Golden Entertainment officials joined their gambling industry peers in describing the coronavirus-triggered casino closures and business halt as unprecedented and crushing.
In February, pre-COVID, year-over-year growth had been robust.
In its first-quarter earnings statement last week, the Las Vegas-based company, which owns hotel-casinos in Southern Nevada and Maryland and slot routes in Nevada and Montana, said it has worked to stabilize business — drawing on its revolving credit facility and reducing cash operating expenses — and plan ahead — devising sanitation protocols to make its casino environment safe for an eventual reopening.
To emphasize that point, Golden Entertainment CEO Blake Sartini said during a quarterly conference call with analysts the company’s Montana slot routes reopened earlier in the week and the 300 locations across the state were busy.
“Although it has only been a few days, we have seen pent-up demand and customer volumes comparable to pre-closure levels as patrons return to their local taverns, where social distancing and enhanced cleanliness standards have been implemented,” Sartini said.
Analysts saw the Montana news as a good sign for the industry.
“While the Montana distributed business accounts for roughly 4% of Golden’s property level (cash flow), we think the read-through is relatively encouraging as it pertains to a high-frequency local drive to venues and the potential for a swifter top-line recovery,” said Deutsche Bank gaming analyst Carlo Santarelli.
“While we would not extrapolate such results, we do believe the early datapoint is a bright spot in a sea of relatively challenging news of late,” he added.
During the quarter that ended March 31, Golden Entertainment its net loss widened fourfold from a year earlier and revenue fell. Both figures missed Wall Street forecasts.
Golden Entertainment said its net loss was $32.6 million, or $1.17 per share, compared with a net loss of $8 million, or 29 cents per share, a year earlier. Analysts surveyed by Seeking Alpha had, on average, expected earnings of 71 cents per share.
Revenue fell 13.6% to $207.3 million from $239.9 million and missed the $218.6 million forecast of Seeking Alpha-polled analysts.
Adjusted earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excludes one-time costs, fell 37.4% to $30.3 million from $48.4 million
Investors apparently found some solace, perhaps in the Montana slot route or news of Nevada gaming regulators approving guidelines for casinos’ eventual opening. In regular Friday trading on the Nasdaq, Golden Entertainment’s shares climbed 93 cents, or 11.83%, to close at $8.79.
Sartini said his company drew down its $200 million availability under its revolving credit facility and deferred all capital expenditures. He said the moves positioned his company to withstand the business disruptions “for the foreseeable future.”
Sartini added that Golden Entertainment has spent the past several years working to ensure long-term growth by renovating the off-Strip Strat (formerly the Stratosphere), acquiring properties in Laughlin, pursuing new slot routes and instituting its True Rewards loyalty program.
“Our current cash position, capital structure with no near-term debt maturities and diverse operations of wholly-owned casinos and distributed gaming operations across multiple jurisdictions will position Golden Entertainment favorably to achieve long-term success as we are allowed to reopen our properties,” Sartini said.
On Thursday, the Nevada Gaming Commission OK’d the rules backed by the Gaming Control Board unanimously approved health and safety requirements casino operators must follow in order to reopen once the shutdown is lifted.
Casinos run by resort operators – which includes the Strat and Laughlin resorts – will be limited to no more than 50% their maximum occupancy capacity, must increase the space between their slot machines, and will be required to limit the seating at table games – three players for blackjack, six for craps, four for roulette, and four for poker.
As with resort casinos, occupancy inside the smaller locations will be reduced by 50% while social distancing measures in taverns will limit the number of bar top slot machines that can be used at a given time.
Taverns that sell food were allowed to reopen Saturday, but the slot machines have to remain closed.
Nevada Governor Steve Sisolak said his office and the Gaming Control Board will decide when gaming operations can restart.
“While Golden’s Nevada businesses (gaming taverns and casinos) will remain closed, we believe there is at least a path to recovery,” said Macquarie Securities gaming analyst Chad Beynon. “With low infection rates in the region and a business-friendly but cautious governor, we believe casinos could open within a month.”
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