Ladies and gentlemen, thank you for standing by and welcome to the Fourth Quarter 2019 Golden Entertainment Earnings Conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded, March 12th, 2020. [Operator Instructions] Now, it's my pleasure to turn the call over to Joe Jaffoni with Investor Relations.

Thank you, Carmen and good afternoon everyone. By now, everyone should have access to our fourth quarter 2019 earnings release, which can be found on the company's website at www.goldenent.com under the Investors section. Before we begin our formal remarks, we need to remind everyone that today's discussion will include forward-looking statements within the meaning of the federal securities laws. These forward-looking statements, which are usually identified by the use of words such as will, expect, believe, anticipate, should, or other similar phrases are not guarantees of future performance. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from our corporate working statements, and therefore, you should exercise caution in interpreting and relying on them. We refer you to the risk factors in our recent SEC filings, including our most recent Form 10-K, as updated by our subsequent quarterly reports on Form 10-Q for a more detailed discussion of the risks that could impact our future operating results and financial condition and other forward-looking statements. During today's call, we will discuss non-GAAP financial measures, which management uses and believes are useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measures is available in our fourth quarter 2019 earnings release. On today's call is Blake Sartini, the company's Founder, Chairman and Chief Executive Officer; and Charles Protell, the company's President and Chief Financial Officer. Charles will start the call, after which Blake will make some comments, and we'll then open the call to your questions. With that, it's my pleasure to turn the call over to Charles Protell. Charles, please go ahead.

Thanks Joe. Gold delivered record fourth quarter revenue and adjusted EBITDA as we grew both our casino and distributed gaming operations. We also made further progress across several initiatives, primarily the completion of our major renovations at The Strat and the rollout of our new loyalty program, TrueRewards. For the fourth quarter, net revenue grew 15.2% to $242.1 million and adjusted EBITDA rose 25.1% to $43.1 million. For Nevada casinos, fourth quarter revenue was $133.9 million, up 24.1% from the prior year, while adjusted EBITDA grew 18.6% to $36.9 million. Growth from our Nevada casinos reflect the contribution from the Edgewater and the Colorado Belle at Laughlin as well as year-over-year increases in revenue and adjusted EBITDA across the rest of our Nevada Casinos segment. The disruption on The Strat casino floor for the second half of 2019 impacted the property's performance despite strong room and F&B revenue growth at the property. At the end of December, we completed the majority of the renovations at The Strat and are now operating in 2020 without construction disruption. For our Laughlin properties, we continue to see increased cross play between our three assets since we consolidated our loyalty programs and rationalize promotional spending. We are focused on bringing more entertainment to the market and expect our loss in operations to benefit from a stronger than calendar compared to 2019. Our local Arizona Charlie's Casino has performed very well, growing revenue mid-single-digits and EBITDA by double-digits for the quarter. At Rocky Gap in Maryland, Q4 revenue increased 3.2% on a year-over-year basis, while EBITDA increased over 24% to $4.8 million. This growth reflects the property lapping some of its regional competitive pressures that emerged in 2019 in our efforts to right-size its marketing spend. In our Nevada distributed business, total revenues during the…

Thanks, Charles. As Charles mentioned, we're coming off a very strong fourth quarter and are continuing to make progress on all of our company initiatives. Having operated in Nevada for over 30 years, I've managed through other local and world events in each and every case; Las Vegas has proven its resiliency and has come back bigger and stronger than before. I'd like to remind everyone; I am the largest shareholder of build and entertainment and have an obvious invest interest, along with all other shareholders to see our valuation grow. I can't control the coronavirus and unfortunately don't have a cure. But we do have one of the most highly regarded management teams and boards in the gaming industry, which together have significant equity ownership that is aligned with all of our public shareholders. As we've communicated in the past, we are a different gaming company and we have deliberately built Golden Entertainment with a focus on positioning ourselves to profit from the fastest-growing region in the country. That being Southern Nevada, which has the most stable regulatory environment, highest population growth, as well as other positive economic factors, all of which have been key drivers that have led to consistent organic growth for Nevada businesses. While we have a Strip asset, we are not a Strip company. Not one of our business units requires air traffic to visit. And in addition, each of our local and regional properties are not dependent on any large group business. As I've said, we built this diverse gaming platform by design to include the local and regional markets, mostly here in Nevada, as well as our operations in Maryland and Montana. I think it's extremely important to point out, but along with our unique gaming platform, we own 100% of the real…

Thank you. [Operator Instructions] Our first question is from Carlo Santarelli with Deutsche Bank. Please go ahead.

Yeah, thank you so much. Blake, Charles, thank you both very much for all of the perspective that you provided. Both of you in your remarks did referenced the real estate several times. And my question is more along the lines of in the changing conditions like we have today and that continue to evolve on a daily basis. The presence of your real estate and your views of your real estate change in what manner in terms of how you think about its value to you?

Carlo, this is Blake. I think first of all, all options are on the table at this point in time, given, as you've mentioned, kind of the day-to-day moving to the goalpost that's occurring as a result of this macro environment. And as a company, we're looking to grow long-term shareholder value. We have no short-term plans to do anything other than what we're doing in operating our business as it is currently. But we do see -- I mean, the share price, today, in fact, all of our compatriots on the phones, share prices are trading today like we're closing forever. And I think the reality is I try to give some perspective and some pick a pause here, the reality is in a company like ours, not only are we diversified, as I have mentioned, given the distributed gaming, local and regional properties that can be driven to, we also own our own real estate to your question. I see that as an advantage. I see that as flexibility. I see that as variability for us. And as we continue through this, depending upon how long this lasts or if we continue to be underappreciated in our share price, we'll consider all of that.

Great. Thank you. That's very helpful. And the second question is -- and I want to be very careful in how I word this, but I actually -- I want to kind of get your opinion. What do you view as the likelihood with everything that's going on from the NCAA tournament being canceled to schools being canceled and closed. In your opinion, looking at the broad picture of the United States, do you believe there is the potential and possibly even a welcome relief to potentially close regional casinos and/or Las Vegas casinos for a brief period of time until things were to cool off a little bit. Do you believe that potentially exists at this point?

It's hard for me to comment on that. At this time, I mean, from a personal perspective, we're not anticipating that. However, again, as this goal post move daily, we're not going to -- I think it's a response for us to comment. I think at the moment, that's built into our share price if that occurs.

Hi, Carlo. A week ago we just thought we would be talking about the NCAA canceling a national championship and not playing games. So yes, in the vein of anything's possible, sure, but we're not planning for it at this point of time.

No. And I think Charles and to both of your points, I mean, it does feel at this point like we're pricing in things beyond that. So if that were to be the start of the healing process here for all of this and the bigger picture thing. So my point was not one of trying to be negative and/or alarmist, it was more of one that could potentially be the solution of this problem in the near term as we get things closed and then start to come out of this as we move further down the road and figure out how everything works at that in time. But I appreciate your perspective on all of it. Thank you guys.

Thanks, Carlos.

Thanks.

Thank you. Our next question is from Chad Beynon with Macquarie.

Taking my question.

Hey, Chad.

Hi.

Charles I wanted to focus on, I guess, fourth quarter, particularly at The Strat, if you could maybe just provide some additional KPIs? Anything to kind of help us think about how the property uptick or uptake occurred? Anything like RevPAR or restaurant covers? I know there was some disruption, I believe, early on in the quarter, but could you help us think about any of those data points that gave you the confidence that things were moving in the right direction? And then maybe even anything in January or February before we started to see the impact from the current situation? Thanks.

Sure. Chad, it's Charles. For the fourth quarter, we're still maintaining a $20 ADR premium on the rooms that we've been renovating, and we sell all our hotel revenues up, call it, mid single-digits over the quarter despite disruption that was going on at the property. We've gotten some of our table games that were back online. That business has been doing very well for us. Revenues on the table gaming side, again, up high single-digits in the quarter. And in the F&B revenues that we've touched, those are also depending on the venue, mid- to high single-digits from that perspective. We had a little erosion in terms of slot performance with the casino floors still down, particularly through October, and disruption throughout the front desk and other areas that casino created a little bit of a drag on EBITDA that we talked about. But for where we've touched, and it's a little bit of trying to find our footing as we ease touched, we've seen very good results. Now for January and February, those numbers for us, clearly are on plan. So I feel very good about the investment that we've made in the property up into this point in terms of -- in talking through our spend, and what we've seen there through the fourth quarter and January, February of 2020.

Okay, great. And then without, I guess, telling your competitors' secrets of how you're going to handle the situation. It was probably about 1.5 years ago when there was some weakness on the strip and some of the bigger players were discounting heavily. If that starts to happen over the next quarter or maybe even beyond that, and those operators are digging deeper into their database and you guys, just given a different type of mix with your FIT customers and gaming customers. How should we expect for you guys to run the business from a discounting standpoint? Or will you be going for occupancy? Will you be trying to kind of hold your own on pricing because this hopefully will be a short term blip? Just maybe help us think about if there is massive discounting, how you guys will handle maybe March and the second quarter?

Listen, I think, Chad, that's a good period to use as a reference point. And so I think at that time, everyone was fighting for occupancy based on rate driving that occupancy on a retail perspective as group business did not materialize as others had anticipated. So from our perspective, what does that do to The Strat, you had within that quarter, EBITDA was down about 18%, which, to give sense of magnitude was around $2 billion to $2.5 billion of EBITDA. So if we're at that point in time, it's our view that those are the type of impacts we're looking at. Given the current situation with groups that are canceling. And then you'd see that for a quarter potentially.

Okay. And then lastly, just on the state of Maryland, your property that Rocky gap. Could you just update us on where that is from a sports betting standpoint legislatively?

Legislation is being proposed. It's working its way through at this point. We're obviously excited about it. There's a limited number of casino gaming licenses in the state right now. We're one of them. So stay tuned for that.

Okay. Thank you very much guys. Best of luck.

Thanks.

Thank you. Our next question is from Dan Politzer with JP Morgan.

Hey, good afternoon, guys and thanks for taking my questions. Certainly, I appreciate all the color on the current situation there and Southern Nevada. So I wanted to touch on the free cash flow. Obviously, that's been a big part of the story for your stock. I mean, how should we be thinking about free cash flow for next year, in the past, we've talked about maybe being in that mid- $3 range. And granted today, the world looks a lot different than it did maybe a few months ago when we last – when we last spoke. But I guess, how should we be thinking about that? And I guess, what leverage do you have here to fully unlock the value in your stock, given it seems that investors are not really appreciating it, given where it's been trading?

So Dan, we have less than $60 million of debt obligations, largely cash interest expense costs. Other than that, we don't have to really spend the dollar. So I think that everyone has their models, we're not giving guidance. You guys – obviously, the sector has taken a haircut for views on what that's going to be for this year. At this point, it's priced in that we may as well not even have to strap within our portfolio at this point in time to do anything with or without real estate. So from my perspective, we can certainly manage our cash flow, and we can manage our obligations. And like I said, right now, all the 80% of our EBITDA really isn't seeing much of an impact to our expectations, if at all, some assets are even up, particularly on the local side. So again, I'm not going to give guidance. But you should have that as a data point that $60 million is what we have to cover. So you guys could do the math in there.

Okay. And then I just wanted to follow up on the real estate. Obviously, that's been topical here. And as you think about options there to maybe monetize that. I mean, is it – will you look at your entire portfolio? Is it certain properties, certain properties in certain markets? Can you kind of maybe frame how you're thinking about that?

Yes, Dan. As I said in my prior comments, pretty much all at this particular time all options are on the table. I see this flexibility. I see it as that's certainly a very valuable asset to our portfolio. And I think over time, if we see share prices continue to be underappreciated and businesses continuing to be traded in line, although, they are very different in many cases. We'll make that -- it will drive conclusion at that point in time. As I said right now, we're not anticipating doing anything. But I like having that. I like having wholly owned real estate as a part of our portfolio.

Right. I appreciate the color. Thanks so much guys.

Thanks.

Thank you. [Operator Instructions] Our next question is from David Katz with Jefferies.

Hi, afternoon everyone. And thank you for the commentary. I know you've talked about around about this a bit, Charles, but can you talk about the book-of-business that you may have and visibility that you may have or at least that you appear to have at the moment at the Stratosphere? And the degree to which you've been able to separate your performance or at least the trajectory of your performance relative to the rest of the Strip? Or are you really tethered to whatever the environment is how correlated are those?

So, as you know, we have a relatively short booking window at The Strat. We do not have group business as Strat becomes the derivatives Strip as it relates to that. So as rate and occupancy goes within the town, and we've done the Strip. So this is a Stratosphere. We compete at the levels with our peers. Like I said, the property we sold out last weekend. We're tracking to a relatively high occupancy rates this weekend. Look, this is obviously evolving every hour and every minute with each new announcement of events getting canceled and other things. I'd say that, again, the context that I gave to chat is probably the right one as we've seen this before. We saw it in the summer of 2018. We saw price competitiveness competing for occupancy along the Strip, and it impacted various properties in different ways. And some people report those very specifically, so folks to go check that. But for us, it was about an 18% drop in EBITDA for the quarter on a year-over-year basis for The Strat. The Strat figures around $50 million of EBITDA annually. So you guys could then do the math and what the impact is on a quarterly basis.

Right. And if I can just follow that up with respect to sort of OTA business being able to drive more direct versus OTA. Can you just -- the quarter was quite good. Can you sort of talk about progress there also?

Yes. I mean, look, we made a lot of progress. If you looked on a percentage basis up quite a bit, so remember, our direct bookings are relatively low. We're actually seeing direct bookings still increase, particularly as we rolled out our TrueRewards player loyalty program. Giving us more access to customers, we're getting crossovers in terms of marketing other people in the database coming from other assets. So that's all helpful. I think those are the kind of relatively small numbers to the overall booking, we're still highly in OTA dependent type of property, depending on the time, because anywhere from 65% to 70% of the bookings are coming on OTA channels still. But that's improving over time. And like I said, we're pretty encouraged with the rollout of TrueRewards and our ability to drive more direct casino bookings. It all ties into some of the metrics we talked about in terms of driving more table game play. So we're pushing that, refining those players. And that should get us a little less reliant on that, but that will be a process over time.

Got it. One last one, if I may. Laughlin, having been there, the degree to which it is connected, plugged into and/or tethered some of the goings on within Las Vegas, meaning, impact from events, et cetera, it struck me as somewhat separated from kind of the vibe of the Las Vegas strip. What are you seeing there in the past week or so in reaction to the situation?

Listen, we had a meeting yesterday with all of our GMs to ask that very question. And, quite frankly, our customers down there was nothing to do with Las Vegas. They see it as a value play, less crowd, less hassle, easier to get in out of, drive to, not fly to and they're comfortable there. So we don't see that changing. We're still seeing them coming. We have a big concert event this weekend. It's on. So we're just not seeing the adverse impact, yet still over into that market.

Thank you. Great quarter.

Thanks David.

Thank you. And our next question comes from John DeCree with Union Gaming. Please go ahead.

Hi Blake. Hi, Charles.

Hi, John.

Thanks for taking my question.

Yes.

I wanted to talk about the distributed business a little bit and any opportunities that you're monitoring, kind of, outside of Southern Nevada, right now? Pennsylvania is kind of up and going and there's been some talks about Missouri possibly considering this. And I wanted to know if you guys had updated thoughts on some of those opportunities? And if you think kind of current situation with coronavirus might kind of distracts politicians at this point and kind of what your -- what the prospects are for that business outside of Nevada for you guys right now?

Yes, John. So, as we've spoken in the past on the last, I think, a couple of quarterly calls, we continue to be very active and very involved in pursuing distributed gaming opportunities wherever they may arise, in particular right now in the short term, Pennsylvania that we've discussed and Missouri seems to be two places that, in the near term, have real possibilities of expanding and/or legalizing this form of gaming. We will have a lot more of an update, to your point, on our next call. I think, the session runs through June in Pennsylvania. There are a lot of catalysts that we're monitoring there that are positioning this legislative effort positively. I don't want to get too far in front of it, but the skill game issue in this, not only Pennsylvania but other states, has caught the proliferation of those gains, which are not tracking any revenue back to the state in the form of any tax and are being placed in literally the hot dog shops, barber shops and elsewhere, are creating a situation where the states ultimately are having to deal with this. And I think Pennsylvania has reached that nexus. And that being a catalyst and also the potential revenue being generated from these games from the BGT legalization is proving to be a catalyst, not only there, but in Missouri as well. So, without repeating myself, we are very involved. We are in real time speaking to folks back there on pretty much a daily basis, and we will have an update for you with much more detail on our next call.

Thanks. Like, that's a good update, helpful. Same business in Las Vegas, you guys have had a pipeline of new openings for a while on the tavern segment, kind of 4% to 6% over the last couple of years. Can you talk about your pipeline, do you still expect some openings in 2020 and kind of still targeting a handful of new openings every year at this point? Or kind of what's the latest in terms of unit growth?

Having been a continuing significant bright spot in our portfolio, we now have approximating 66 taverns in the market in the Southern Nevada or Clark County, I guess, market. As Charles mentioned in his comments, our focus this year is on debt reduction and not necessarily on growth capital spend, and the taverns would fall into the growth capital spend category. So, specifically, we are not anticipating any new openings this year. We are always looking for what we call three-star AAA locations to put our brand. Having said that, we don't have really anything in the pipeline at the moment. It is an opportunity for us to operate that business. As I mentioned in my written comments, uninterrupted this year without having to take a lot of energy to open tavern, believe it or not, and six of them in one year puts a lot of stress on our team. So, we're focused on that operation as it is. We're focused on paying down debt and there's nothing right now in the foreseeable future for new openings.

Great. Thanks, Blake. Appreciate the additional color.

Thank you. Our next question is from Dennis Farrell [ph].

operator:

Look, I think that's probably important for companies to do that have liquidity or maturities or that have issues with their financial covenants that they see in the future. I mean, look, we're fortunate we have no financial covenants in our current debt structure. We think we have plenty of liquidity. We have an undrawn $200 million revolver, as you noted. We have cash on the balance sheet. So look, we're kind of comfortable where we are right now. But obviously, we'll watch it is certainly always an option for us as we look going forward. But I think its situational dependent on company’s internees, what's coming up in the future.

Okay. And then, would you say that your age of your customers, I guess, SKU like a higher age? Or just kind of like the -- like -- is it like the average 55 year old? Or do you say it's like an all SKUs older?

I think it depends on the business you're looking at. So, our local's properties on the casino side, certainly SKU older. Our Tavern SKU younger. Strat ends up being somewhere in the middle of this.

Okay. All right. Thank you, very much guys. Good luck to you.

Thanks.

Thank you. And at this time, I will turn the call back to Mr. Sartini for his closing comments.

Thank you, operator, and thank you for joining us today. We are -- we anticipate hosting you on our next call for the next quarter and look forward to updating everyone when we report our first quarter results in 2020. Thank you.

And with that, ladies and gentlemen, we thank you for participating, and you may now disconnect.