Golden Entertainment enjoyed a strong third quarter that has continued into October and bodes well for the rest of 2022, the company announced in its Thursday earnings call.
Chairman and CEO Blake Sartini said the quarterly results continue to be significantly above 2019 levels and that they’re encouraged by the business trends to start the fourth quarter – echoing comments by other casino companies this earnings season.
Charles Protell, president and CFO, said the third quarter represented the second highest revenue and adjusted earnings in history, surpassed only by the third quarter in 2021.
Revenue of $279 million for the Q3 2022 was down 1% from $282.4 million for Q3 2021. Net income was $14 million compared to last year’s $29.1 million. Third quarter adjusted EBITDA was $61.1 million, a 17% decline from $73.4 million for the third quarter of 2021. Adjusted EBITDA margin was 22% for the third quarter compared to 26% last year.
“To start the fourth quarter in October we saw strong business trends across our portfolio with [adjusted earnings] up over last year at every property other than in Laughlin, where we had one more concert in October ,” Protell said. “The Strat [in Las Vegas] posted its highest revenue month in history with occupancy above 80% on average, including being completely sold out on the weekends. We expect October to be the second highest [adjusted earnings]-generating month in the company’s history.”
Protell said they’re positioned to weather any economic environment. There are more visitation drivers and economic activity in Southern Nevada than in any other gaming market in the country, he said.
“Our properties are stable cash-generating assets with underlying real estate values,” Protell said. “We have one of the lowest leverage ratios in the industry and plenty of liquidity. These factors make us excited about our future and confident in our ability to continue creating long-term value for our shareholders.”
Revenue for the company’s Nevada Casino Resorts segment that includes The Strat was $98.9 million for the third quarter of 2022 compared to $104.4 million for the third quarter of 2021. Third quarter 2022 adjusted EBITDA was $30.1 million compared to $39.2 million for the third quarter of 2021. Adjusted EBITDA margin was 30% for the third quarter of 2022 compared to 38% for the third quarter of 2021, the company announced.
“Reduced occupancy at The Strat compared to last year is the primary driver of lower margins in our resort segment,” Protell said. “We expect margins to improve in the fourth quarter as occupancy continues to grow.”
A Golden Entertainment joint venture broke ground in August on a $75 million golf entertainment facility with more than 100 bays adjacent to The Strat. It’s expected to be completed by the end of 2023.
“We believe it will be a significant traffic driver to our property, locals and visitors alike,” Protell said.
Revenues for Golden’s Nevada locals casinos segment were $37.7 million for Q3 compared to $38.1 million for the third quarter of 2021. Third quarter adjusted EBITDA was $16.8 million compared to $18.1 million for the third quarter of 2021. Adjusted EBITDA margin was 45% for the third quarter compared to 48% for the third quarter of 2021.
“To start the fourth quarter in October, revenue and [adjusted earnings] tracked ahead of last year for all of our local casinos,” Protell said.
Revenues for distributed gaming were $117.6 million for Q3 compared to $117.9 million for the third quarter of 2021. Third quarter adjusted EBITDA was $18.8 million compared to $21.2 million for the third quarter of 2021. Adjusted EBITDA margin was 16% for the third quarter compared to 18% for the third quarter of 2021.
“In Nevada, our wholly owned, branded taverns as well as our managed third-party locations both saw a decrease in August and early September,” Protell said. “It’s similar to what we typically see at our properties when people tend to travel or get ready to go back to school. This was offset by increased revenue in Montana where we added new locations and benefited from increased summer tourism over last year.”
Nevada’s wholly owned taverns got off to a strong start in the fourth quarter, benefitting from the sports calendar as well as strong performance from the newest taverns opened in March.
Revenues for the Maryland Casino Resort segment were $21.6 million for the third quarters of both 2022 and 2021. Third quarter adjusted EBITDA was $7.4 million compared to $7.7 million for the third quarter of 2021. Adjusted EBITDA margin was 34% for the third quarter compared to 35% for the third quarter of 2021.
In August, Golden announced it entered into definitive agreements to sell the Rocky Gap Casino Resort in Maryland for $260 million. Century Casinos will acquire the operations for $56.1 million, and VICI Properties Inc. will acquire an interest in the associated land and buildings for $203.9 million. The company expects the transaction to close during the second quarter of 2023.
“Without any other East Coast properties, this sale will allow us to further focus on our core operations in Nevada,” Protell said.