Las Vegas-based Golden Entertainment rode a strengthening southern Nevada economy and improved performance in its Montana and Maryland operations to record first quarter revenues.
Net revenues grew 17 percent year-over-year from $91 million to $107 million, with the jump being attributed to a full quarter of revenue from newly acquired distributed gaming routes in Montana.
Distributed gaming revenue in Nevada was up 4 percent to $67 million, while the first full quarter of Montana revenue checked in at $15 million. Total casino revenues from Nevada and Maryland were up 9 percent to $24 million.
“Golden Entertainment’s record 2017 first quarter financial results were driven by significant year-over-year growth across our distributed gaming and casino businesses,” said Blake Sartini, chief executive officer.
Total adjusted EBITDA for the quarter grew 29 percent from $10.5 million to $13.6 million and net income more than doubled to $5.3 million. Both came on the heels of double digit increases in both categories across all segments. Earnings per share checked in at $0.23 per share, up from $0.10 in the prior year quarter.
“The first quarter 2017 financial performance of our distributed gaming segment benefited from last year’s Montana acquisitions as well as contributions from our new tavern openings,” Sartini added. “In March, we opened the first of our seven planned taverns for this year and our three casinos in Pahrump and Rocky Gap continued to benefit from our recent investments.”
Golden’s biggest driver in Nevada remains its wholly-branded tavern business. It opened its 54th store in the first quarter and plans to unveil six more by the end of the year.
“Our continued investment in branded taverns is an attractive way to drive high return growth and further participate in the health of the Nevada economy,” Sartini said, adding that “these taverns are one of the most attractive ways we can invest our capital given the positive macroeconomic trends seen in Nevada.”
On a conference call with investors, Golden executives touted the resilience of the post-recession Las Vegas economy. Tourist visitation and convention business remains strong, unemployment is down below 5 percent and there are a number of significant construction projects in the works that will improve area infrastructure.
“With these developments and the continued economic strength of Nevada, we remain very excited about our distributed gaming operations and continue to invest in this market,” said Sartini.
The company also detailed for the first time its interests in new distributed gaming markets.
“We remain optimistic about the long term growth prospects of our Montana operations and see ourselves as a key consolidator of what remains a fragmented distributed gaming market – not only in Nevada but also across the country,” said Charles Protell, the company’s chief strategy and financial officer.
Protell added that Golden was closely eyeing Pennsylvania – which is currently debating a gambling expansion package that could potentially include video gaming terminals – as a potential jurisdiction for expansion.
“We’re heavily involved and focused on [Pennsylvania]. We‘re hopeful that something happens this calendar this year for enactment on January 1, but obviously the bills are still being debated as we speak.”
“While it’s hard to handicap the probability of legislation passing this year, we think the odds are favorable,” said John DeCree of Union Gaming in a research note. “Distributed gaming in Pennsylvania would be a substantial opportunity for Golden that we believe is not included in valuation today.”
Rocky Gap Casino, situated in rural western Maryland, pulled off a surprisingly strong quarter – growing revenues by 11 percent to $15 million on the heels of a fresh renovation.
“Our recently completed investments at Rocky Gap led to solid year-over-year revenue and EBITDA growth despite a new property opening in Maryland late last year,” Sartini said.
Rocky Gap will also benefit from a new law, signed in April that will allow casinos in Maryland to purchase gaming machines on their property from the state in exchange for a 10 percent discount on slot revenues. Such a development is projected to increase EBITDA at the property by $3 million annually.
The company also improved its balance sheet and leverage profile during the quarter.
“We reduced total borrowings on our credit facility by $6.0 million while completing $5.7 million of capital expenditures across our businesses,” said Protell. “In addition to our organic reinvestment plan, we continue to evaluate strategic opportunities to grow both our casino and distributed gaming businesses in 2017 and beyond.”
For its balance sheet, Golden concluded the first quarter with $45 million in cash against total debt of $181 million.
