Golden Entertainment spent its second-quarter conference call touting the market potential in Laughlin, where the company acquired two hotel-casinos last month.
The company announced higher revenue. However, profits – though higher – missed Wall Street forecasts.
In a statement, Golden Entertainment, which owns hotel-casinos in Southern Nevada and Maryland and slot routes in Nevada and Montana, said net income was $3.6 million or 12 cents per diluted share, for the three months ended June 30, up from net income of $1.7 million, or 7 cents per diluted share, a year earlier.
The latest result lagged well behind Yahoo Finance’s analysts’ estimate of 23 cents per share.
Adjusted earnings before interest, taxes, depreciation and amortization, a measure of cash flow, more than tripled to $46.3 million from $15 million. In a statement, the company said operational changes and strong performance from its hotel-casino in Las Vegas and Laughlin fueled results.
Revenue rose 96.7 percent to a record $216.5 million from $109.9 million. Analysts polled by Yahoo Finance had forecast profits of $222.9 million.
In July, Golden Entertainment agreed to buy two Laughlin casinos, the Edgewater and the Colorado Belle in Laughlin from Marnell Gaming for $168 million to $190 million. The deal will give Golden, which owns the Aquarius, three hotel-casinos in the market.
On the conference call, Golden CEO Blake Sartini said the transaction will give the company 55 contiguous acres on Laughlin’s main walking path along the Colorado River.
Golden Entertainment said it expects the deal to close during the first quarter. Together, Edgewater and the Colorado feature over 1,400 slot machines, 40 table games and 2,150 hotel rooms.
Sartini said Laughlin generated $500 million in gambling revenue in 2017 and suggested there was potential for more; the market’s gaming revenue topped $630 million in 2007 before the U.S. economy crashed and the Great Recession started.
“The market’s core customers from Arizona and Southern California will continue to see Laughlin as an attractive alternative to Las Vegas, while an increasing number of Southern Nevada’s 2.2 million residents will visit Laughlin as a weekend getaway.
“This acquisition … solidifies our network in what we believe to be the most attractive gaming jurisdiction in the country,” he said, referring to Southern Nevada.
Macquarie Securities gaming analyst Chad Beynon told investors in a research note following the conference call “the market has failed to give Golden credit for the Marnell Gaming acquisition, which we believe will add greater than $2 of value to the name and actually increases exposure to Southern Nevada.”
Golden Entertainment’s casino segment revenue rose to $130.9 million from $26.2 million. Distributed Gaming segment revenues rose 2.1 percent to $85.4 million from$83.6 million.
Distributed gaming revenue rose 2 percent to $85.4 million from $83.6 million.
Golden bought the Aquarius, along with the Stratosphere and two Arizona Charlie’s hotel-casinos in Las Vegas, in October when it paid $850 million to acquire American Casino and Entertainment Properties.
The company is spending $32 million this year to renovate the Stratosphere, a project the company said is on schedule and on budget. The first phase, begun in May, includes the renovation of 317 rooms, the installation of state-of-the-art exterior signs and lighting, and the addition of a gastro brewery connected to a renovated sports book.
The company said it expects 250 of these renovated rooms to be in service in September and the balance to be finished in the fourth quarter.
In all, Golden Entertainment will spend $140 million over three years to upgrade to the Stratosphere.
In a note to investors Thursday, Union Gaming Group analyst John DeCree said Golden maintained that its other business segments in Las Vegas would off-set any third quarter softness discussed on earnings calls last week by Strip casino operators.
“We believe there is more margin opportunity ahead and some incremental revenue potential as the company continues strategic investments into Stratosphere,” DeCree told investors.
Golden Entertainment shares were down 6 percent in trading Thursday morning on the Nasdaq.
Follow Matthew Crowley on Twitter @copyjockey
