Despite the impact of mandated shutdowns due to the COVID-19 pandemic, Golden Entertainment said its financial performances quickly recovered at its properties in its third quarter.
The company said Thursday adjustments were made to managing its portfolio, which allowed Golden to generate its third highest-ever quarterly earnings before interest, taxes, depreciation, and amortization (EBITDA) of $45.4 million
“Our record third quarter results demonstrated that our diverse portfolio of locals-oriented and regional gaming operations have rebounded quickly from the mandated shutdowns in March,” Golden President Charles Protell said during a conference call with analysts. “We achieved these results even with The STRAT (the company’s flagship Las Vegas hotel and casino) performing below 2019 levels and the mandated closing of most of our bar areas for most of the third quarter.”
Net loss for the third quarter was $7 million, or 25 cents per share, compared to a net loss of $9.4 million, or 34 cents per share, in the third quarter of 2019. The adjusted EBITDA of $45.4 was an increase of 5.5% from 2019’s third quarter EBITDA, $43.1 million.
The third quarter EBITDA was led by Arizona Charlie’s Decatur and Arizona Charlie’s Boulder, the company’s two Las Vegas locals casinos, which achieved double-digit revenue growth and collectively doubled their cash flow compared to the 2019 third quarter.
Macquarie Securities gaming analyst Chad Beynon said in a research note that Golden’s third quarter revenues in the Nevada locals market grew roughly 15%, calling the area “one of the strongest regional gaming markets in the U.S. during the quarter.” Beynon noted that the overall Las Vegas locals market was flat with Boyd Gaming reporting its locals revenues down 20% and Red Rock Resorts were down 27%.
In Laughlin, Nevada, the Aquarius and Edgewater casinos experienced an 8% growth in adjusted EBITDA compared to the third quarter in 2019. Golden Entertainment’s casinos in Pahrump, Nevada had a 40% increase in adjusted EBITDA, and its Rocky Gap Casino in Maryland improved by 27% in adjusted EBITDA compared to the third quarter of 2019.
Since reopening in May, Golden Entertainment’s Montana operations experienced a 17% increase in revenues, with an increased EBITDA of 7%.
The STRAT’s occupancy rate remained at 50% during the week, and reached 90% on weekends, according to Protell, with room revenues down 50% from the third quarter of 2019. However, the spending per guest has increased by 30%, with most of that spending on higher margin gaming revenue.
“Given the increased customer spend on gaming combined with the fact that the STRAT has never directly depended on conventions or international books, we believe the STRAT is performing better than most Strip properties, as it is generating two-thirds of the EBITDA from last year,” Protell said.
Protell added that excluding the STRAT, the total casino EBITDA would amount to 38% over 2019’s third quarter.
“We believe these margin levels are sustainable,” Protell said, “primarily based on fundamental changes to our class structure within property marketing and labor expenses.”
Golden Entertainment said it has $100 million on cash on hand and its balance sheet is essentially at the same level prior to state-mandated shutdowns due to COVID-19. No additional debt or equity capital needed to be raised to sustain or restart operations.
Protell said that looking forward, Golden Entertainment’s focus will be on sustaining and improving performance across operations while using excess cash flow to reduce leverage and explore future opportunities.
“These opportunities include sports wagering in Maryland, expansion of distributed gaming to new jurisdictions, as well as returning capital to shareholders,” Protell said.
Shares of Golden, traded on the Nasdaq, closed at $16 Thursday, up 35 cents or 2.24%.
