Executive Summary / Key Takeaways

• Golden Entertainment has strategically transformed its portfolio through significant divestitures, shedding non-core assets to focus on its wholly-owned Nevada casino and branded tavern operations.
• This streamlined focus, coupled with proceeds from asset sales, has resulted in a substantially strengthened balance sheet, characterized by low net leverage and significant liquidity.
• Management views the company's stock as undervalued relative to its intrinsic value, particularly highlighting the unrecognized value of its real estate holdings, and is prioritizing aggressive share repurchases and a recurring dividend to return capital to shareholders.
• Operational performance in Q1 2025 showed resilience, with strength in Locals Casinos and stabilizing Taverns, offsetting expected impacts at The STRAT from tough year-over-year event comps, and management anticipates improving trends throughout 2025 driven by internal initiatives and Nevada's economic backdrop.
• While facing competitive pressures, particularly in the tavern market from smaller operators, and macroeconomic uncertainties affecting lower-tier consumers, GDEN's disciplined approach, operational efficiencies, and unique market positioning provide a foundation for future performance and shareholder value creation.

A Transformed Portfolio: Focusing on Nevada's Core

Golden Entertainment, Inc. operates a diversified entertainment platform deeply rooted in the Nevada market. Founded by Blake L. Sartini, the company has undergone a significant transformation over the past two years, strategically divesting non-core assets, including a Maryland casino and distributed gaming operations in Nevada and Montana. This culminated in the sale of the Nevada distributed gaming business on January 10, 2024, marking the completion of a process that generated over $600 million in proceeds.

This strategic pivot was not merely a divestiture but a deliberate streamlining to concentrate on GDEN's core strengths: its portfolio of eight wholly-owned casino properties and 72 branded taverns across Nevada. The substantial capital generated from these sales has been instrumental in fundamentally reshaping the company's financial profile, enabling significant debt reduction (over $500 million repaid since early 2021), optimization of its capital structure (including repricing the term loan), and, critically, accelerating the return of capital to shareholders. This disciplined approach has positioned GDEN with a robust balance sheet, low net leverage, and enhanced financial flexibility, setting the stage for its current strategic priorities.

Operational Footprint and Segment Dynamics

GDEN's operations are segmented into three key areas: Nevada Casino Resorts, Nevada Locals Casinos, and Nevada Taverns. Each segment caters to distinct customer bases and contributes uniquely to the company's performance.

The Nevada Casino Resorts segment, anchored by The STRAT Hotel, Casino & Tower on the Las Vegas Strip and properties in Laughlin (Aquarius and Edgewater), targets a regional drive-in market. These properties feature extensive hotel capacity and amenities. Performance in this segment can be influenced by large-scale events and broader tourism trends. In the first quarter of 2025, the segment's revenues decreased by 6.7% year-over-year to $94.22 million, with Adjusted EBITDA declining by 7.9% to $24.77 million. Management attributed this primarily to the tough comparison against the prior year's Super Bowl impact in Las Vegas, which particularly affected The STRAT, resulting in a $3 million EBITDA headwind and lower occupancy (down 5% for the quarter, 13% in February). Reduced entertainment offerings at the Laughlin Event Center also contributed to decreased visitation. However, management noted improving trends at The STRAT heading into Q2 2025, with April hotel revenue up on higher occupancy and rate, and May pacing up 6% in occupancy at attractive rates. Efforts to improve direct bookings and increase carded play at The STRAT are ongoing strategic initiatives.

The Nevada Locals Casinos segment, including properties like Arizona Charlie's and the Pahrump casinos, focuses on customers within a five-mile radius, characterized by higher visitation frequency and revenue primarily from slot play. This segment demonstrated resilience in Q1 2025, with revenues remaining relatively flat year-over-year at $38.83 million, while Adjusted EBITDA saw a modest increase of 1.9% to $17.87 million, resulting in a stable 46% Adjusted EBITDA margin for the second consecutive quarter. Operational efficiencies, particularly in labor and streamlined menus, were key drivers of the EBITDA improvement. Management highlighted increasing strength in this segment in April 2025, suggesting a positive start to Q2. Despite some prior weakness noted in Q3 2024 among lower-tier customers and impacts from renovations at Arizona Charlie's Decatur, the segment's consistent performance and high margins underscore its stability.

The Nevada Taverns segment, comprising 72 locations, offers a hyperlocal, casual upscale environment with food, beverages, and limited slot machines. Following the distributed gaming sale, GDEN receives a percentage of gaming revenue from third-party operated machines. This segment's revenues saw a slight decrease of 1.2% year-over-year in Q1 2025 to $27.47 million, with Adjusted EBITDA down 2.8% to $7.35 million, maintaining a 27% margin. While facing some impact from an uptick in promotional activity from smaller private operators, management views this as unsustainable and is confident their disciplined approach will prevail. Sequential EBITDA performance improved from Q4 2024, driven by better results from newer tavern additions. These newer taverns, including six acquisitions, have required operational revamping and are expected to stabilize within 9-18 months of opening/acquisition, with full stabilization anticipated by the end of 2025. The tavern demographic, less exposed to broader market turmoil, remains a resilient part of the portfolio.

Operational and Strategic Differentiation

While GDEN does not highlight proprietary gaming technology platforms, its competitive positioning is shaped by distinct operational models and strategic initiatives. The Nevada Taverns represent a key differentiator, offering a hyperlocal gaming and entertainment experience that captures a younger demographic than traditional casinos. This model, leveraging a revenue-share arrangement post-divestiture, provides a consistent revenue stream embedded within community social hubs. Management's focus on developing new "5-star" or premier tavern locations, which historically provide a strong 25% cash-on-cash return, underscores the profitability and scalability of this model.

At The STRAT, strategic efforts are focused on enhancing the guest experience and driving direct business. Initiatives to improve direct bookings and increase carded play are aimed at reducing reliance on higher-cost third-party channels (like OTAs, which currently represent ~65% of bookings but are trending down towards a 50% target). The integration of third-party amenities, such as the revenue share from the adjacent Atomic Golf facility (noted as "pretty significant" in 2025) and the planned opening of a nationally recognized F&B concept, are designed to increase visitation and cross-traffic without significant company capital investment. Furthermore, the company is exploring synergistic uses for its excess real estate around casino properties and developing unused space within The STRAT (150,000 sq ft on the mezzanine) for experiential attractions, leveraging third-party investment to add amenities.

Across the portfolio, a focus on operational efficiencies has been crucial, particularly in the Locals segment, where rightsizing labor and streamlining operations contributed to margin stability. While facing ongoing mid-single-digit labor inflation, management is actively working to mitigate these costs. This emphasis on cost control, combined with strategic investments in high-return areas like new tavern builds and third-party-funded amenities, forms the core of GDEN's operational strategy.

Competitive Landscape and Positioning

Golden Entertainment operates within a competitive Nevada gaming market dominated by larger players like Caesars Entertainment (CZR), MGM Resorts International (MGM), and Boyd Gaming Corporation (BYD). While CZR and MGM focus heavily on large-scale integrated resorts and increasingly on digital platforms, and BYD competes strongly in regional and locals markets, GDEN has carved out a distinct niche.

GDEN's Nevada Taverns segment provides a competitive edge in the restricted gaming market, offering a widespread, convenient presence that larger resort operators typically do not replicate. While smaller private operators can introduce promotional pressures, GDEN's scale (72 locations) and disciplined strategy are expected to overcome these short-term dynamics.

In the Nevada Locals Casinos segment, GDEN competes more directly with BYD. Both focus on the local customer base, but GDEN's consistent 46% Adjusted EBITDA margin in this segment demonstrates strong operational efficiency relative to its peers.

The Nevada Casino Resorts segment, particularly The STRAT, competes with other properties on the Strip and in Laughlin. The STRAT's positioning on the north Strip offers a value-oriented alternative to the higher-end resorts further south. While lacking direct convention space limits its ability to fully capitalize on citywide events compared to larger peers, strategic initiatives like improving direct bookings and adding third-party amenities aim to enhance its competitive appeal. Laughlin properties compete for regional drive-in customers, and GDEN's shift to more frequent, smaller-scale, profitable entertainment acts is a strategic response to market dynamics aimed at improving segment profitability.

Financially, GDEN differentiates itself with a significantly stronger balance sheet compared to highly leveraged peers like CZR and MGM. Its low net leverage (2.4x EBITDA as of Q1 2025) provides greater financial resilience and flexibility for capital allocation, a key advantage in an uncertain macroeconomic environment. While larger competitors may possess greater scale and investment capacity in areas like digital technology (where GDEN has no presence), GDEN's focus on operational efficiency and high-return, asset-light growth initiatives (like the tavern revenue share and third-party amenities) allows it to compete effectively within its chosen segments. The company's wholly-owned real estate, particularly the perceived undervaluation relative to its enterprise value, is seen by management as a significant, currently unrecognized competitive asset.

Financial Health and Capital Allocation

The transformation journey has left Golden Entertainment with a notably strong financial foundation. As of March 31, 2025, the company held $50.5 million in cash and cash equivalents and had $225 million available under its $240 million revolving credit facility (with an additional $20 million borrowed in April 2025). Total debt stood at $404.6 million net of discounts and issuance costs. This robust liquidity profile and low net leverage (2.4x EBITDA) are central to the investment thesis.

Management is actively leveraging this financial strength to maximize shareholder value, primarily through aggressive capital returns. The company's share repurchase program, increased by $100 million in November 2024, had $91.8 million of availability remaining as of March 31, 2025. In Q1 2025 alone, GDEN repurchased 274,000 shares for $7.6 million. Since the start of 2024, the company has repurchased 3.2 million shares totaling almost $100 million and paid out $35 million in dividends. Management explicitly stated that, given the perceived "dislocation" in the share price and the lack of compelling M&A opportunities, buying back its own stock is currently the "best use for our capital."

In addition to buybacks, GDEN initiated a recurring quarterly cash dividend of $0.25 per share in February 2024, demonstrating a commitment to direct shareholder distributions. The dividend was maintained at this level for the Q1 2025 payment and authorized again for Q2 2025.

Capital expenditures are focused and manageable. Maintenance CapEx is estimated at $30-$35 million annually. Planned growth CapEx is limited to a few new tavern builds (estimated at $3 million each), with no major large-scale investments currently planned. This disciplined approach to CapEx, coupled with strong operating cash flow ($28.6 million in Q1 2025), supports both debt service and capital returns.

Outlook and Growth Drivers

Management views Q3 2024 as the low point in the company's recent financial performance and anticipates improving trends throughout 2025. This outlook is based on several factors:

• STRAT Improvement: Expectations for higher occupancy and rate at The STRAT, particularly benefiting from increased citywide activity as the Convention Center expansion is completed, and the continued ramp-up of Atomic Golf and new F&B concepts.
• Tavern Stabilization: The newer tavern locations are expected to stabilize and contribute more meaningfully to performance by the end of 2025, with future growth driven by high-return new builds in premier locations (1-2 in 2025, potentially 3-4 annually thereafter).
• Locals Resilience: Continued consistent performance and high margins from the Nevada Locals Casinos segment, supported by operational efficiencies and the underlying strength of the local Nevada economy.
• Cost Management: Mitigation efforts aimed at offsetting expected mid-single-digit labor inflation across the portfolio.

While management's visibility beyond the near term remains somewhat limited, particularly at The STRAT without direct convention bookings, the overall sentiment is positive regarding organic growth potential.

Strategic M&A remains an option, but management maintains a high bar, focusing on opportunities that would be transformative and accretive, rather than smaller single-asset deals or greenfield developments. The perceived undervaluation of the company's stock, particularly the value of its real estate, continues to make share repurchases the most attractive use of capital.

Risks and Challenges

Despite the positive outlook and strong balance sheet, Golden Entertainment faces several risks. Macroeconomic conditions and their impact on consumer discretionary spending, particularly among lower-tier customers, remain a concern. Competitive pressures, including promotional activity in the tavern market, could impact performance. Increased labor costs present an ongoing headwind that requires effective mitigation. Seasonality, with historically lower revenues in the summer, will continue to affect quarterly results.

The company's concentration in Nevada exposes it to regional economic shifts and regulatory changes. While management believes the resolution of current legal proceedings should not have a material adverse effect, litigation always carries inherent uncertainty. Furthermore, the estimated fair value of an indefinite-lived trade name in the Nevada Casino Resorts segment did not significantly exceed its carrying value as of late 2024, indicating a potential risk of future impairment if performance or key assumptions deteriorate.

Conclusion

Golden Entertainment has successfully executed a significant portfolio transformation, emerging as a more focused, Nevada-centric gaming and entertainment company with a substantially strengthened balance sheet. The strategic divestitures have provided the financial flexibility to aggressively return capital to shareholders through share repurchases and dividends, which management views as the most compelling use of capital given the perceived undervaluation of the stock, particularly relative to its real estate assets.

While facing operational challenges related to event comps, labor costs, and integrating newer tavern acquisitions, the company's core segments demonstrate resilience and potential for organic growth. The Nevada Locals Casinos maintain strong margins, the Tavern segment offers a scalable, high-return growth avenue through new builds, and initiatives at The STRAT aim to enhance performance and capture more direct business. GDEN's disciplined operational approach and unique market positioning, particularly in the tavern space, provide a competitive foundation against larger, more diversified rivals.

The investment thesis for GDEN hinges on the successful execution of its capital return strategy to unlock value in an undervalued stock, coupled with the realization of organic growth potential from its focused Nevada portfolio. While macroeconomic uncertainty and competitive dynamics present risks, the company's strong balance sheet and management's clear strategic priorities position it to navigate the current environment and potentially deliver enhanced shareholder value.