Golden Entertainment, Inc. (GDEN) Bundle
Understanding Golden Entertainment, Inc. (GDEN) Revenue Streams
Understanding Golden Entertainment, Inc.’s Revenue Streams
Golden Entertainment, Inc. generates revenue from multiple sources, primarily from gaming, food and beverage services, room accommodations, and other ancillary services. Below is a detailed breakdown of the revenue streams as of 2024.
Breakdown of Primary Revenue Sources
| Revenue Source | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | 9M 2024 Revenue (in thousands) | 9M 2023 Revenue (in thousands) |
|---|---|---|---|---|
| Gaming | $75,684 | $165,177 | $240,880 | $535,619 |
| Food and Beverage | $41,849 | $44,507 | $128,623 | $137,312 |
| Rooms | $28,938 | $31,417 | $89,760 | $92,912 |
| Other | $14,762 | $16,625 | $43,351 | $56,615 |
| Total Revenue | $161,233 | $257,726 | $502,614 | $822,458 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate indicates a significant decline in revenues. For the three months ended September 30, 2024, the revenue decreased by 37% compared to the same period in 2023. The nine-month revenue comparison shows a decrease of 39% for the period ended September 30, 2024 versus 2023.
Contribution of Different Business Segments to Overall Revenue
As of September 30, 2024, the contributions from various segments to total revenue are as follows:
- Nevada Casino Resorts: $99,547 (Q3 2024)
- Nevada Locals Casinos: $35,405 (Q3 2024)
- Nevada Taverns: $26,042 (Q3 2024)
- Distributed Gaming: $0 (Q3 2024)
- Maryland Casino Resort: $0 (Q3 2024)
Analysis of Significant Changes in Revenue Streams
The decline in gaming revenues by $89.5 million, or 54%, for the three months ended September 30, 2024, was primarily attributed to the sale of the Rocky Gap operations and the cessation of distributed gaming operations in Montana and Nevada. The food and beverage revenues also faced a reduction of $2.7 million, driven by fewer entertainment offerings and lower visitation rates.
For the nine months ended September 30, 2024, gaming revenues decreased by $294.7 million, representing a 55% decline year-over-year, while food and beverage revenues fell by $8.7 million, marking a 6% decrease.
The following table summarizes the changes in revenue by segment for Q3 2024 compared to Q3 2023:
| Segment | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | Change (in thousands) | Percentage Change |
|---|---|---|---|---|
| Nevada Casino Resorts | $99,547 | $105,524 | -$5,977 | -6% |
| Nevada Locals Casinos | $35,405 | $37,901 | -$2,496 | -7% |
| Nevada Taverns | $26,042 | $26,540 | -$498 | -2% |
| Total Revenue | $161,233 | $257,726 | -$96,493 | -37% |
A Deep Dive into Golden Entertainment, Inc. (GDEN) Profitability
Profitability Metrics
Analyzing the profitability metrics of the company reveals key insights into its financial health. Below are the crucial profitability metrics for the third quarter and the nine months ended September 30, 2024.
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the gross profit was reported at $34,014 thousand, with an operating profit of $6,728 thousand, and a net income of $5,167 thousand. This translates to a gross margin of approximately 21.1%, an operating margin of around 4.2%, and a net profit margin of about 3.2%.
During the nine months ended September 30, 2024, the gross profit reached $116,198 thousand, the operating profit stood at $100,405 thousand, while the net income was $47,753 thousand, resulting in a gross margin of 23.1%, an operating margin of 20.0%, and a net profit margin of approximately 9.5%.
| Metric | Q3 2024 (in $000) | 9M 2024 (in $000) |
|---|---|---|
| Gross Profit | 34,014 | 116,198 |
| Operating Profit | 6,728 | 100,405 |
| Net Income | 5,167 | 47,753 |
| Gross Margin | 21.1% | 23.1% |
| Operating Margin | 4.2% | 20.0% |
| Net Profit Margin | 3.2% | 9.5% |
Trends in Profitability Over Time
When comparing the profitability metrics from previous years, it is evident that there has been a fluctuation in net income, particularly with a significant decrease in net income for Q3 2024 compared to $241,216 thousand in Q3 2023. The operating income also saw a notable decline from $323,709 thousand in Q3 2023 to $6,728 thousand in Q3 2024.
Comparison of Profitability Ratios with Industry Averages
The company's gross margin of 21.1% for Q3 2024 is below the industry average of approximately 25% for gaming and entertainment sectors. The operating margin of 4.2% also lags behind the industry average of 10%, indicating potential areas for operational improvements. In contrast, the net profit margin of 3.2% is slightly below the industry standard of 5%.
Analysis of Operational Efficiency
Operational efficiency metrics reveal that the operating expenses decreased by 50% or $75.0 million for Q3 2024, primarily due to reduced gaming operations following divestitures. The cost management strategies implemented have resulted in a decrease in overall operating expenses, but the increase in labor costs at certain properties has offset some gains in efficiencies.
The following table summarizes the key operational efficiency metrics:
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Operating Expenses | $75.0 million | $150.0 million | -50% |
| Labor Costs | $X million | $Y million | Z% |
Debt vs. Equity: How Golden Entertainment, Inc. (GDEN) Finances Its Growth
Debt vs. Equity: How Golden Entertainment, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, the company reported a total long-term debt of $386.3 million, which includes:
- Term Loan B-1: $395 million
- Finance lease liabilities: $3.961 million
- Current portion of long-term debt: $5.294 million
The total long-term debt and finance leases decreased from $658.5 million at the end of 2023.
Debt-to-Equity Ratio
The debt-to-equity ratio for the company as of September 30, 2024, is 0.76. This ratio is calculated as:
Debt-to-Equity Ratio = Total Debt / Total Equity
As of the same date, total equity stood at $513.1 million.
Industry Comparison
The average debt-to-equity ratio in the gaming industry typically ranges from 0.5 to 1.0. Thus, the company’s ratio of 0.76 indicates a balanced approach to leveraging debt for growth.
Recent Debt Issuances and Refinancing Activity
In April 2024, the company redeemed all its $276.5 million of 2026 Unsecured Notes, incurring a loss on debt extinguishment of $4.4 million. The company also restructured its senior secured credit facility, which resulted in reduced interest rate margins, enhancing liquidity and reducing overall debt service costs.
Credit Ratings
The company has maintained a stable credit profile, with its senior secured credit facility rated B2 by Moody’s. This rating reflects the company's operational performance despite recent divestitures and revenue fluctuations.
Balance Between Debt Financing and Equity Funding
The company has strategically utilized both debt and equity to finance its operations. In the nine months ending September 30, 2024, it repurchased 1,804,233 shares at an average price of $30.67 per share, totaling $55.4 million. This reflects a commitment to returning value to shareholders while managing its capital structure effectively.
| Financial Metric | Amount (in millions) |
|---|---|
| Total Long-term Debt | $386.3 |
| Debt-to-Equity Ratio | 0.76 |
| 2026 Unsecured Notes Redeemed | $276.5 |
| Loss on Debt Extinguishment | $4.4 |
| Total Equity | $513.1 |
| Shares Repurchased | 1.804 |
| Total Cost of Repurchase | $55.4 |
Assessing Golden Entertainment, Inc. (GDEN) Liquidity
Assessing Golden Entertainment, Inc. Liquidity
Current and Quick Ratios
As of September 30, 2024, the company reported a current ratio of 1.11, calculated as current assets of $105.5 million divided by current liabilities of $94.8 million. The quick ratio stood at 0.79, determined by excluding inventory from current assets, resulting in quick assets of $98.0 million and maintaining the same current liabilities.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, was $10.7 million as of September 30, 2024, indicating a decrease from $235.1 million at the end of 2023. This decline reflects the company's strategic divestitures and shifting operational focus.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, was $69.8 million, a decrease of 46% from $128.3 million in the same period of 2023. This reduction was primarily due to decreased operating income and changes in working capital.
Cash flows from investing activities provided $155.1 million, largely from the sale of distributed gaming operations. In contrast, cash used in financing activities totaled $354.0 million, reflecting significant debt repayments and share repurchases.
| Cash Flow Statement (in thousands) | 2024 | 2023 |
|---|---|---|
| Cash flows from operating activities | $69,812 | $128,325 |
| Cash flows from investing activities | $155,121 | $293,597 |
| Cash flows from financing activities | ($354,000) | ($268,100) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company held $68.6 million in cash and cash equivalents, alongside a $240 million available under its revolving credit facility, indicating adequate liquidity to meet short-term obligations. However, the substantial cash outflows for financing activities raise potential concerns regarding future liquidity, especially considering ongoing capital expenditures and operational costs.
Moreover, the company’s total long-term debt was $391.6 million as of the same date, down from $658.5 million at the end of 2023, which reflects improved leverage and potential for enhanced liquidity management moving forward.
Is Golden Entertainment, Inc. (GDEN) Overvalued or Undervalued?
Valuation Analysis
Is Golden Entertainment, Inc. Overvalued or Undervalued?
Price-to-Earnings (P/E) Ratio
The current P/E ratio is 22.56, calculated using the latest net income of $5,167,000 for the three months ended September 30, 2024, and the diluted shares outstanding of 29,408,000. The earnings per share (EPS) stands at $0.18.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated using the book value per share of $18.51 and the current stock price of $37.67. This results in a P/B ratio of 2.03.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is computed as the market capitalization of $1,118,000,000, plus total debt of $398,961,000, minus cash and cash equivalents of $68,551,000, resulting in an EV of $1,448,410,000. The latest EBITDA is $173,762,000 for the nine months ended September 30, 2024. Therefore, the EV/EBITDA ratio is 8.34.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between a low of $25.10 and a high of $41.33. The current price is $37.67, reflecting a 50% increase from the 12-month low.
Dividend Yield and Payout Ratios
The dividend yield is currently 0.18%, with a recent dividend payout of $6,962,000. The payout ratio based on the latest net income is approximately 14.6%.
Analyst Consensus
Analyst consensus on the stock valuation is Hold, with a target price range of $34.00 to $40.00.
| Metric | Value |
|---|---|
| P/E Ratio | 22.56 |
| P/B Ratio | 2.03 |
| EV/EBITDA Ratio | 8.34 |
| Stock Price (Current) | $37.67 |
| 12-Month Low | $25.10 |
| 12-Month High | $41.33 |
| Dividend Yield | 0.18% |
| Payout Ratio | 14.6% |
| Analyst Consensus | Hold |
Key Risks Facing Golden Entertainment, Inc. (GDEN)
Key Risks Facing Golden Entertainment, Inc.
The financial health of the company is influenced by various internal and external risk factors that can significantly impact its operations and profitability. Below are the major risks identified as of 2024:
Industry Competition
The gaming and hospitality industry is highly competitive. The company faces competition from both regional operators and national chains. This competitive environment can lead to price wars and increased marketing expenses, which can erode profit margins. For the three months ended September 30, 2024, total revenues decreased by $96.5 million, or 37%, compared to the prior year, with gaming revenues specifically declining by $89.5 million.
Regulatory Changes
Changes in regulations can impact operations significantly. The gaming sector is subject to extensive federal, state, and local laws and regulations. Any changes in these regulations can lead to increased compliance costs or operational restrictions. In 2024, the company noted that the exclusion of the results from certain operations due to regulatory compliance led to a $319.8 million decrease in revenues over nine months.
Market Conditions
The company's performance is closely tied to the economic conditions and consumer spending patterns. A downturn in the economy can lead to reduced discretionary spending on entertainment and gaming. The company reported a 46% decrease in net cash provided by operating activities, amounting to $69.8 million for the nine months ended September 30, 2024, down from $128.3 million in the previous year.
Operational Risks
Operational risks include challenges in managing a diverse portfolio of gaming assets and maintaining service quality across various locations. The company has faced higher labor costs, especially at The STRAT, impacting its adjusted EBITDA, which decreased by 20% for the three months ended September 30, 2024.
Financial Risks
Financial risks involve the company's capital structure and debt levels. As of September 30, 2024, the company reported long-term debt obligations of approximately $1.5 billion. The increase in interest expense, net of interest income, was $27.3 million for the nine months ended September 30, 2024, compared to $52.3 million in the previous year.
Strategic Risks
Strategic risks arise from the company’s decisions regarding acquisitions, divestitures, and capital expenditures. In 2024, the company has engaged in significant divestitures, which included the sale of its distributed gaming operations in Nevada for $204.1 million. Such strategic moves can affect operational continuity and revenue generation.
Mitigation Strategies
The company continues to adapt its strategies to mitigate these risks. Efforts include enhancing operational efficiencies, diversifying revenue streams, and maintaining a flexible capital structure to manage debt levels effectively. As part of its strategy, the company aims to improve liquidity through additional financing when necessary, which may consist of debt or equity financing.
| Risk Type | Description | Impact on Revenue | Recent Financial Impact |
|---|---|---|---|
| Industry Competition | High competition leading to price wars | Decrease in market share | $96.5 million revenue decrease in Q3 2024 |
| Regulatory Changes | Changes in laws affecting operations | Increased compliance costs | $319.8 million revenue drop in 9 months |
| Market Conditions | Economic downturn affecting consumer spending | Reduced discretionary spending | 46% decrease in operating cash flow |
| Operational Risks | Challenges in managing diverse operations | Increased operational costs | 20% decline in adjusted EBITDA |
| Financial Risks | High debt levels impacting financial stability | Increased interest expenses | $27.3 million interest expense in 2024 |
| Strategic Risks | Risks from acquisitions and divestitures | Potential revenue loss | $204.1 million from divestiture in 2024 |
Future Growth Prospects for Golden Entertainment, Inc. (GDEN)
Future Growth Prospects for Golden Entertainment, Inc.
Analysis of Key Growth Drivers
Product Innovations: The company has recently added seven branded taverns, which contributed to an increase in food and beverage operating expenses by $0.7 million for the three months ended September 30, 2024.
Market Expansions: As of September 30, 2024, the company operates 72 branded taverns primarily in the greater Las Vegas metropolitan area. This focus on local patrons positions the company to capture a steady customer base with frequent visits.
Acquisitions: The acquisition of GAP taverns added $3.988 million to the goodwill balance as of September 30, 2024. This strategic move is expected to enhance the company’s market presence and operational capabilities.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, total revenues decreased by 39% to $502.6 million compared to $822.5 million in the prior year. However, the Adjusted EBITDA for the Nevada Casino Resorts segment was $78.9 million, indicating potential for recovery as market conditions improve.
The company anticipates future revenue growth driven by a recovery in customer visitation and operational improvements across its segments, particularly in the Nevada Casino Resorts.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has implemented a share repurchase program, repurchasing 1,804,233 shares at an average price of $30.67 per share during the nine months ended September 30, 2024. This initiative is expected to enhance shareholder value and reflects management's confidence in the company's future prospects.
Additionally, ongoing partnerships with local suppliers and entertainment providers are aimed at enhancing the customer experience, which could lead to increased foot traffic and revenue.
Competitive Advantages That Position the Company for Growth
The company operates a diversified entertainment platform with a portfolio that includes eight casino properties and a significant number of tavern locations. This diversification helps mitigate risks associated with market fluctuations and provides various revenue streams.
With a focus on local customers, the company's Nevada Locals Casinos segment has shown resilience, with Adjusted EBITDA margins of 43% for the nine months ended September 30, 2024. This segment's performance underscores the company’s competitive edge in catering to local demographics.
| Segment | Revenues (2024) | Adjusted EBITDA (2024) | Adjusted EBITDA Margin (%) |
|---|---|---|---|
| Nevada Casino Resorts | $301.7 million | $78.9 million | 26% |
| Nevada Locals Casinos | $112.3 million | $48.7 million | 43% |
| Nevada Taverns | $82.0 million | $20.7 million | 25% |
| Distributed Gaming | $6.0 million | $0.5 million | N/A |
Overall, the company’s strategic focus on local markets, combined with operational improvements and ongoing acquisitions, positions it well for future growth opportunities.
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Resources:
- Golden Entertainment, Inc. (GDEN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Golden Entertainment, Inc. (GDEN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Golden Entertainment, Inc. (GDEN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.