Golden Nugget is the market leader for online casino games in New Jersey and the company’s numbers reflect that. The Golden Nugget 2020 financials revealed a lot about the state of the company and its outlook for the future.
Golden Nugget took in nearly $91 million in 2020, clearing almost $25 million in operating income. The cost of growing the company was significant during the year, however, but that’s the name of the game right now.
Details from the Golden Nugget 2020 financials
Overall, Golden Nugget appears to be quite healthy. Total revenues were up 64.4% from 2019 according to a press release. Operating income, or the difference between expenses and revenue, was offset by an acquisition cost of $4.1 million. EBITDA (earnings before interest, taxes, depreciation, and amortization) rested at $6.2 million.
So, how did the company end up showing a net loss of $31.7 million, then? Debt servicing. That includes:
- Interest expense associated with a term loan outstanding against the company’s ledger
- Debt extinguishment costs associated with the repayment of $150.0 million of the term loan, totaling $25.4 million
- Amortization of deferred loan costs and debt premium associated with the extinguishment totaling $8.3 million
What does all that mean in plain English? Golden Nugget borrowed money to help fund its operations, and paid not only part of that back but paid other costs associated with maintaining its credit standing. Taking the company public late last year played a part in that.
Showing a loss of nearly $32 million isn’t really as bad as it looks in this industry, however. As a matter of fact, that number may get “worse” before it gets better. In the online gambling industry, perhaps more than any other, you have to spend money to make money.
Cash flow, not a positive daily ledger, is pertinent in this context
What the debt service and the revenues provide Golden Nugget with is a steady flow of cash coming into the company. That’s important not just to keep the lights on but also to help the company expand. Marketing is also a huge expense.
Just this year, Golden Nugget has launched products in Michigan, got licensed in Virginia, and launched a new version of its New Jersey sportsbook. The company has also secured market access for Illinois and West Virginia. All that took or will require a good deal of capital to get going.
Then, there’s the cost of making consumers aware of the products in all those markets. Add that to the expense of competing to stay relevant in the markets it is already operating in. It’s common for gambling companies to purposefully operate at a loss in order to gain or maintain market share.
In fact, DraftKings’ EBITDA after the fourth quarter of 2020 was -$88 million, and that company showed a loss of $266 million for the quarter. So, in comparison, Golden Nugget is sitting quite pretty.
The Golden Nugget 2020 financials should make anyone who has bought stock since late December seeing gold in these “hills.” The key to building on the success will be converting the cash into expansion and market dominance in 2021.