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Golden Entertainment Reports 2019 Second Quarter Results

August 6, 2019 4:05 PM

Second Quarter and Recent Highlights:

- Record quarterly net revenues and Adjusted EBITDA

- The Strat renovations on schedule and on budget; casino floor renovations and additional room remodels underway

- Implementing operational synergies in Laughlin

- TrueRewards one card loyalty program now live at all ten casino properties

- Opened two new taverns in Q2 and one in July bringing current total to 66 Nevada locations

- Refinanced 2nd lien debt and repaid outstanding revolving credit facility with unsecured notes offering

LAS VEGAS--(BUSINESS WIRE)-- Golden Entertainment, Inc. (NASDAQ: GDEN) (“Golden Entertainment”, “Golden” or the “Company”) today reported financial results for the second quarter ended June 30, 2019.

Blake Sartini, Chairman and Chief Executive Officer of Golden Entertainment, commented, “Record quarterly revenue and Adjusted EBITDA in the second quarter reflects solid year-over-year increases across both our Casinos and Distributed Gaming operations.

“The improvements we have made at The Strat continue to be well received by our guests despite the ongoing construction disruption at the property. We have started renovations to The Strat casino floor and remodels of additional hotel rooms, which we expect to complete by the end of the year. We have also integrated the operations of the Edgewater and Colorado Belle casinos in Laughlin and we expect these properties to deliver improved results in the second half of the year as we begin to realize our targeted synergies. In addition, we have improved our ability to incentivize guests across our casino platform with the completed rollout of our new TrueRewards loyalty program at all ten of our casino properties.

“During the second quarter our Distributed Gaming operations benefited from six new taverns opened since the prior-year period and from improved Nevada chain store performance following rent adjustments to approximately half of our locations. Further, our Montana business continues to grow organically with the addition of new locations.

“During the second quarter we completed a $375 million unsecured notes offering that refinanced our revolver borrowings and outstanding 2nd lien term loan, reduced secured leverage, extended maturities and added fixed cost capital to the balance sheet while maintaining an attractive blended interest rate.

“We expect continued economic growth in southern Nevada will support the financial performance for the majority of our portfolio of gaming assets. In addition, we believe our strategic investment in The Strat as well as our recent property acquisitions in Laughlin position us favorably to build long-term shareholder value.”

Consolidated Results

The Company reported record second quarter revenues of $248.1 million, up 14.6% from $216.5 million in the second quarter of 2018. Net loss for the second quarter of 2019 was $14.4 million or a loss of $0.52 per share, compared to net income of $3.6 million or $0.12 per diluted share in the second quarter of 2018. Adjusted EBITDA increased 7.6% to a record $49.8 million for the second quarter of 2019 compared to $46.3 million for the second quarter of 2018. Results for the second quarter include a full quarter of operations of the Edgewater and Colorado Belle Casino Resorts acquired by the Company on January 14, 2019.

Casinos

Casino revenues grew 21.2% to $158.7 million in the second quarter of 2019 compared to $130.9 million in the second quarter of 2018. Casino Adjusted EBITDA grew 13.7% to $48.0 million compared to $42.2 million in the same quarter of 2018.

In the second quarter, growth in the casino segment was primarily driven by the acquisition of two casinos in Laughlin, Nevada in January 2019, partially offset by the construction disruption at The Strat and increased regional competition that impacted Rocky Gap Casino Resort in Maryland.

Distributed Gaming

Distributed Gaming revenues increased 4.4% to $89.2 million from $85.4 million in the second quarter of 2018. Adjusted EBITDA for the segment grew 6.5% to $13.7 million from $12.8 million in the same period of 2018.

The Company generated growth in revenue and Adjusted EBITDA in both its Nevada and Montana distributed gaming businesses for the second consecutive quarter. In Nevada, continued growth from the Company’s wholly-owned tavern portfolio, which added six new locations since the prior-year period, as well as stabilization of the Company’s chain store locations contributed to improved results. In Montana, the Company continued to add new locations and also benefited from continued investment in new game technology.

The Strat Renovations Update

The Strat renovations for 2019 remain on schedule, with renovations to the casino floor beginning in June and additional room renovations beginning in July. The Strat’s new tap room, lounge and sports book were open for the entire second quarter. In addition, the Company completed renovations to the SkyPod on the 108th floor of the tower, which includes a remodeled gift shop and food and beverage outlets as well as improvements to the Sky Jump experience. Prior to the second quarter, Golden completed the renovation of 317 hotel rooms, other food and beverage outlets (including Top of the World, Strat Café and Starbucks), exterior lighting and landscaping of the property.

The remaining projects for 2019 include completing the casino remodel, renovating an additional 252 hotel rooms and completing the design of potential group meeting space. Golden expects the renovations of the casino floor to be ongoing throughout the remainder of the year.

As of June 30, 2019, the Company has invested approximately $54 million on The Strat renovations, including approximately $24 million in 2018. The Company expects approximately $30 million of additional renovation costs for 2019 which it intends to fund with cash flow from operations. Golden Entertainment’s total budget for The Strat renovations remains unchanged at approximately $140 million.

Balance Sheet Highlights

As of June 30, 2019, the Company had cash and cash equivalents of approximately $117 million and total outstanding debt of $1.15 billion, with no borrowings outstanding under the Company’s $200 million revolving credit facility.

In April, the Company completed a $375 million, 7-year senior unsecured notes offering which priced at 7.625%. Proceeds from the notes offering were used to repay $145 million of outstanding borrowings under the Company’s revolving credit facility, repay the Company’s $200 million 2nd lien term loan facility, repay $18 million of outstanding borrowings under the Company’s existing 1st lien term loan facility and pay offering fees and expenses. Currently, the Company has $772 million outstanding under its first lien term loan facility with an interest cost of LIBOR plus 3%.

Investor Conference Call and Webcast

The Company will host a webcast and conference call today, August 6, 2019 at 5:00 p.m. Eastern Time, to discuss the second quarter 2019 results. The conference call may be accessed live by dialing (844) 465-3054 or (480) 685-5227 for international callers and entering the passcode 5152816. A replay will be available beginning at 8:00 p.m. ET on August 6, 2019 and may be accessed by dialing (855) 859-2056 or (404) 537-3406 for international callers; the passcode is 5152816. The replay will be available until August 9, 2019. The call will also be webcast live through the “Investors” section of the Company’s website, www.goldenent.com. A replay of the audio webcast will also be archived on the Company’s website, www.goldenent.com.

Forward-Looking Statements

This press release contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933 and the Securities Exchange Act of 1934. Forward-looking statements can generally be identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “potential,” “seek,” “should,” “think,” “will,” “would” and similar expressions, or they may use future dates. Forward-looking statements in this press release include, without limitation, statements regarding: the integration and benefits of, and realization of cost synergies from, the Laughlin acquisition; future financial and operating results; proposed future capital expenditures, investments and property improvements, including The Strat renovations, anticipated opening of new tavern and distributed gaming locations and investment in technology, and their associated timing, source of funding and cost; and the Company’s plans, strategic priorities, objectives, expectations, intentions, including with respect to its growth prospects and growth opportunities and potential acquisitions. Forward-looking statements are based on our current expectations and assumptions regarding the Company’s business, the economy and other future conditions. These forward-looking statements are subject to assumptions, risks and uncertainties that may change at any time, and readers are therefore cautioned that actual results could differ materially from those expressed in any forward-looking statements. Factors that could cause actual results to differ materially include: the Company’s ability to realize the anticipated cost savings, synergies and other benefits of the American and Laughlin transactions and its other acquisitions, and integration risks relating to such transactions; changes in national, regional and local economic, political and market conditions; legislative and regulatory matters (including the cost of compliance or failure to comply with applicable laws and regulations); increases in gaming taxes and fees in the jurisdictions in which the Company operates; litigation; increased competition; the Company’s ability to renew its distributed gaming contracts; reliance on key personnel (including the Company’s Chief Executive Officer, Chief Operating Officer and Chief Strategy and Financial Officer); the level of the Company’s indebtedness and the Company’s ability to comply with covenants in its debt instruments; terrorist incidents; natural disasters; severe weather conditions; the effects of environmental and structural building conditions; the effects of disruptions to the Company’s information technology and other systems and infrastructure; factors affecting the gaming, entertainment and hospitality industries generally; and other risks and uncertainties discussed in the Company’s filings with the SEC, including the “Risk Factors” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 and most recent Quarterly Reports on Form 10-Q. The Company undertakes no obligation to update any forward-looking statements as a result of new information, future developments or otherwise. All forward-looking statements in this press release are qualified in their entirety by this cautionary statement.

Non-GAAP Financial Measures

To supplement the Company’s consolidated financial statements presented in accordance with United States generally accepted accounting principles (“GAAP”), the Company uses Adjusted EBITDA, which measure the Company believes is appropriate to provide meaningful comparison with, and to enhance an overall understanding of, the Company’s past financial performance and prospects for the future. The Company believes Adjusted EBITDA provides useful information to both management and investors by excluding specific expenses and gains that the Company believes are not indicative of core operating results. Further, Adjusted EBITDA is a measure of operating performance used by management, as well as industry analysts, to evaluate operations and operating performance and is widely used in the gaming industry. Other companies in the gaming industry may calculate Adjusted EBITDA differently than the Company does.

The presentation of this additional information is not meant to be considered in isolation or as a substitute for measures of financial performance prepared in accordance with GAAP. Reconciliations of Adjusted EBITDA to net income (loss) are provided in the financial information tables below.

The Company defines “Adjusted EBITDA” as earnings before interest and other non-operating income (expense), income taxes, depreciation and amortization, acquisition expenses, loss on disposal of property and equipment, share-based compensation expenses, preopening and related expenses, class action litigation expenses, executive severance, gain on change in fair value of derivative, and other gains and losses. Adjusted EBITDA for a particular segment or operation is Adjusted EBITDA before corporate overhead, which is not allocated to each segment or operation.

About Golden Entertainment, Inc.

Golden Entertainment owns and operates gaming properties across two divisions – casino operations and distributed gaming. Golden operates approximately 17,300 slots, 160 table games, and 7,318 hotel rooms, and provides jobs for approximately 8,200 team members. Golden owns ten casino resorts – nine in Southern Nevada and one in Maryland. Through its distributed gaming business in Nevada and Montana, Golden operates video gaming devices at over 1,000 locations and owns over 60 traditional taverns in Nevada. Golden is also licensed in Illinois and Pennsylvania to operate video gaming terminals. For more information, visit www.goldenent.com.

Golden Entertainment, Inc.

Consolidated Statements of Operations

(Unaudited, in thousands, except per share data)

Three Months Ended June 30,

Six Months Ended June 30,

2019

2018

2019

2018

Revenues

Gaming

$

146,246

$

132,546

$

290,038

$

266,409

Food and beverage

52,104

43,422

101,862

86,025

Rooms

35,514

27,660

66,801

53,787

Other

14,206

12,915

29,261

25,111

Total revenues

248,070

216,543

487,962

431,332

Expenses

Gaming

84,007

78,510

166,355

156,198

Food and beverage

40,216

35,351

78,430

68,943

Rooms

16,008

12,291

30,409

23,856

Other operating

5,160

3,655

11,594

7,651

Selling, general and administrative

56,235

43,615

113,182

87,821

Depreciation and amortization

29,976

22,854

57,241

48,091

Acquisition and severance expenses

1,123

565

2,667

1,864

Preopening expenses

738

389

1,516

837

Loss on disposal of assets

585

218

832

295

Total expenses

234,048

197,448

462,226

395,556

Operating income

14,022

19,095

25,736

35,776

Non-operating income (expense)

Interest expense, net

(19,135

)

(16,066

)

(37,270

)

(30,809

)

Loss on extinguishment and modification of debt

(9,150

)

—

(9,150

)

—

Change in fair value of derivative

(1,489

)

1,462

(3,737

)

4,673

Total non-operating expense, net

(29,774

)

(14,604

)

(50,157

)

(26,136

)

Income (loss) before income tax benefit

(15,752

)

4,491

(24,421

)

9,640

Income tax benefit (provision)

1,344

(897

)

1,995

(2,116

)

Net income (loss)

$

(14,408

)

$

3,594

$

(22,426

)

$

7,524

Weighted-average common shares outstanding

Basic

27,762

27,406

27,667

27,278

Dilutive impact of stock options and restricted stock units

—

2,258

—

2,250

Diluted

27,762

29,664

27,667

29,528

Net income (loss) per share

Basic

$

(0.52

)

$

0.13

$

(0.81

)

$

0.28

Diluted

$

(0.52

)

$

0.12

$

(0.81

)

$

0.25

Golden Entertainment, Inc.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

(Unaudited, in thousands)

Three Months Ended June 30, 2019

Casino Segment

Distributed Gaming Segment

Nevada Casinos

Maryland Casino

Nevada Distributed Gaming

Montana Distributed Gaming

Corporate

and Other

Consolidated

Total Revenues

$

140,260

$

18,456

$

71,445

$

17,708

$

201

$

248,070

Net income (loss)

$

18,194

$

4,277

$

6,687

$

660

$

(44,226

)

$

(14,408

)

Depreciation and amortization

23,092

960

3,894

1,675

355

29,976

Preopening and related expenses(1)

685

15

660

-

137

1,497

Acquisition and severance expenses

101

-

9

-

1,013

1,123

Asset disposal and other writedowns

412

99

78

(4

)

-

585

Share-based compensation

-

-

-

-

2,134

2,134

Other, net

81

-

-

-

406

487

Interest expense, net

63

1

21

2

19,048

19,135

Loss on extinguishment and modification of debt

-

-

-

-

9,150

9,150

Change in fair value of derivative

-

-

-

-

1,489

1,489

Income tax benefit

-

-

-

-

(1,344

)

(1,344

)

Adjusted EBITDA

$

42,628

$

5,352

$

11,349

$

2,333

$

(11,838

)

$

49,824

Three Months Ended June 30, 2018

Casino Segment

Distributed Gaming Segment

Nevada Casinos

Maryland Casino

Nevada Distributed Gaming

Montana Distributed Gaming

Corporate

and Other

Consolidated

Total Revenues

$

112,917

$

18,009

$

69,507

$

15,890

$

220

$

216,543

Net income (loss)

$

19,632

$

4,604

$

6,583

$

969

$

(28,194

)

$

3,594

Depreciation and amortization

16,364

1,048

3,745

1,234

463

22,854

Preopening expenses(1)

-

-

88

-

301

389

Acquisition and severance expenses

168

-

2

-

395

565

Asset disposal and other writedowns

214

4

-

-

-

218

Share-based compensation

-

-

-

-

2,758

2,758

Other, net

123

-

195

-

99

417

Interest expense, net

23

2

25

1

16,015

16,066

Change in fair value of derivative

-

-

-

-

(1,462

)

(1,462

)

Income tax provision

-

-

-

-

897

897

Adjusted EBITDA

$

36,524

$

5,658

$

10,638

$

2,204

$

(8,728

)

$

46,296

Six Months Ended June 30, 2019

Casino Segment

Distributed Gaming Segment

Nevada Casinos

Maryland Casino

Nevada Distributed Gaming

Montana Distributed Gaming

Corporate

and Other

Consolidated

Total Revenues

$

275,889

$

34,201

$

142,850

$

34,660

$

362

$

487,962

Net income (loss)

$

38,056

$

7,104

$

13,719

$

1,234

$

(82,539

)

$

(22,426

)

Depreciation and amortization

43,781

1,914

7,617

3,281

648

57,241

Preopening and related expenses(1)

2,339

15

1,226

-

149

3,729

Acquisition and severance expenses

387

-

22

13

2,245

2,667

Asset disposal and other writedowns

668

99

78

(13

)

390

1,222

Share-based compensation

11

-

5

-

6,302

6,318

Other, net

92

-

-

-

1,259

1,351

Interest expense, net

113

3

36

3

37,115

37,270

Loss on extinguishment and modification of debt

-

-

-

-

9,150

9,150

Change in fair value of derivative

-

-

-

-

3,737

3,737

Income tax benefit

-

-

-

-

(1,995

)

(1,995

)

Adjusted EBITDA

$

85,447

$

9,135

$

22,703

$

4,518

$

(23,539

)

$

98,264

Six Months Ended June 30, 2018

Casino Segment

Distributed Gaming Segment

Nevada Casinos

Maryland Casino

Nevada Distributed Gaming

Montana Distributed Gaming

Corporate

and Other

Consolidated

Total Revenues

$

228,584

$

32,829

$

138,241

$

31,317

$

361

$

431,332

Net income (loss)

$

40,772

$

7,305

$

13,406

$

1,594

$

(55,553

)

$

7,524

Depreciation and amortization

34,973

2,074

7,525

2,602

917

48,091

Preopening expenses(1)

-

-

236

-

601

837

Acquisition and severance expenses

219

-

37

-

1,608

1,864

Asset disposal and other writedowns

276

4

5

10

-

295

Share-based compensation

-

-

-

-

4,602

4,602

Other, net

160

-

362

-

203

725

Interest expense, net

45

4

69

3

30,688

30,809

Change in fair value of derivative

-

-

-

-

(4,673

)

(4,673

)

Income tax provision

-

-

-

-

2,116

2,116

Adjusted EBITDA

$

76,445

$

9,387

$

21,640

$

4,209

$

(19,491

)

$

92,190

(1) Preopening and related expenses include rent, organizational costs, non-capital costs associated with the opening of tavern and casino locations, and expenses related to The Strat rebranding and the launch of the TrueRewards loyalty program.

Golden Entertainment, Inc.

Charles H. Protell

Chief Financial Officer

702/893-7777

Investor Relations

Joseph Jaffoni, Richard Land, James Leahy

JCIR

212/835-8500 or [email protected]

Source: Golden Entertainment, Inc.

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