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Golden Entertainment reports revenue, announces Stratosphere renovations

16 March 2018

(PRESS RELEASE) -- Golden Entertainment, Inc. today announced financial results for the fourth quarter ended 31 December 2017, as summarized below.

Blake L. Sartini, Chairman and Chief Executive Officer of Golden Entertainment, commented, "Organic financial growth in 2017 in all of our operations, combined with our significantly expanded business across Southern Nevada following our acquisition of American Casino & Entertainment Properties, has positioned Golden Entertainment for continued growth in 2018. The addition of Stratosphere Casino, Hotel & Tower, Arizona Charlie's Decatur, Arizona Charlie's Boulder, and the Aquarius Casino Resort has significantly scaled our operations in the Las Vegas Valley and Southern Nevada with leading assets which are complementary to our unique platform of casinos, taverns and route operations. Notably, since acquiring the American properties in October, we are seeing encouraging cross-play trends, with our tavern customers visiting the Stratosphere, Aquarius and Arizona Charlies' locations in increasing numbers.

"Our strategic priorities for 2018 include the ongoing integration and synergy realization from the American acquisition, the introduction of a single loyalty card program across all of our operations, and the commencement of focused capital investments at Stratosphere that we expect will further establish the property as a unique destination for visitors to the north end of the Las Vegas Strip. Since completing the acquisition, our conviction has only grown stronger that targeted, return-focused investment in the Stratosphere will enhance our guests' experiences and allow us to drive financial performance at the property. Importantly, our phased approach to this project, including further investment in the room product and the development of existing unused space within the property's footprint, will minimize potential disruption to our current operations and allow us to maximize this iconic property's potential."

Stratosphere Redevelopment and 2018 Capital Plan
The Company's master plan for the Stratosphere includes upgrading the existing room product, adding exciting new food and beverage outlets, creating attractive meeting space, upgrading the casino floor and refreshing the building's exterior. Golden Entertainment expects to begin work on the redevelopment project in the second quarter of 2018, and to minimize disruption to the Stratosphere's current operations, intends to phase the construction over a three-year period ending in the summer of 2021.

Highlights of the Stratosphere three-year redevelopment plan include:
  • A complete renovation of more than 1,100 rooms, representing nearly 50% of the existing room base.
  • The addition of a unique gastro-brewery, featuring Golden Entertainment's signature branded craft beer and menu, which will be connected with a remodeled, state-of-the-art sports- and racebook.
  • The addition of new steakhouse, noodle bar and other food outlets.
  • A refresh of the iconic Top of the World restaurant and Tower experience.
  • The installation of state-of-the-art digital signage and lighting for the property exterior.
  • The creation of a dedicated casino area conveniently located near access to the tower thrill rides to appeal to a younger visitor demographic.
  • The transformation of existing unused space into approximately 50,000 square feet of meeting space targeted at modest-sized groups and conventions.
Golden Entertainment anticipates that the total investment for the Stratosphere redevelopment plan will approximate $140 million, with approximately $32 million budgeted for 2018.

In addition, the Company is planning approximately $48 million of additional capital spending across the balance of its platform in 2018, inclusive of $20 million in maintenance capex. Other key capital projects for 2018 include:
  • The installation of a new slot management system and loyalty program.
  • The opening of six new wholly-owned branded taverns across the Las Vegas Valley.
  • A remodeling of the hotel rooms at Rocky Gap.
The Company expects that total capital expenditures for 2018 and in future periods will be funded by operating cash flow.

Mr. Sartini added, "Going forward, we remain confident that the health and economic vitality of the Las Vegas Valley and the surrounding Southern Nevada communities provide a tangible foundation for the long-term growth of our business. Billions of dollars of expected new investment in the greater Las Vegas area in large-scale gaming projects on the Strip, as well as in non-gaming venues, continue to support growth of the Las Vegas economy. In addition, the local community's support for professional sports, reflected by continued sell-outs by the Golden Knights and a building anticipation for arrival of the Raiders, has brought new excitement and visitors to the market. These factors and others have us excited for the future as we deliver on our goal of further enhancing shareholder value."

Results for the Three Months Ended 31 December 2017
Consolidated net revenues for the 2017 fourth quarter were $184.3 million, compared to $105.4 million in the prior-year quarter. The increase in net revenues was driven primarily by the inclusion of 73 days of operations of American in the fourth quarter as well as continued revenue growth across the Company's existing casinos and distributed gaming operations. Net revenues for the casino operations in the 2017 fourth quarter were $101.2 million compared to $24.1 million in the prior-year period, reflecting the contributions from the acquired American properties in the fourth quarter. Combined Net Revenues for the Casino operations for the fourth quarter were up 2.4% year-over-year on a same property basis. Net revenues for Golden's Distributed Gaming business rose 2.1% over the prior-year period to $82.9 million.

For the fourth quarter of 2017, the Company recorded a net loss of $13.4 million, or 53 cents per diluted share, compared to net income of $10.0 million, or 44 cents per diluted share, in the prior year quarter. The year-over-year decline in net income was driven primarily by the inclusion in the 2017 fourth quarter of corporate and other costs associated with the Company's acquisition of the American operations on 20 October 2017. Distributed Gaming net income for the 2017 fourth quarter increased 7.1% year-over-year, and net income for the Casino operations in the 2017 fourth quarter grew 278% year-over-year.

Adjusted EBITDA for the 2017 fourth quarter was $29.0 million compared to $12.2 million for the prior-year period. The increase in Adjusted EBITDA was driven primarily by contributions from the American casino assets for part of the quarter as well as continued growth at Rocky Gap and growth in the Nevada distributed gaming business. Adjusted EBITDA for the Distributed Gaming business for the 2017 fourth quarter declined 3.1% year-over-year while Adjusted EBITDA for our Casino operations for the 2017 fourth quarter grew 428.4% year-over-year. Combined Adjusted EBITDA for the Casino operations for the fourth quarter was up 9.9% year-over-year on a same property basis.

Balance Sheet and Liquidity
As of 31 December 2017, the Company had cash and cash equivalents of approximately $91 million and total outstanding debt of approximately $1 billion. In January 2018, the Company raised approximately $25 million as part of a marketed equity offering. There were no outstanding borrowings under the Company's $100 million revolving credit facility.

Charles H. Protell, Chief Strategy Officer and Chief Financial Officer, commented, "Since completing the American Casinos & Entertainment Properties acquisition in the fourth quarter, we have realized approximately $14 million of our targeted $18 million in cost synergies with the balance expected to be achieved by the end of 2018. Our strong cash flow and healthy financial position will allow us to fund approximately $80 million in planned capital
4 expenditures for 2018, and we also expect to reduce our net leverage ratio to between 4.5x-4.75x by year end. In addition, we remain active in evaluating strategic opportunities across both our casino and distributed gaming businesses that could further our goal of expanding the scale of our entertainment and gaming platform."

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