Golden Entertainment dismisses M&A talk after net profit rises in Q1

Revenue for the three months to 31 March hit $174.0m (£139.3m/€161.9m). This is some way behind the $278.1m posted by Golden Entertainment in Q1 last year following a series of asset sales.

The first sale saw Rocky Gap offloaded to Vici Properties and Century Casinos for $260.0m. Vici acquired the venue in July while Century took on the operations.

Golden Entertainment also sold its Montana distributed gaming business to J&J Ventures Gaming in September. This is part of a wider deal, with the group also selling its distributed gaming operations in Nevada to an affiliate of J&J Ventures Gaming for $213.5m in January this year.

Inevitably, offloading assets had an impact on revenue performance, with this also evident both in the 2023 full-year and Q4 of last year. However, on the flip side, it has left Golden Entertainment with a healthier net profit, while expenses are lower and it redeemed and repaid in full all senior unsecured notes valued at $287.0m.

Chief financial officer Charles Protell also noted that when comparing continuing operations year-on-year, revenue was down less than 1.0%. 

“The financial flexibility recreated by reducing leverage and maintaining liquidity has allowed us to establish a recurring dividend at an attractive yield and positions us to fully utilise our current $91.0m share repurchase authorisation,” Protell added.

Is M&A an option now for Golden Entertainment?

With this additional financial flexibility, could this push Golden Entertainment into making acquisitions of its own? CEO Sartini said while the group is monitoring the market, there is nothing immediate in the M&A environment.

“We pretty much get first look at anybody who wants to sell or we have had first look,” he said. “So, we’re in a good position there in terms of knowing what’s available and out in the market. We also get one of the first looks, if not the first greenfield opportunities, which we’re focused on our five-star locations, primarily at this point.”

Sartini went on to say the group’s footprint is “large enough” at present, giving Golden Entertainment a “significant competitive advantage”.

“If you look at the regulatory complexities of each of these taverns having to be licensed individually, to get a large number, a significant number in a portfolio that would compete quickly, I think, would be nearly impossible from a regulatory standpoint,” Sartini said.

“So, our size and our brand, I think, is a significant competitive advantage out there for us. Competition has always been there. We’ve weighted our way through that very successfully. We believe with our footprint and our brand, we’re in a good position to not only grow but continue to stay strong in the tavern business going forward.”

Revenue from continuing operations almost level

Looking at where revenue came from in Q1, some $86.9m of total revenue was attributed to gaming operations. This is 53.8% lower than last year following the asset sales.

However, this is based on both continuing and divested gaming operations, with the latter including $6.0m in revenue. In the previous year, this figure stood at $108.5m, prior to the asset sale.

When focusing on continuing operations – removing the impact of the now-divested assets – total revenue was only 0.9% lower at $168.0m. 

Here, Nevada Casino Resorts revenue edged up 0.8% to $101.0m but Nevada Locals Casinos revenue slipped 5.3% to $39.0m. Elsewhere, Nevada Taverns revenue was up by 0.7% to $27.8m but corporate and other revenue fell 57.7% to $218,000.

Net profit jumps 262.1% in Q1

Elsewhere, food and beverage revenue dropped 5.6% to $43.7m, rooms revenue slipped 3.9% to $29.4m and other revenue fell 6.9% to $14.0m.

However, when it comes to comparing spending, the asset sales had a marked improvement on results. Total expenses were 61.7% lower at $93.9m, with spending lower across several key areas. Golden Entertainment also benefitted from a $69.7m gain on the sale of business.

Even after accounting for $10.7m in non-operating costs, pre-tax profit was 382.6% higher year-on-year at $69.5m. Golden Entertainment paid $27.5m in tax, leaving a net profit for Q1 of $42.0m, an increase of 287.9%.

However, adjusted EBITDA from continuing operations was down 14.4% at $40.5m. When also including divested operations, total adjusted EBITDA fell 34.1% to $41.0m.

“We now have a Nevada portfolio of eight casinos with owned real estate and 71 gaming taverns with our operations focused in markets where we see long-term drivers of future growth,” Sartini said.

“In addition, with our debt reduced significantly, our low leverage provides us with the flexibility to invest in our own assets, return capital to shareholders and pursue potential strategic opportunities.”