Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Golden Entertainment First Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode, a question-and-answer session will follow the formal remarks. Please note that this call is being recorded today. Now I'd like to turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead, sir.

Thank you very much, operator, and good afternoon, everyone. On the call today is Blake Sartini Blake, the company's Founder, Chairman and Chief Executive Officer; and Charles Protell, the company's President and Chief Financial Officer. On today's call, we will make forward-looking statements under the safe harbor provisions of the federal securities laws. Actual results may differ materially from those contemplated in these statements. Additional information concerning factors that could cause actual results to materially differ from these forward-looking statements is contained in today's press release and our filings with the SEC. Except as required by law, we undertake no obligation to update these statements as a result of new information or otherwise. During the call, we will also discuss non-GAAP financial measures in talking about our performance. You can find the reconciliation of GAAP financial measures in our press release, which is available on our website. We'll start the call with Charles reviewing the details of the first quarter results and the business update. Following that, Blake and Charles will take your questions. With that, it's my pleasure to turn the call over to Charles Protell. Charles, please go ahead.

Thanks, Joe. For the first quarter, we generated revenue of $278 million and EBITDA of $62 million, with revenue up over last year, but EBITDA impacted by cost pressures as well as disruption of the STRAT from ongoing room renovations we are undertaking to be ready for the strong Las Vegas calendar later this year. Before getting into the operations, we have a few updates on our previously announced M&A activity. At the end of April, the Maryland Lottery Commission improved Century Casinos to acquire a Rocky Gap resort. We have one more step in Maryland, the approval of VICI's lease with the state and then we will be able to close, which we still anticipate by the end of June. In March, we announced the sale of our Nevada and Montana distributed businesses to J&J Gaming, the largest distributed operator in Illinois, which will become the largest distributed operator in the country after closing. We remain confident both transactions will close by year-end, and we look forward to having J&J as our gaming partner in our Nevada taverns. Importantly, both these transactions accomplished our goal of divesting noncore businesses at attractive valuations, leaving us with a Nevada portfolio of owned casino assets and the largest gaming tavern footprint in the state. Collectively, these transactions will generate over $500 million of net proceeds, which will allow us to reposition our balance sheet, more effectively invest in our core assets, return capital to shareholders and evaluate strategic opportunities. Within our segment results, revenue at Nevada Casinos resorts increased 4%, while EBITDA declined 5.5%. Revenue for the STRAT increased 9% and EBITDA rose 6% despite having about 15% less rooms available given the ongoing renovations. Disruption from having rooms off-line during the quarter cost us about $2 million in EBITDA, and we…

[Operator Instructions] Your first question will come from David Bain with B. Riley. Please go ahead.

Thank you. Hi, Blake and Charles. My first question around the completion of Atomic golf since it's coming up, I was hoping to get a little bit more detail on how you look to maximize its value in terms of potential cross pollination with your casino strategies around, promotion, coupons awards, or anything around signage or ingress to the casino. I understand it has a separate driver that's very high margin, but I'm trying to understand the strategic opportunity to the casino?

Yes, David. I mean the short answer is all of the above. We meet with those folks regularly. And after touring the facility, we believe there's significant potential cross-marketing opportunities even beyond what we had originally contemplated. But we have a very willing ownership group on that side to combine the two properties. I think we've told -- we've said in the past, we're looking at roughly 500,000 to 600,000 visitors potentially that will be driven by that facility. And I think the main thing to consider here is we have plenty of capacity within our current parking garage, which our anticipation is those people have to transition through the property to get to Atomic golf, the majority of them, let's say, there is a rideshare drop-off, and there is some adjacent parking to the facility. But we intended to -- without getting into granular detail, intend to combine marketing efforts with that property and our property, primarily there's all kinds of things we can do there. But primarily, we can integrate our player rewards program. We can -- there's all kinds of offers that we can make one-off, if you will. But we're pretty confident that we can get those people to stick in the casino, particularly, as you know, we've renovated what we call the South Casino. As we go forward, we will renovate that north end casino with more food and beverage offerings and additional gaming which we anticipate to capitalize on that foot traffic. So all of the above, as you said, without getting into granular detail, we are focused, very focused on ensuring that those people within the Atomic golf facility have many reasons to visit our properties while they -- before or after they are done with the Atomic golf.

Okay. Perfect. And then I guess my second one would be on the tavern expansion strategy. Could that include a kind of a broader focus outside of Las Vegas with the Sierra Gold and PT's brand still in Nevada, Reno, Laughlin? Or is the focus only on Las Vegas expansion?

That's a great question, David. I would say we -- by divesting of, as Charles mentioned, our non-core, what we believe are non-core route or third-party business does not forgo our ability to continue to operate within the distributed platform, not only in Nevada, but other states, we outperformed with our brick-and-mortar assets where we control the environment. So there is brick-and-mortar opportunities in other states potentially and with J&J, being our partner, who is broadening their footprint. There may be a lot of synergies there as we -- as other markets open up, we could potentially participate on the brick-and-mortar side versus the third-party route side.

Thank you so much. Thanks, Blake. Thanks, Charles.

Your next question comes from David Katz with Jefferies. Please go ahead.

Hi, afternoon everyone. Thanks for taking my questions. I wanted to just follow on that line a little bit. Just talk about any parameters qualitatively that might be willing to share in terms of size, where you would take leverage back up to those kinds of issues other than just kind of where it's located? Thank you.

Yes. I think from a -- David, hey, it's Charles. From a leverage perspective, we've been pretty clear. We're going to keep our net leverage below 3 times. Like I said on the call, that's a lot of capacity within the existing capital structure. I think our time this year needs to be spent on focusing on closing these transactions keeping the balance sheet leverage low, should we can think about those opportunities that may come up in the future. With respect to the specifics around taverns, we have data in our investor deck, we track all of the ROIs on our recent tavern openings, remodels and new builds. And it's about a 30-plus percent ROI is where those are tracking to. So to us, that means that, quite frankly, the new tavern bill is probably the most attractive ROI opportunity in the portfolio. They're just small in terms of quantum of EBITDA. But it's still something that we should be doing when we find premier sites or acquisition opportunities to pursue.

Perfect. Then just a follow-up, and I know this is all after and available. Can you remind us what excess land you may have available in Las Vegas and whether that's an area of attention for you at this point in terms of activating it in some way?

Yes. That's actually very clear, great question. If you take each of our wholly owned assets here in Nevada and add up the contiguous and/or adjacent property that we have to develop, in addition to our current core assets that already sit on the property. If you include the Colorado Belle, which is approximately 22 acres, which is a blank canvas some in Colorado River with 1,000 feet of river frontage. We have approximately 95 additional acres if you add them all up between our existing properties to develop to provide ancillary amenities that would benefit those properties, whether they're high-density third-party investments, hotel rooms, additional casino space or whatever. So to answer your question, if you include the Colorado Belle, it's about 95 acres. If you exclude the Colorado Belle just for perspective, it's about 74 acres of additional real estate between the STRAT, to Arizona Charlie's, our Laughlin properties and Pahrump that we would have to invest in to generate additional returns at those facilities.

Thank you very much.

Your next question comes from Edward Engel with ROTH MKM. Please go ahead.

Hi, thanks for taking my question. Could you please maybe just remind us at the Stratosphere in terms of the investments going on there other than maybe some of the fit room renovations, I guess, what other projects are also being completed in the first half of this year? Thanks.

Yes. Of course, as you know, the rooms, which we talked about, we also have embarked on our main mezzanine level, our H4 pool, which is the main pool for the property. We began in January that should be completed by Memorial Day. We also have open Chi restaurant, which in our new Asian facility, which is doing extremely well at the moment. Those are the things that are going on currently. We have plans, as I mentioned in my prior comments, or north casino, and other amenities coming on later. But the pool, the rooms and the food facility that we just opened our primary investments at this point in time.

Thanks. And I guess on that, the future projects related to the casino floor, is that within this year's budget? Or is that more of a longer term.

No, I mean, look, I think that those are all things that we look at and we say, if the property is performing, we're doing well, we're showing the growth and return on investment we've made. Those are things that we think that we could do. I think if you look at where we're going to be when we get to the end of Q2, we'll have renovated over half of the routes where we're seeing right now currently a $20 ADR premium in those rooms. We will have touched up all of the pool space. We will have touched up on the main casino and then some life work in the north casino, and we've refreshed all the food and beverage offerings. So -- and by the way, we're adding a $75 million amenity in the form of Atomic golf that is not coming off of our balance sheet. So when you look at all of that, I think that we're going to be in a position to see what the property could really do as we get into the fall to see what it does when the [indiscernible] with that line, with the raters [ph] as we head into Super Bowl, and then we'll be able to evaluate the trajectory of further investment in the property.

It's helpful. Thank you.

[Operator Instructions] Your next question comes from Chad Benyon with Macquarie. Please go ahead.

Afternoon, Charles, Blake. Thanks for taking my question. Charles, I wanted to just hit on kind of your last comment, but asked with respect to the quarter, your rooms revenues were up significantly, I think about $5 million year-over-year. Can you just kind of talk about what you saw in the quarter with some compression on the weekdays. And then roughly what your gap is to the average Strip ADR right now. Obviously, this will kind of help inform what you're going to be able to charge for the renovated rooms? Thanks.

Yes. I mean, look, I'd say relative to where we were in 2019 is kind of how we think about looking at it, how do we get that back. And if you look at this quarter's performance relative to '19, occupancy is still down 16%. And all of that is really midweek occupancy for the most part. I think that while we had this construction going on, there was some of that displacement that happened during the weekend, which cost us a little bit. So from a Strip performance perspective, you look at our improvement in EBITDA and revenue relative to others who, by the way, have group meeting space, have larger facilities, we aren't quite there. But again, when you have 15% of your room base offline, we expect that. So from our perspective, we're pretty encouraged at the STRAT show EBITDA up revenues up with 15% of the rooms that are off-line.

Great. Thank you. And then within your database or maybe within the different tiers of your taverns, have you seen any meaningful change in trends with the different levels of customers that you cater to?

Yes. I mean, look, I think when you look over the past, if you go back a year plus ago, which was the comp clearly for Q1, we had very strong tavern performance across all of the demographics within the database. We have seen that tail off a little bit, and we've seen a little bit more volatility at the higher end of that database. I think as you've had more things that are opened up in town, there's more alternatives for spend. And those folks are traveling more, we just see a lot more volatility within the tavern top end. Now that's in Q1. I think when things happen like the nights make it deeper run into the playoffs, we see that pick up the tavern business also across the entire spectrum of the player database.

Okay. Thanks for the additional color. Nice quarter.

Thank you. Your next question comes from John DeCree with CBRE Securities. Please go ahead.

Hey, Blake, Charles. Thanks for taking my question. Charles, I'm not sure I caught in the prepared remarks, but you had mentioned about potentially refinancing the term loan in 2Q and using proceeds from Rocky Gap to pay that down. I'm not sure if I caught that. And if you were thinking about doing anything with the bonds as well. So maybe the question is capital structure plans as we get closer to Rocky Gap closing in June?

Yes. I mean I think if you just fast forward, in the near term, we'd like to refinance the existing $575 million of term loan that we have outstanding. We would use, as we said in the remarks, $175 million of the Rocky Gap proceeds to do that. And I think at this point, our view is we leave the bonds outstanding, which are unsecured and at a fixed rate that quite frankly, is lower than our secured debt from a cost perspective right now until we close on the distributed sale and then use the proceeds from the distributed sale to pay off the bonds after their call protection is up in April of next year. Now if you fast forward through all of that, we are a $200-ish million EBITDA entity that's 1.5 times levered. We just a $400 million term loan on a net basis, $400 million term loan in place with a $240 million unfunded revolver that provides us plenty of liquidity to go find opportunities.

Thanks all for that. You caught my follow-up question, so maybe I'll ask one about operations. You had discussed in different components of cost inflation that you've experienced in the quarter, I think Laughlin, if the metric was up 10%, and I think taverns, labor up similarly. I was wondering if you could revisit that for us and kind of help us understand when maybe the cost inflation you start to anniversary. I think you've mentioned that maybe it starts to taper off, all of that's absorbed. So -- or at least a good chunk of it. So if you could give us a little bit more color on how you're thinking about costs, maybe for the balance of the year that would be helpful.

Yes. I think -- I mean, look, if you look at over the last nine months, that was Q3, Q4, Q1, the margins have been fairly consistent within this range. So it's our view that we're at the margin point going forward despite some of the continued cost increases that we saw year-over-year from Q1, you'll still see some of that in Q2. But if you look back, again, historically over the last nine months, we've been telling people, hey, we think margins have kind of settled in at this point.

Got it. Thanks, Charles, thanks, Blake.

Thank you. This concludes our question-and-answer session and today's conference call. Thank you for attending today's presentation. You may now disconnect.