Increases in casino and slot route earnings helped Golden Entertainment post a 15.7% first-quarter revenue increase as Las Vegas-based company rebounded from losses a year ago when its entire portfolio in three states closed due to the pandemic.
Golden, which operates 10 hotel-casinos in Southern Nevada and Maryland and slot machine routes in Nevada and Montana, said Thursday occupancy in Las Vegas improved significantly during the quarter.
The company’s earnings per share and revenue exceeded Wall Street forecasts.
“The first quarter demonstrates Golden’s unique and acute correlation with current and long-term secular growth drivers, more so than regional gaming peers, in our view,” said B Riley Securities gaming analyst David Bain.
Golden’s net income was $10.6 million, or 35 cents per diluted share, for the three months ended March 31, reversing a net loss of $32.6 million, or $1.17 per share, a year earlier. The latest results topped the 54-cents-per-share average forecast of analysts surveyed by Seeking Alpha.
In a statement, Golden Entertainment CEO Blake Sartini said the company generated more than $40 million of cash in the first quarter and foresaw free cash flow improving, which allows the company to focus on reducing leverage.
As of March 31, Golden had cash of $145.4 million and total debt of $1.2 billion.
“These results highlight strong demand at our properties combined with substantial margin improvement due to the adjustments we have made to our operations,” Sartini said. “As the year continues, we expect that our free cash flow will allow us to reduce leverage and return capital to shareholders while also providing added financial flexibility to pursue potential strategic growth initiatives.”
Revenue in the quarter rose 15.7% to $239.7 million from $207.2 million. Casino revenue rose 1.2% to $129.5 million from $128 million. Slot route revenue rose 39.1% to $109.9 million from $79 million.
Wall Street has been mostly upbeat about Golden Entertainment. On March 15, Union Gaming Group analyst John DeCree set a $40 per share price target for Golden. Bain’s target price is $60 a share.
Following earnings, DeCree reiterated his view of the company, saying the Strat tower and casino in downtown, just north of the Las Vegas Strip, “is just now turning the corner and gearing up for a leisure-led demand recovery this summer.”
DeCree said the pandemic recovery “is undoubtedly a key driver of growth going forward, but the Strat has a few unique catalysts that have seemingly gotten lost in the recovery excitement.” He noted the resort’s hotel room remodeling program and a casino floor renovation.
Golden spent more than $100 million on the Strat remodels just before the pandemic hit.
“The refreshed building was hitting stride in January/February of 2020 before being interrupted by the pandemic,” DeCree noted. “We were excited about The Strat’s prospects then, but we are even more enthusiastic now as visitation to Las Vegas accelerates.”
Macquarie Securities gaming analyst Chad Beynon said the recent Strip land sales around the Strip “should underscore the value of Golden portfolio, given 100% land ownership.”
Golden Entertainment shares fell 50 cents, or 1.38%, Wednesday to close at $35.75 on the Nasdaq. The shares have surged 85.6% in 2021.
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