Golden Entertainment reported second-quarter declines in revenue, net income, and adjusted earnings, blaming pool and room renovations at The Strat completed in June.
Revenue of $286.7 million for the second quarter declined 1% from $289.4 million for Q2 2022. Net income for the second quarter of 2023 was $12.3 million compared to net income of $21.2 million for the second quarter of 2022. Second-quarter 2023 adjusted EBITDA was $58.4 million compared to adjusted EBITDA of $75 million last year.
Revenue at The Strat was down 10%, while EBITDA fell 44%, in part due to having 15% less rooms available for the majority of the quarter due to renovations. Some 537 rooms were completed in mid-June and estimates are that it lost about $3 million in room revenue and $2 million in room EBITDA in the second quarter by the disruption, according to President and Chief Financial Officer Charles Protell.
“The Strat’s second-quarter results were also impacted by higher labor expenses, weaker spend per guest, and reduced table-game volume,” Protell said. “Upon completion of our 537-room renovation, we commenced renovation on another 118 rooms and our oldest tower at the property.”
That budget for that $8 million and will be funded from last week’s sale of its Rocky Gap casino property in Maryland for $250 million.
“We expect to complete these room renovations prior to the fourth quarter, so we can further capitalize on F1, the opening of Atomic Golf (in November or December), and increased citywide conference attendance in the fall,” Protell said.
Performance at Golden Entertainment casinos in Las Vegas outside of The Strat were in line with the second quarter of 2022. Gaming revenue at taverns was down from a year ago. Golden opened its 65th tavern in the quarter and plans to acquire six additional taverns by the end of 2023 or early 2024. It has three development sites for future locations, Protell said.
Distributed gaming revenue was down 4% compared to 2022, while EBITDA decreased 14%.
“We felt some weakness in Nevada across our third-party tavern partners, which is similar to our own Nevada tavern performance for the quarter,” said Protell. He later added, “Our company remains uniquely positioned to benefit from the growth drivers from Nevada’s resort and locals market and we believe our properties will demonstrate better performance in the back half of the year.”
Golden took action to improve its balance sheet with the refinancing of its revolving credit facility and term loan in May. Following the Rocky Gap Casino Resort divestiture in July, it allocated $175 million of the $250 million in proceeds to repay outstanding debt.
The company continues to expect the sale of its distributed gaming businesses for $360 million to close by the end of 2023, which will further strengthen the balance sheet and liquidity.
“Reflecting the strength of our capital structure, continued strong free-cash-flow generation, and the expected cash proceeds from the sale of our distributed gaming operations later this year, we’re accelerating our return of capital to shareholders both in the form of a special dividend and expanding our stock-repurchase authorization,” said CEO and Chairman Blake Sartini.
Golden’s board of directors has declared a one-time cash dividend of $2 per share of its outstanding common stock payable on August 25 to stockholders of record as of August 11. The board also increased the company’s share repurchase authorization to $100 million.
As of June 30, the company’s total principal amount of debt outstanding was $916 million, consisting primarily of $175 million in outstanding borrowings under the original term loan to be repaid with proceeds from the sale of Rocky Gap Casino Resort, $400 million in outstanding borrowings under the new term loan, and $335 million of senior unsecured notes. As of June 30, the company had cash and cash equivalents of $166 million.
In July 2023, the company allocated $175 million of the proceeds from the sale of Rocky Gap Casino Resort to repay its remaining debt under the original term loan. Total debt outstanding as of July 31 primarily consisted of $400 million in outstanding borrowings under the new term loan and $335 million of senior unsecured notes. In addition, there continues to be no outstanding borrowings under the company’s $240 million revolving credit facility.
