to our financial results. We generated revenue of $174 million and EBITDA of $41 million in the first quarter, which excludes the prior year operations from our divested Maryland casino and distributed gaming businesses in Nevada and Montana. Comparing the results of the continuing operations in the first quarter, total revenue was down less than 1%, but EBITDA was down over 15%, primarily due to increased labor costs in our Nevada Casino Resorts as well as weaker revenues from our higher-margin Nevada Locals casinos. At the STRAT, total occupancy improved almost 8% to 78% for the quarter with over 6% improvement in midweek occupancy. Unfortunately, in March, Las Vegas missed several large drivers of visitation compared to last year, including CONEXPO which is one of the city's largest conventions, the hosting of NCAA tournament basketball games as well as a few sold-out concerts at Allegiant Stadium. Despite a successful Super Bowl weekend in February, our ADR was down about 8% for the quarter. Weekend occupancy at STRAT was 96% for the quarter, but we were still missing over 12% of occupancy during the week compared to 2019, although that gap is narrowing with each passing quarter. We view improving midweek occupancy as a key component to growing EBITDA at the STRAT, and we continue to believe that our recent capital investments and the growth in Las Vegas visitation will increasingly improve our business throughout the year. In addition, Atomic Golf opened at the end of March, which is expected to drive additional visitors and locals to the STRAT for this new entertainment experience. On the expense front, the STRAT experienced higher labor costs primarily driven by our new union contract that increased wages by about 11% year-over-year. This will anniversary after Q2. We also had about $500,000 of additional advertising expenses in the quarter to enhance our media campaigns for the STRAT in order to build consumer awareness and drive future visitation. In Laughlin, we grew revenue slightly in the quarter supported by our new bingo room in Edgewater that is driving more local customers as well as having 8,000 seats filled for a concert at our Laughlin Event Center. Our rated gaming revenue and database activity in Laughlin remains healthy with improved visitation and spending across all tiers of players in the market. Margins in Laughlin were impacted by higher labor costs as we compete for employees out of the limited pool of labor primarily residing in Arizona. We also experienced higher entertainment expenses related to the concert that increased comp activity as well as advertising expense. For our Nevada Locals Casinos, revenue declined 5% and EBITDA declined 13%, primarily due to decreased visitation spending in our low- and mid-tier rated players. Our largest revenue and EBITDA declines were in our Arizona Charlie's Boulder property, which we view as the most value-oriented casino in the portfolio. In addition, we have been impacted by road construction affecting the entry to our Arizona Charlie's Decatur property as well as seeing some increased promotional activity in the market. These trends have continued in April, but we see improvement in May. First quarter Nevada tavern revenue was up 1% over last year, supported by the purchase of four new taverns in November, bringing our total locations to 69 at the end of March. On a same-store basis, total revenue declined 4%, driven by declines in food and beverage revenue, partially offset by a slight increase in same-store gaming revenue. We attribute lower same-store revenue to declining retail demand as well as less frequent visitation from our lower tier-rated players. As a result, EBITDA for the Nevada taverns declined 11%. In April, we purchased two additional taverns, growing our tavern portfolio to 71 locations, with 68 of them in the Las Vegas Valley. We anticipate opening our 72nd tavern by the end of Q2, and we still target growing the portfolio to over 90 locations within the next few years. Now let me provide an update on our balance sheet. Outstanding debt at the end of the quarter consisted primarily of a $397 million term loan and $276 million of unsecured notes, with cash on hand of approximately $400 million due to proceeds received from the sale of our distributed gaming business. In April, we used $287 million of cash to repay the outstanding notes and accrued interest as well as another $15 million for initial dividend and the purchase of two taverns. This leaves us with about $100 million of cash and access to $240 million of additional liquidity from our unfunded revolver. Our current net leverage of less than 2x and strong liquidity profile provides us with the flexibility to continue to invest in our own assets, return capital to shareholders and evaluate potential strategic opportunities. While we continue to review actionable strategic opportunities, the current market environment and macro backdrop has made it less conducive to M&A for us. At this time, it's difficult to find an opportunity to acquire Nevada-based casinos with owned real estate, which would be more accretive than acquiring our own stock, which we intend to do over the remainder of the year with our current repurchase authorization.

Yes. I think as Charles said in his prepared remarks, we're seeing midweek occupancy grow as well as overall occupancy grow. You referenced an ad campaign. We did a regional ad campaign that rolled out towards the end of last year and the first quarter of this year to reintroduce the property and the new amenities that we provided there with our capital investment. We will continue to advertise on a retail basis, if you will, the new amenities and the new capital improvements at the property. In terms of FID and OTA in particular, we are attacking that by moving up on the search. If you scroll on these OTA sites, it's an endless kind of scroll for room rates and value in Vegas. By improving our guest scores, we have moved up significantly on those OTA sites in terms of the scroll. We moved to the top of the pages, which allows us to produce, I think, more occupancy and better rates over time. So we will continue internally doing that. And then as you mentioned, more conventions coming to town. We always rise in the high tide of that when Las Vegas is full. The challenge there has been the rate, as Charles mentioned in his opening comments, but we are seeing forward movement in the STRAT, and we believe we will continue to see improvement throughout the remainder of the year.

Yes. Look, we're pretty excited about it. I mean it's an $80 million project that's not off of our balance sheet. It opened at the end of the quarter so it's kind of in its ramping up phase. But we expect that to contribute $4 million to $5 million of EBITDA to us through a combination of a revenue share agreement we have with them, plus additional traffic that we think will be driven on the property. And we're seeing some of that now. So you'll see on our website, we'll have certain promotions in terms of stay and play type packages. And again, we view it as just another amenity for our guests and a way that we could get some of the local population here in Las Vegas to come down and experience this new entertainment offering as well as the STRAT.

Specifically, I would just add, the parking in our facility or valet parking through our valet, both front and back, at the STRAT is a way to drive traffic through there, which we are promoting internally and externally as well as providing Atomic in, let's say, combined with the room package at the STRAT that we're beginning rolling out. So to answer your question, we are using Atomic specifically to drive foot traffic through the casino as well as to drive room inventory going forward. And as Charles mentioned, these are kind of green shoots right now that we're going to mature through the year.

Can you discuss your preparations for the upcoming minimum wage increase in July? Do you believe this will have a lesser impact than it did last year? Also, do you think you will be able to offset it?

Yes. This will mainly affect our tavern portfolio, and we are preparing for it. We have budgeted for this and are currently implementing expense mitigation programs within the organization, mostly focusing on labor. We expect to realize the full benefits of these efforts starting in the middle of this quarter. Additionally, as Charles mentioned earlier, company-wide, we will start to compare costs year-over-year in early Q3. To answer your question, we are actively working on mitigation efforts now, and these cost comparisons will last through Q3. We believe both of these strategies will help alleviate the challenges we are facing.

Great. And then just as a follow-up, speaking of the taverns business, continue to hear other players in the market express some interest here. Wondering how you're viewing potential increased competition and if you're seeing anything maybe in an M&A environment there.

We are not observing any activity in the mergers and acquisitions landscape. We typically get the first opportunity to look at potential sellers, which puts us in a favorable position to understand what is available in the market. Additionally, we have early access, if not the earliest, to new opportunities, particularly focusing on our top-tier locations at this stage. Our current footprint is substantial enough that considering the regulatory challenges of licensing each tavern individually, it would be nearly impossible to rapidly build a significant portfolio that could compete effectively. Therefore, our size and brand provide us with a considerable competitive edge. Competition has always existed, and we have navigated it successfully. With our footprint and brand, we believe we are well-positioned to continue growing and maintaining strength in the tavern sector moving forward.

I have two. First one is a little bit bigger picture and second one is probably a little bit more bigger picture than the first one. But obviously, Charles, in your comments, and we see it in the data and we heard it from peers, but the trend seems to be down in most of the locals businesses in and around Nevada. Given kind of the macro backdrop and acknowledging that things don't grow to the sky, what do you think has perhaps changed that's driving kind of some of the top line headwinds, some of the incentive for competitors to go out and be a little bit more promotional, et cetera?

We have 600,000 active players in our database, which gives us a solid understanding of our consumer. Persistent inflation and higher interest rates are certainly impacting some of our consumers. We've observed this trend continuing into April, but in May, we've noticed some stabilization. A factor influencing this is the local market conditions, particularly with our Arizona Charlie's Decatur property facing accessibility issues due to road construction. Once that area is opened, it should help. However, it is challenging to claim that prolonged inflation and higher interest rates will have no effect on the consumer, including ours.

Got it. The second question might be a bit more challenging to answer. If we consider the first quarter run rate, the property level business is approximately $210 million. There are about $50 million in corporate expenses. You mentioned that the M&A environment on the buy side is tough. You certainly have an attractive portfolio of assets. I assume that potential buyers are encountering similar challenges in that market. When you think about scope and size and the strategic options that could be available to your team, what insights can you share regarding those aspects?

Yes. We have assessed various opportunities over the past few months during our discussions, both publicly and privately. However, the current M&A landscape from the buyer's perspective is not very appealing in terms of size, market, or structure concerning operational assets. Additionally, the prevailing interest rate environment affects financing costs, making it more challenging to perform accretive deals due to the discrepancy between buyer and seller expectations. As a result, we are focusing on investing in our own assets and utilizing our buyback authorization, as we believe this is the most effective use of our capital. It's worth noting that, as a company that owns its own real estate, even at our current trading valuation, the value of our properties exceeds our enterprise value based on various market multiples for rent. Therefore, we do not anticipate actionable steps until we are valued appropriately in relation to our real estate and business operations. For the time being, we see the best value in repurchasing our shares.

Charles, Blake, you guys just kind of hit on what you're seeing in the database. Charles, in your prepared remarks, you talked about that lower end probably being the weakest part of it. Are you seeing any of that in the mid- to kind of core higher-end players? Like is it broad across the board? Or is it mainly in the lower segments of your database?

Chad, primarily, if we consider the term primarily, it pertains to the lower tier of the database. The upper tier visitation remains steady, and mid-tier visitation is also stable; however, mid-tier spending may be somewhat limited in certain instances, even though visitation is consistent. To address your question, the significant portion is indeed in the lower tier of the database, while the upper tier stays consistent and the mid-tier has stable visitation, although there may be instances of reduced spending.

Okay. And then as we think about maybe the next 12 months on the strip, you potentially have some supply coming off the strip with Trop just closed. Potentially Hard Rock under renovation and taking some rooms out of inventory. You have Fontainebleau which just opened, you have Rio new ownership. When you put all these things together, should that be a net positive for you guys as we're kind of thinking about some of the big convention weeks and F1. How do you see that?

Yes. We think it's a net positive. Given the level of convention activity that we're seeing throughout the remainder of the year, the entertainment calendar throughout the year, and as you mentioned, some inventory coming off the market pretty sizably actually, we do see it as a net positive going forward.

Do you expect to start seeing that benefit in a significant way, perhaps in the fourth quarter?

Yes, we believe that Q3 and into Q4 is when we expect to start seeing that. Thank you all for joining. We'll talk to you in the next quarter.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.