Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Golden Entertainment, Inc. First Quarter 2025 Earnings Conference Call. At this time, please note that this call is being recorded today. Now I would like to turn the conference over to James Adams, the company's Vice President of Corporate Finance and Treasurer. 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, and Charles Protell, the company's President and Chief Financial Officer.

On this call, we will make forward-looking statements under safe harbor provisions of the federal securities laws. Actual results may differ materially from those contemplated in these statements. 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 when talking about our performance. You can find the reconciliation of GAAP financial measures in our press release, available on our website. We will start the call with Charles reviewing the details of the first 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.

Thanks, James. Our first quarter year-over-year results were in line with our expectations and primarily impacted by not having last year's Super Bowl in Las Vegas, which was mainly felt at The Strat. Outside of the Super Bowl impact on The Strat, our business in Q1 was healthy with EBITDA from our other casinos up year-over-year and EBITDA from our tavern stabilizing. As we look forward, April continues to demonstrate stable operating trends and May is off to a strong start. Currently, we are not seeing the dislocation in our business that seems to be reflected in our public valuation. Now for some context on our property performance in the first quarter. The Strat experienced declining occupancy and spend primarily in February, resulting in a $3 million EBITDA headwind from last year's Super Bowl. Occupancy was down 5% for the quarter, but down 13% in February, which obviously led to lower gaming, food and beverage, and other revenues for the property. However, in April, our hotel revenue is up on both higher occupancy and rate, which is driving improved EBITDA heading into Q2. Looking forward through May, Strat occupancy is pacing up 6% over last year at attractive rates, and June is showing strength as well. Currently, Q2 is looking better than last year for the property, but without direct convention bookings at The Strat, we have limited visibility beyond the next few months. In Laughlin, we increased EBITDA by reducing expenses and focusing on more profitable concerts at our smaller entertainment venue. We also targeted weekend promotional activities for driving customers as well as continue to promote our midweek bingo for local guests, which allowed us to maintain our leading market share in Laughlin. For Nevada locals' casinos, our revenue was flat to prior year with EBITDA up 2%, largely driven by operational efficiencies across payroll and other expenses. We see consistent performance out of our locals' casinos, with EBITDA margins at 46% for the second straight quarter. We actually see increasing strength in our locals' business in April, so this segment is off to a strong start in Q2. In our taverns, revenue and EBITDA were down slightly year-over-year, but on a sequential basis, EBITDA continued to increase over Q4 as we achieved improved performance from our newest taverns and lowered operating expenses. We have seen an uptick in promotional activity in the tavern market from smaller private operators, which we do not view as sustainable, but it may have some impact on Q2 performance for our taverns as we maintain a more disciplined reinvestment strategy. Moving on to our capital structure. We ended the quarter with just over $400 million of debt outstanding, $50 million of cash, and $225 million of remaining availability under our revolving credit facility. Our low net leverage at 2.4 times EBITDA and liquidity profile will enable us to withstand any potential impact to our business from the macro environment and allow us to continue to reinvest in our own assets, pay dividends, and opportunistically acquire more of our own stock. In Q1, we had a short open window to buy stock, but still used $7.6 million of our buyback authorization to repurchase 274,000 shares. Since the start of 2024, we have repurchased 3.2 million shares totaling almost $100 million and paid out $35 million in dividends. We have $92 million remaining on our current buyback authorization, which we will use opportunistically throughout the year. We have evaluated the limited M&A opportunities currently in the market, and given the dislocation in our share price, there is no better use for our capital than repurchasing our own equity at these levels. Our business has remained resilient and is improving despite an uncertain macroeconomic environment. Having a focused portfolio of branded taverns, casinos with owned real estate, and low leverage positions us well to withstand any potential short-term fluctuations in consumer demand and to benefit from the favorable long-term economic trends in Nevada. That concludes our prepared remarks. Blake and I are now available for questions.

We will now begin the question and answer session. If you would like to ask a question, simply press star followed by the number one on your telephone. And if you would like to withdraw your question, press star 1 again. Your first question comes from the line of Barry Jonas with Truist Securities. Barry, please go ahead.

Hey, guys. Wanted to start with The Strat. Appreciate some of the comments in the opening remarks. Can you maybe just give a little color now about what the booking window is, how it's been trending as of late, and also maybe talk about what your OTA mix is now and how you're sort of moving towards that targeted 50% mix. Thanks.

Yeah. So as Charles mentioned in his prepared comments, we don't have much visibility without our traditional banquet space. Our window is probably much shorter than others. For April, May, it looks very, very good. Looks very strong. It's hard for us to predict pacing, you know, on a trending basis better than Q1, really outside of June. I think Charles mentioned June was looking strong also. But we are seeing, I think in addition, I think it's important to point out, we're seeing casino revenues and operational margins also trend in the right direction at The Strat. So overall, the property is trending well. And outside of the next ninety days, it's hard for us really to provide any solid guidance.

Yeah. And I'd also just add to that. I mean, different than others, you know, because, as Blake said, we don't have that group space, our booking window has always been relatively short compared to some of our peers. So we'll typically see 25 to 30% of the occupancy materialize within a seven-day period. And that's been fairly consistent for us. So we haven't seen a lot of change in terms of shortening booking window from our perspective. Again, we've always been shorter than others. On the OTA percentage, I think we're running approximately 65% now. And it's trending downward as well. We are doing a much better job through our casino marketing programs and direct bookings and producing a lot more personal information with people checking in, putting systems in place that allow us to speak with them directly, which had been a bit spotty in the past. So we are trending at 65%, give or take, right now, trending in the right direction. We're very bullish on us being able to get to that 50% level.

Got it. And then if I could sneak one more in, you know, I think as well the comments about share repurchases taking priority in the current environment makes a lot of sense. But can you maybe expand more on the M&A environment, both on the buy side as well as sell side of what you've discussed before? Just curious how much the macro is impacting those discussions or opportunities. Thanks.

Well, I think the short answer is quite a bit. I mean, when you have this much value just looking in a short period of time, you are resetting expectations and you're uncertain about what the future looks like. So that obviously puts a damper on your strategic M&A discussions. And from a financing perspective, I think certainly, us and others headed into this year anticipating interest rates to be lower than where they are at this point in time. So we'll see how that plays out over the course of the year. But that obviously has a direct impact on the ability to pay and ability to finance transactions.

Makes sense. Alright. Thank you so much.

Thanks. And your next question comes from the line of David Katz with Jefferies. David? Please go ahead.

Thank you. Good evening, everybody. Charles, I wanted to go back to your commentary about the tavern business and smaller operators. You know, by definition, a smaller operator or two shouldn't make that much of a difference. So there must be, I'm guessing, more of a trend among the smaller guys. And is it true that other larger operators are not participating in the competition? A little more meat on that would be helpful.

Yeah. I mean, keep it we're the largest operator of taverns in Nevada. Most of that is in Southern Nevada and Las Vegas. If you think about restricted licenses that we operate, there's probably around 400 or so in Southern Nevada. Again, we're the largest, but we're a smaller portion of that. So we see, and we've lost some visibility on this once we divested the route that serviced these locations. And we see an increased promotional activity not so much necessarily at chains for locations, but on competing bar-type locations from private operators. What we've seen in the past over many years is in that mode, you are really just chasing more dollars over the same customer wallet. And so I think that we haven't seen that behavior in the casinos. In the local casinos, I think there's probably a little bit more sophistication there and a little bit more experience. I think the turnover in ownership with smaller private tavern operators is a lot more frequent than what you see in casinos, and it's a lot less institutionalized in terms of ownership and sophistication. So those are people chasing business. We've seen it before in the past. We think we're gonna stick with our strategy. And we've already, by the way, we've seen that mitigate a bit as we get into, you know, April and May. But, you know, there's really no way for us to know, govern what other people aren't doing in the market. As we were somewhat able to at least provide some guidance when we owned the route to others on best practices for tavern marketing.

Yeah. I might just add you. It's a good question. You're right. Typically, these smaller operators one or two would not impact our 72 or 73 chain franchise. In the past, I have seen that these marketing trends are typically not sustainable even for the smaller guys. To Charles' point, the short-term chase dollars. But back to Charles' prepared comments, with our disciplined approach, we're now three quarters in a row of trend of EBITDA trend upward. We've gotten our arms around, and I think we can get a little more detail if you're interested. On our newer taverns that are now performing significantly better than our prior call. So we are confident our size and our disciplined approach will overcome these short-term trends that some of these independent operators may be trying but we know are not sustainable.

Understood. And if I can just go a little further from your unique purview, given that you have that tavern business. Is there anything we can point to or discuss with respect to how consumers are behaving across the valley over the last, call it, sixty-five days or so?

Yeah. I think as we define our taverns as hyperlocal, if you will, other than 401k exposure, our demographic in the taverns really is not invested in the market, so to speak, from a broader perspective. They are more in tune with commodity prices, mortgage rates, wealth effect of equity in their homes. And so, you know, it's been, as I mentioned in the past, the most resilient part of our business. In the last sixty-five days and particularly since Liberation Day are when the turmoil began on the market, our most for the most part, our customers have seen right through that as they're not really exposed to the broader market. We are seeing trends, as we mentioned in our prior calls, of similar amounts of gaming days but less gaming investment, so to speak. There has been a pullback a little bit in terms of people coming in as frequently, but maybe not spending as much. But generally speaking to your question, I don't believe the broader market has a long-term impact on our Tavern customer.

Okay. Thank you very much.

And your next question comes from the line of Chad Beynon with Macquarie Group. Chad, please go ahead.

Afternoon, Blake, Charles. Thanks for taking my question. Wanted to revisit the point, Charles, you were making about the M&A search and the decision to buy back stock. So just on that, I know you talked a lot about this last quarter or maybe even the quarter prior. But since you did a comprehensive search, is this something that you would maybe revisit throughout the year or are you just keeping the lines open? What do you think would bring more portfolios or assets to the market? Do you think it's fairly static right now, or this is something that could change as we progress through the year? Thank you.

Yeah. Thanks, Chad. Look. I think we're in a wait-and-see type of moment for the market, particularly around M&A. I think if you look at assets that have been marketed recently, single assets, opcos, subscale single assets, or larger type of opcos. Those have been in the opportunities that had been presented in one way, in a shape, or form. I think, you know, this and with relatively high price expectations, in relation to the quality of those assets. And the opportunities that they present. So when you put that at the backdrop against, you know, buying EBITDA or wholly owned gaming assets, that we know in markets that we like at seven times EBITDA or less, that obviously leads to we should just be buying our own business. With excess capital. Does that change over time? You know, maybe, but I don't see that in the near term. I think there's still gonna be potential dislocation. And so we are a we've been a big buyer of our stock. At prices that are higher than we're trading at right now. Gonna be a buyer of our stock at these levels. For more larger scale M&A, I mean, again, I think you're gonna have to wait and see how things play out on the macro side. And, you know, that within the sector, I still believe the sector should be consolidating. I think that opportunities may present themselves in the future that are attractive to us, a good fit for us. But know, there's nothing out there that's worth in our mind changing strategy from repurchasing our own stock as the focus investing in our own assets, showing off the operations, and, you know, paying and distributing capital to shareholders in the form of dividends.

Okay. Thank you. That makes a lot of sense. And then back on The Strat, I guess a two-parter here. One, can you talk about exposure to Canada or any other market where we're seeing weakness in terms of inbound enplanements? And then secondly, any update just in terms of how citywides and events at, you know, the Sphere, Allegiant, etcetera, look beyond, you know, the period that you talked about in your near-term window? Thank you.

Yeah. Chad, in regards to Canada, you know, we that is really not exposed to a material amount of international business primarily flying and driving. Southern California, Arizona, and so on. So I would say, it's immaterial to discuss what we would maybe feel at The Strat from that perspective. Citywides, you know, the citywide seem to be booking pretty well. Obviously, as you know, when the city fills up, we do better. But, Charles, do you have?

Yeah. No. It just goes back, Chad, to the same visibility question. So anything that's coming in if you look at things like EDC in May, like that is big for us given our location relative to where that is held. You know, those things we're looking great. We just don't have that visibility to get past June. We may only we'll have less than, you know, maybe 10% on the books. For the property as you get into July. So, again, tougher for us to tell, but in the if you look in the near term, we're looking at May, and we're looking at June. Like I said, we're up six points in occupancy in May year over year. June looks strong for us as well on a relative basis to last year. So but but we'll see. I mean, obviously, are changing pretty quickly in the market. But for right now, our business feels, you know, very solid to improving as we head it into the couple of other quick data points, and this may not be a great segue, but into Q2. At The Strat, we just signed a nationally recognized food and beverage concept that should open in the scrap sometime during the fourth quarter or first of next year. Which is a positive given in the context of controlling our own destiny there. And we're beginning to receive revenue share from Atomic Golf that continues to ramp next to us. We begun receiving quarterly checks on our revenue share, which is pretty significant this year. So the property in the context of what we can control we feel very good about going forward.

That's great. Thank you, boss. Appreciate it.

Thanks, Chad. And your next question comes from the line of Zachary Silverberg with Wells Fargo. Zachary, please go ahead.

Hey. Good evening. Thanks for taking my questions. And one on the local segment, you guys saw some strong margins, 46% for the second straight quarter. Increasing strength in April. Can you talk about the operational efficiencies there? Are there any other levers to pull moving forward where we could potentially see margins stable or potentially growing moving forward?

Yeah. I think in from a locals perspective, we really did a great job rightsizing labor within those properties, particularly on the food and beverage outlets. Streamlining menus, and getting some efficiencies in the hotel. Quite frankly, we've made some capital investments there. I'd say, also, we've experienced the declining cost on the utility side. It's been contributing to margins. So we feel pretty good about where that is. And, look, the spend from our guests has remained strong. And so our assets our local assets, we only have two local casinos, but they're fairly significant within the portfolio. And they have a very loyal local following. That plays there frequently, and we've seen very little impact from, you know, the macro conditions on that customer.

Gotcha. And, you know, maybe back to capital allocation. How are you guys thinking about, you know, CapEx spend, maybe, either maintenance or potentially more growth-oriented spending given the uncertain economic outlook? And or a potential increase in input costs.

Yeah. I'd say for us, you know, we're pretty well insulated from any type of tariff exposure. You know, from a procurement perspective, if you look at linens and those types of things, we've already kind of sourced that away from Asia and into India and Pakistan. In terms of that sourcing. So we don't have a lot of exposure from a tariff perspective. On the CapEx side of things, you know, maintenance CapEx, the portfolio runs around $30 to $35 million as it sits right now today. Yeah. We do have, you know, two taverns that we intend, you know, to open, you know, this year that is, you know, previously designed. And so we obviously intend to do that. We think they're in great locations. They'll be added into the portfolio. And those are about, you know, $3 million each. Beyond that, we have no major investments that are planned. And, again, that goes back to we think the best capital allocation at this point is in buying our own stock.

Yeah. I would just add in terms of growth, I mentioned the nationally recognized food members concept. We are negotiating a lot of third-party investment in our facilities which allows us for growth-type amenities without using our capital. As well as we have, as you know, a lot of excess real estate surrounding all of our casinos. And we continue to dial in on potential synergistic uses with third parties for those parcels as well.

Thank you.

And your next question comes from the line of Jordan Bender with Citizens JMP. Jordan, please go ahead.

Hey, everyone. Good afternoon. You know, I know we're talking about some pretty short-term impacts, but in recent weeks, have you seen the drive-in traffic into Laughlin or Strat improve, you know, just given the gas prices have moved lower or historically? Does that potentially point to, you know, a forward-looking tailwind?

Yeah. I think it does. I mean, what it does, it really helps discretionary spending. Right? So it's offsetting some of those other inflationary pressures, particularly in the local market. It's a big driver when you see gas prices come down a little bit. You'd see a little bit of that spend, you know, in the taverns as well. From a Laughlin perspective, what's driving business there more is the events that we put on on the weekends. So us, being able to have more frequent smaller events has been a more profitable exercise for us than having a lot of large-scale concerts in the Laughlin event center. So we're leading market share down there right now. It's viewed as a more cost-effective entertainment destination than Vegas for a lot of people driving in for the Inland Empire. It's whether that tank of gas for them was, you know, $35 or $45, still gonna come and see Jason Aldean or, yeah, Alabama, whatever is going on down there in the market at that time.

Great. And following up on the M&A discussion, you know, been a few years of you guys just being a smaller size company after the divestitures of Distributed Gaming in Maryland. You know, now that you've settled in and run that business, you know, do you feel that if you continue as an independent company, you would love to add more scale back to the business?

I think it all depends. Right? It depends on value, quite frankly, in either direction of the M&A discussion. So, you know, I think for us, we feel like we definitely have built a platform here over a long period of time that we could add assets to accretively from an operational perspective. We just need to find assets in the right value zone that you could add accretively to do that. And, like I said, we've done a lot of work. We talked a few quarters about looking at opportunities. And I think at this point in time, those are not out there that are attractive to us. So we are no longer looking at that. We are looking at buying our own stock and investing in the business as we move throughout this year.

Great. Thank you very much.

Thanks. And your next question comes from the line of John DeCree with CBRE. John? Please go ahead.

Hey, Charles. Blake. Maybe to ask the capital allocation question a little differently. Given where your stock is, how cheap it is, and your commitment to buying back stock, and where the balance sheet is. Have you considered perhaps leaning into the repurchase a little bit more given your balance sheet capacity? I guess, you could use a little bit of leverage that you'd probably use for M&A anyway, but given how attractive your stock is. So your thoughts on maybe being more aggressive there, a tender, something to that effect? And then a follow-up on the Strat operations.

Yeah. I mean, look. I think we will be aggressive in buying the stock. We'll use liquidity to do that. We obviously have a lot of capacity on a revolver. You could see there's, you know, over $200 million of availability. I do think, you know, tenders and this is anecdotal and a bit personal opinion. I have not seen those work so well within the gaming space. I think that, you know, you get a better sustained, not only support for the stock, but value for shareholders to the extent that you are buying back the shares over time. Now those could be meaningful buybacks per quarter. I mean, you could see we bought back, you know, if we look over last year, we're buying at the clip of a million shares a quarter. Which, you know, would make us, you know, effectively, you know, largest shareholder of our own stock. Right, as a company within those nine months. So I think that institutional, of course, like, what I'm making that comment. I think that, you know, that is that's how I see that rolling out. I would not expect immediacy of some tender. Now that said, that's given kinda where sitting right now, that there's some massive market dislocation. You know, our business remains quite stable. And, again, in our mind, you know, the trends in our business are not reflective of our valuation and the recent gyrations in our stock. So, you know, if, you know, I can't see how it happened, but if we're moving lower, maybe we change our tune on that.

Fair enough. I appreciate that. I'd agree with the valuation as well. And so, fundamentally, I wanted to ask about The Strat and your ability to yield up hotel room rate there, you know, like, good occupancy in the 1Q outside of February, which is a tough comp. And then I think you said up in April at attractive rates. And so when you look forward, what's the key to driving higher room rate at The Strat? Is that just getting occupancy back, or do you need to price off of the Strip so continue to see your peers, you know, further south on the Strip drive rate? And kind of what are your levers to pull to kind of get room rate back up?

I think it's a combination of a couple of things. Think, obviously, we have to have some tailwinds from the city. As the city as Charles mentioned, EDC and citywide promotions that we do tremendous with. Helps significantly. As I mentioned in my earlier comments, we are internally doing a much better job of being able to gather information from our guests that allow us a more direct line for direct bookings and things like that. So we see our OTA trends going down. That in two ways is gonna increase revenue. One, potentially in rate two, certainly in casino revenue. So that benefits the property either way. It really boils down to compression midweek. I mean, midweek is really where weekends, we are we're solid. We're great. We yield rate significantly effectively on the weekends. But midweek, without a lot of citywide driven traffic. We, to your point, we take our lead off of kind of the South Strip guys and where they're going with their rate. And we with our newer casino, newer rooms, newer food and beverage, Atomic Golf, all the things we're building there service-wise, I think we're surpassing a lot of our peers on the service floor side. We, you know, the midweek is where we focus, and we need a little help from the city on that side.

Understood. Thanks, Blake.

Ladies and gentlemen, as there are no further questions, that concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.