Reporting that it didn’t benefit from the Formula 1 race in November, Golden Entertainment experienced a $49 million decline in fourth-quarter revenue, a net loss of $9.4 million and adjusted earnings of $48.8 million, a decrease from the $63.6 million in the fourth quarter of 2022. The numbers were impacted by the 2023 sale of a Maryland casino and Montana distributive operation.
Adjusting for those sales, revenue fell 1.6%, while adjusted earnings fell 11% in the fourth quarter.
Despite the flat F1 results, the company said it benefitted from the Super Bowl in February, which will be part of first-quarter revenue and earnings. Atomic Golf, a version of Top Golf, will open in March and provide further advantages in 2024.
Deutsche Bank analyst Carlo Santarelli sent a note to investors, saying Golden delivered “fairly in-line results,” with upside to the net-revenue forecast offset by higher-than-expected costs in the fourth quarter; the $3.9 million net revenue beat was mitigated and the property EBITDA fell $1.5 million shy of forecast. Adjusted EBITDA, post corporate expense, came in at $48.8 million and was $800,000 below forecast.
For the fourth quarter, Golden Entertainment reported $230.7 million in revenue, down from $279.7 million in 2022.
The $9.4 million net loss is in contrast to $11 million in income during fourth-quarter 2022. It’s attributed primarily to an asset-impairment charge of $12.1 million related to the Colorado Belle Casino Resort in Laughlin, the operations of which remain suspended.
The year-over-year declines in revenues and adjusted EBITDA were primarily due to the exclusion in the 2023 fourth-quarter results of the company’s Rocky Gap Casino Resort and distributed gaming operations in Montana sold in July and September 2023, respectively.
Charles Protell, president and CFO, told Wall Street analysts Thursday that the fourth quarter concluded a “transformative year” for Golden Entertainment. He said margins were impacted during the fourth quarter by increases in labor and other costs.
Revenue at Golden’s Nevada casinos, including the Strat on the Strip, rose slightly, while adjusted earnings declined 8.8%, Protell said.
“Unfortunately, we didn’t see any benefit from Formula One, with the Strat’s November EBITDA down about $800,000 year over year,” Protell said. “Despite that disappointing experience, Strat occupancy in the fourth quarter was 79%, up 2% over last year, with the weekends full and midweek occupancy improving, but still lower compared to 2019. We’re still missing 125,000 room nights at the Strat when compared to 2019, which we see gradually returning as we complete renovations and add amenities to the property.”
In October, Golden completed the renovation of the Strat’s original 118-room tower, the last of the major upgrades to the property.
“Recently, we saw tremendous pickup during the Super Bowl, resulting in approximately $1 million in incremental room revenues over that weekend,” Protell said.
“Like peers, we anticipate the first quarter for Golden got off to a somewhat bumpy start in January, though business has rebounded nicely in February, helped in part by the Super Bowl, which management noted as having driven $1 million in incremental hotel room revenue at the Strat,” Santarelli said. “Despite the thin float, which could create additional volatility with the relatively in-line quarter, 2024/2025 estimates not moving in a material manner, and the dividend announcement in conjunction with the release, we wouldn’t anticipate a significant move in the shares on the print.”
Within the Nevada casino segment, the Strat union wages kicked in and served as a headwind for margins, down about 290 basis points in the fourth quarter year over year, Santarelli said.
“Looking ahead, management believes it can maintain flattish margins in 2024, though this is based more on revenue growth, from the lapping of renovation disruptions and the addition of Atomic Golf, while also lapping some of the cost headwinds. Atomic Golf is expected to add about $6 million in annual EBITDA, though with the later-than-expected opening in March, the 2024 impact is likely to be modestly below $5 million.”
For full-year 2023, revenues were $1.1 billion, the same as in 2022. Net income for 2023 was $255.8 million compared to net income of $82.3 million for the full year 2022.
Net income for full-year 2023 included the $303.2 million gain on the sales of the Rocky Gap Casino Resort and distributed gaming operations in Montana. During 2023, the company incurred transaction costs of $8.3 million and $0.8 million on the sales of the Rocky Gap and distributed gaming operations in Montana, respectively, and $0.4 million in transaction costs related to the sale of the Nevada distributed gaming operations sold subsequent to the fiscal-year end.
Full-year 2023 adjusted EBITDA of $222.5 million declined from adjusted EBITDA of $267.1 million for full-year 2022, primarily due to the exclusion of the results for the businesses sold in 2023, the company said.
In January, Golden Entertainment completed a $213.5 million sale of its Nevada distributed gaming business, combined with non-core divestitures in 2023 that generated over $600 million total proceeds, the company said.
More than $60 million of debt was repaid in the fourth quarter and $239 million of total debt repaid in 2023.
On Feb. 27, the company’s board of directors declared a recurring quarterly cash dividend of $0.25 per share of the company’s outstanding common stock, the first of which is payable on April 4 to shareholders of record as of March 18.
