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Golden Entertainment (NASDAQ:GDEN)
Q3 2019 Earnings Call
Nov 07, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2019 Golden Entertainment Inc. earnings call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to your speaker today, Mr.

Joe Jaffoni. Thank you. You may go ahead, sir.

Joe Jaffoni -- Investor Relations

Thank you very much, Robert, and good afternoon, everyone. By now, everyone should have access to our third-quarter 2019 earnings release, which can be found on the company's website at www.goldenent.com, under the Investors section. Before we begin our formal remarks, we need to remind everyone that today's discussion will include forward-looking statements within the meaning of federal securities laws. These forward-looking statements, which are usually identified by the use of words such as will, expect, believe, anticipate, should or other similar phrases, are not guarantees of future performance.

These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from our corporate working statements, and therefore, you should not -- you should exercise caution in interpreting and relying on them. We refer you to the risk factors in our recent SEC filings, including our most recent Form 10-K as updated by our subsequent quarterly reports on Form 10-Q, for a more detailed discussions of the risks that could impact our future operating results and financial condition and other forward-looking statements. During today's call, we will discuss non-GAAP financial measures, which management uses and believes are useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

A reconciliation of these measures to the most directly comparable GAAP measure is available in our third-quarter 2019 earnings release. On today's call is Blake Sartini, the company's founder, chairman and chief executive officer; and Charles Protell, the company's president, chief strategy officer and chief financial officer. Charles will review the quarterly results, while Blake will review recent strategic and operating initiatives. After that we'll open it up to your questions.

With that, it's my pleasure to turn the call over to Charles Protell. Charles?

Charles Protell -- President, Chief Strategy Officer, and Chief Financial Officer

Thanks, Joe. Golden delivered record third-quarter revenue and adjusted EBITDA as we generated growth in both our casino and distributed gaming operations. We also continue to make further progress across several growth initiatives that we will discuss after reviewing the numbers. For the third quarter, net revenue grew 15.7% to $243.3 million, and adjusted EBITDA rose 12.9% to $43.1 million.

For our Nevada casinos, third-quarter revenue was $135.5 million, up 23.1% from the prior year, while adjusted EBITDA grew 14.3% to $36 million. Growth from our Nevada casinos primarily reflects the contribution from the Edgewater and the Colorado Belle at Laughlin, partially offset by ongoing construction disruption at The Strat. While we have expected renovations to the central section of the casino floor at The Strat to be completed by the beginning of September, it did not reopen until early October. This part of the casino has nearly half the table games, making the disruption in the third quarter a bit more than we anticipated.

Even with a few weeks delay to this section, we remain on track to complete the renovation of the casino by year end. Also in the last week of September, we had a power outage at The Strat, which led to room refund and other lost revenue at the property. We continue to see improved performance in areas of The Strat that we have renovated, such as the upgrades through the SkyPod, several F&B outlets and our new taproom and lounge connected to our new sports book. In addition, we are maintaining a $20 ADR premium in the hotel rooms that we have touched.

We are through approximately 80% of the casino floor renovations with all our table games back at the end of October. However, we still have approximately 150 less slots on the floor than we will after the casino renovations are complete. In addition to the casino floor remodel, we are now working on the front desk area, a new fitness center and ridesharing pickup area. We completed remodels of 130 rooms in the third quarter and expect to remodel another 126 rooms in Q4.

At the end of this year, almost 900 out of 2,400 Strat hotel rooms will have been renovated within the last three years, including about 300 rooms renovated immediately prior to our acquisition of the property in 2017. For our two new Laughlin properties, we remain on track to realize half of our target $4 million cost synergies by year end, and we'll capture the balance in 2020. We have also seen an increased cross-play between these assets in our Aquarius property since the rollout of our new TrueRewards one-card player loyalty program. At Rocky Gap in Maryland, revenue increased 4.6% on a year-over-year basis, while EBITDA increased about 1% to $6.2 million as competitive pressures in the region continue to cost us a bit more marketing spend to grow revenues.

For our Nevada distributed business, total revenues during the third quarter grew 5.9% to $69.4 million. Adjusted EBITDA of approximately $9 million was up 7% over the prior year, reflecting stabilized performance from our chain store locations, renegotiated rents as well as having six new taverns opened compared to last year. In Montana, our distributed operations generated revenue of $18.6 million, up 18.7% year over year. Adjusted EBITDA for the Montana distributed business grew 19.4% to $2.4 million.

Our growth in Montana is a result of new locations as well as our exclusive new games that are generating the highest win per unit in the state. Moving to the balance sheet. We have $772 million outstanding of first lien term loans in addition to $375 million of senior unsecured notes. We continue to have no outstanding borrowings under our $200 million revolver.

We ended the third quarter with cash and cash equivalents totaling $124 million, resulting in net leverage of approximately 5.6 times. Total capex for the quarter was $28 million, with approximately $16.6 million spent on our ongoing renovations at The Strat. Since June of 2018, we've spent approximately $70 million on the property and expect to spend approximately $20 million of additional capex at The Strat in Q4. All of our capital expenditures will continue to be funded with cash flow from operations.

By the end of this year, we will have spent approximately $90 million on The Strat, which will complete the majority of our planned investment in the property. Since starting work last June, we'll have remodeled 573 rooms; completed a renovation of the remaining casino floor; remodeled the front desk area; built a new state-of-the-art sports book; added new F&B concepts and refreshed existing venues; remodeled the SkyPod and SkyJump experience; created a new entertainment venue on excess land; and updated exterior lighting, landscaping and other features the property. We have no significant capital expenditures planned at The Strat for 2020 beyond additional room remodels and a few discrete projects. We view 2020 as a year in which we will be able to operate the property with minimal construction disruption and take advantage of the many events that will drive improved citywide occupancy, such as ConAg, the NFL Draft and the Raiders.

As we look to harvest the free cash flow generation of the portfolio, we are evaluating a variety of capital allocation opportunities in 2020, including debt reduction, returning capital to shareholders and new market opportunities, particularly as it relates to expansion of our distributed gaming business. Based on current Street estimates, we would generate more than $3.50 per share of discretionary free cash flow next year, which will position us favorably to allocate capital accretively for our shareholders. I'll now turn the call over to Blake to provide additional color on our initiatives.

Blake Sartini -- Founder, Chairman and Chief Executive Officer

Thanks, Charles. I'd like to start with a review of the progress we're making for the renovations of The Strat. As Charles noted earlier, we have endured construction disruption at The Strat due to ongoing renovations across many of the property's public areas. The feedback from guests continues to be very positive.

When we acquired The Strat, we were well aware that there have not been any major reinvestment in the property since its opening in 1996. As a result, we were committed to investing wisely and with design discipline to elevate the property physically as well as operationally. By the end of this year, we will spend approximately $90 million on these renovations that are modernizing and updating the look and feel of the property. These investments are already positioning The Strat to be more relevant and appealing as the Las Vegas Strip continues its development for the north.

There would be some legacy spend in 2020 but nothing significant. And we expect the total investment for The Strat, when complete, will be approximately $100 million to $110 million. This does not include adding group meeting space to the property, which we have put on hold while we operate the asset without construction disruption next year, and evaluate the property's performance and Las Vegas market conditions. Our capital investment plan to update the property was based on the thesis of creating an environment for our customers, where we can generate a modest incremental spend from their trip.

Between our hotel guests and our unique tower visitation, there are about 2.5 million unique annual visitors to The Strat. By presenting our customers with a compelling offer to stay on the property to eat, drink and play just a little longer, we will earn an attractive return on our investment. The early benefits we are generating from our investments in The Strat are promising and include: during the third quarter, we exceeded the balance of the Las Vegas Strip in terms of year-over-year RevPAR growth; we generated the highest ever third-quarter ADR for the property; and we are seeing initial signs of an improved room and rate mix, including an increase in group room nights and in BREP Internet room bookings. Additional indications of our progress at The Strat include continuing to generate an additional $20 in ADR premium for our newly remodeled rooms and the success we are having with our newly opened restaurants, bars and entertainment amenities.

We have used cash flow from operations to fund all of the renovations of The Strat and have been able to operate the property effectively throughout the construction disruption. Over the balance of this year, we are focused on completing the renovations to the main casino floor while remodeling an additional 126 rooms by year end. We expect the work remaining on the casino floor will continue to be disruptive through year end, and we are pushing to finish so we can move forward with the rebranding of the property. The major citywide events that Charles spoke about earlier will undoubtedly drive more visitors to Las Vegas, which will create a favorable dynamic for existing properties, like ours.

I'd also note that The Strat sits on approximately 35 acres, with about 17 acres undeveloped along Las Vegas Boulevard. Recent M&A transactions for Las Vegas properties only further highlight that there is strong strategic demand for long-term Strip exposure and the enormous value we see in owning the real estate under The Strat as well as our other assets. Turning to our initiatives on Laughlin. We have rationalized the labor cost of the Edgewater and Colorado Belle properties acquired earlier this year and have begun to adjust our marketing reinvestment.

As we have spent more time operating these properties, we are gaining greater confidence that we can improve their operating margin from the 23% margin they were achieving at the time of the acquisition. For reference, excluding the acquired properties, our Nevada casinos currently operate at over a 30% EBITDA margin, while our Aquarius property in Laughlin operates at close to a 40% EBITDA margin. Moving on to our distributed gaming platform. We continue to lead the industry, operating approximately 11,000 devices across multiple jurisdictions.

Our distributed business revenues and EBITDA grew at a healthy pace in the third quarter, and we see this growth continuing in future periods. By the end of this year, we will integrate our current casino TrueRewards loyalty program with our taverns and certain distributed gaming locations to create a network of more than 130 locations across Nevada. This will establish the largest location network of any players' club in the industry and be a clear differentiator for Golden. In addition, we are accelerating our activity in jurisdictions where we believe there is an increasing potential for new legislation and expansion of existing distributed gaming operations.

In closing, we have a unique portfolio of gaming assets concentrated in Southern Nevada that are well positioned to deliver significant free cash flow in 2020 and beyond. I look forward to our future success and continuing to create value for our shareholders. With that, operator, please open the call for questions.

Questions & Answers:


Operator

[Operator instructions] First question will be coming from the line of Carlo Santarelli with Deutsche Bank. Your line is now open.

Carlo Santarelli -- Deutsche Bank -- Analyst

Hey, Blake, Charles. Thank you for taking my questions. Guys, could you just talk a little bit about what went into the decision with respect to the 2020 plans for the the start-ups? And acknowledging it was never firmly in your agenda to definitely go ahead and move forward with the group space, and you'd always said that it would be something you would reevaluate. But is it just kind of giving the asset, as it stands, a chance to breathe and see where it takes you, and then potentially revisit whether or not that money is best spent there or elsewhere? Or can you just talk us through the process?

Blake Sartini -- Founder, Chairman and Chief Executive Officer

Yes, Carlo. I think that's very accurate. As we look into 2020, there are a couple of variables that are becoming clearer to us. One, there's approximately 2 million square feet of convention space that will come online during some portion of 2020 in the Las Vegas market.

Obviously, we want to see how that absorption takes place for that convention and meeting space. While at the same time, as I mentioned in my comments, we're seeing some positive impacts to the capital dollars that we're currently spending at the property. So the decision to hold on the capex on the banker space, as you mentioned, doesn't mean it will eventually may be built. We will have a design-ready plan to implement on that mezz level when and if appropriate.

In addition, I would also mention that we're exploring additional potential uses for the space, as you might imagine, including capital-light models that may be unique and attractive and would drive additional traffic to the property. And ultimately, as you mentioned, we believe by operating in a nondisruptive environment at The Strat throughout 2020, and as Charles mentioned, we can redeploy that free cash to our balance sheet, which I think offers us many options, create value for the shareholders, again, as Charles mentioned.

Carlo Santarelli -- Deutsche Bank -- Analyst

Great. That's very helpful. And then just one follow-up, if I may. On the distributed side, both in Nevada and Montana, obviously, you guys showed very healthy growth on both the revenue and EBITDA lines.

Any guidance or color you could provide around what the same-store contributions were to growth and kind of the split between the incremental unit adds year over year relative to kind of same-store organic growth?

Charles Protell -- President, Chief Strategy Officer, and Chief Financial Officer

Yes. I mean we don't typically break that out. I mean I think we're over 40% of the market here in Nevada, so the portfolio ebbs and flows with over 700 locations. So there's a few and we'll add a few.

In Montana, it's very similar with about 300 locations that are there. We were net additive in Montana. A lot of the growth out in Montana coming out of not only new additional -- new locations, but we do have a proprietary exclusive game, exclusive to Golden, in our partner locations that is earning about two times the state average in terms of win per unit. So that is a big driver of revenue growth for us within that state.

Carlo Santarelli -- Deutsche Bank -- Analyst

Great. Thank you both very much.

Operator

Thank you. Next question will be coming from the line of Chad Beynon with Macquarie. Your line is open.

Chad Beynon -- Macquarie Research -- Analyst

Guys, thanks for taking my question. Back on The Strat capex reduction from, I guess, the $140 million master plan to your now projected $100 million to $110 million. Has the return profile of 15% changed at all given that some of the amenities, particularly on the mezz level won't be there? Or do you still think a 15% cash-on-cash return is kind of in your crosshairs?

Charles Protell -- President, Chief Strategy Officer, and Chief Financial Officer

Absolutely. We're looking at that over time, and we expect to make progress on that next year. Obviously, we're deploying this capital with the expectation we will earn a return. As Blake said in his comments, our thesis is pretty simple.

We're not trying to completely to transform the property, to compete with the most highest end properties on The Strip. We already have 2.5 million unique visitors to the asset each and every year between our hotel guests and our unique tower visitors. You can do the math. If you just get another $20 out of each one of those patrons at a reasonable flow through, that's how we're thinking about it.

How do we have someone come to our asset and not use it anymore, the dormitory, use it where they like to actually stay in play, eat at the restaurants, play in the casino and go to your show and enjoy the tower experience, which is very unique to Las Vegas.

Blake Sartini -- Founder, Chairman and Chief Executive Officer

I think, Chad, just quickly to this capex time out of The Strat, once we're complete with the projects we just discussed, will obviously allow us to fine-tune our operating approach to the property to deliver the returns that we're anticipating. And I think that's going to be -- it's going to be very helpful without a disruptive environment over there.

Chad Beynon -- Macquarie Research -- Analyst

OK, makes sense. And then on the excess cash that you'll have from not spending it on the property in 2020, how do you think about risk-adjusted returns? Charles, you mentioned your stocks, free cash flow yield, which is attractive. You guys have been successful in land-based acquisitions, obviously, on the tavern side. So how do you just think about, I guess, from a risk-adjusted standpoint, how you can deploy your capital in the best way for shareholders?

Charles Protell -- President, Chief Strategy Officer, and Chief Financial Officer

Yes. I mean, look, I think we're fortunate that we will have options on how to deploy that capital. Again, whether it's leverage reduction, potential share buybacks or investing in new opportunities that may come up, either through the M&A that obviously in process and being discussed or new jurisdictions that we're focused on from a distributed perspective. I think what -- as Blake alluded to, we are laser-focused on operating all of our assets with minimal disruptions, putting cash on the balance sheet for the first part of next year and then be in a better position to decide how to deploy that liquidity.

Chad Beynon -- Macquarie Research -- Analyst

And then the last quick one. Are you able to quantify the disruption in the third quarter? And I know you mentioned that it bled into October a little bit and will -- maybe continue. But are we talking about kind of low-single digits in terms of --

Charles Protell -- President, Chief Strategy Officer, and Chief Financial Officer

We're talking mid-single digits at The Strat relative to the performance last year in terms of EBITDA. And I'd add to that, there was probably a few hundred thousand of disruption over the weekend that we effectively lost due to a power outage.

Operator

[Operator instructions] Next question will be coming from the line of Dan Politzer of JP Morgan. Your line is now open.

Dan Politzer -- J.P. Morgan -- Analyst

Good afternoon, guys. It's Dan Politzer of JP Morgan. So the first one is just on the distributed side. Just can you give an overview of maybe some of the jurisdictions that you might be most interested in? And how you would think about -- concerning those markets, whether it be organically or through possibly through an acquisition?

Blake Sartini -- Founder, Chairman and Chief Executive Officer

Yes, Dan. So in my comments, I made reference to some accelerated activity. I think to shed some light on where that is taking place, we're ramping up our activity in the state of Pennsylvania, in particular. And these things take time in terms of the political process and the state's acceptance of any new kind of industry, in this particular case, distributed gaming.

Pennsylvania is in the later stages, two, three or four years down the line, of considering this. And as you know, they have already approved truck stops for VGT operation in the state. What's changed and what the catalyst is there for us now, and I think the state is also been public with this, is the accelerated placing of skill games out in the state, which are controversial and, dependent upon your viewpoint, legal or illegal. But the state is reaping a benefit from those currently and their estimate currently, I think, only to this is in the 10,000 to 15,000 range of these games currently, and they're being deployed at a greater speed now.

So the state now is in a position and is forced to look at this expansion of these skill games, and in the future determine how they're going to deal with that. As a result, we think if you look at other models in regards to distributed gaming, that Pennsylvania may look toward a more viable and more regulated approach to a distributed gaming platform. So we are ramping up our activity back there and, at some point, believe that they may widen their -- or broaden their VGT expectations in that state. We also, as you can imagine, with our platform, are involved in other states that are percolating in regards to the potential for this type of legislation.

And so we are laser-focused on that side of our business and the potential opportunities that may exist.

Dan Politzer -- J.P. Morgan -- Analyst

Got it. That's helpful. And then just turning to The Strat. In terms of your room mix, I think in the past, you've talked about a lot of rooms going to OTAs, short booking window.

As you shift your capex strategy there, how are you thinking about maybe improving your mix of rooms? And maybe if you could share some of the KPIs that you're looking to get to.

Charles Protell -- President, Chief Strategy Officer, and Chief Financial Officer

Yes. I mean, the easiest one from our perspective is to react into the casino side. So as we've talked about in the past, currently, you have less than 5% of the occupancy is coming from the casino database, which is obviously anemic relative to our peers with Strip assets. So we are excited to have our one-card TrueRewards platform in place.

We have been collecting player data both at the hotel check-ins now as well as with our casino hosts and shows. So Blake highlighted some of the increase in the bookings through that channel, both direct and on the casino side. Now the numbers on a percentage base in terms of the increase are large. In aggregate, room nights still relatively small but making progress.

And where would we like to be? We like to be somewhere in that 15% range, working our way toward 20% on the casino side. And we think that that's achievable with the new product that we have in place the rooms, the casino and the F&B amenities at the property.

Blake Sartini -- Founder, Chairman and Chief Executive Officer

Yes, I think the casino marketing program, as Charles described, is in place and will be relevant and important to us to generate room bookings through the casino which, as Charles described prior to our arrival, really didn't exist. One other thing I might mention is no -- we have generated no retail marketing campaign for the property on our own by design until we get through this transformation, at which time we plan to do a pretty robust rebranding retail campaign, which we believe will drive direct bookings and displace OTAs. That we anticipate happening, as I mentioned in my comments, throughout 2020.

Dan Politzer -- J.P. Morgan -- Analyst

Got it. And then if I could just sneak in one more. How should we be thinking about the level of disruption maybe in the fourth quarter at the property relative to that of the third quarter?

Charles Protell -- President, Chief Strategy Officer, and Chief Financial Officer

Look, we think it's going to be somewhat similar to the fourth quarter. We're in the last [Inaudible] push to make sure we get everything wrapped up by Christmas so we can have this property without disruption, operating through a big holiday, and then have it complete as we head into Q1 of next year to take advantage of CAS, ConAg, NFL Draft, all the things that are starting to happen. So from our perspective, we'll take a little bit of that disruption now, make that push to get the property where it needs to be in 2020.

Dan Politzer -- J.P. Morgan -- Analyst

All right, guys. Thanks so much, guys.

Operator

Next question will be coming from the line of John DeCree with Union Gaming. Your line is now open.

John DeCree -- Union Gaming -- Analyst

Hi, Blake. Hi, Charles. Just two questions, I think, for me. One is you guys have a little bit of land at the Stratosphere.

We've seen asset values on the Las Vegas Strip for real estate and land climbing pretty quickly. I was wondering if you could give us your latest thinking on that and your thoughts of what you might do with that.

Charles Protell -- President, Chief Strategy Officer, and Chief Financial Officer

Well, certainly, we like the data points of those transactions. I think from our perspective, it just makes our portfolio more valuable as you look at those deals. I mean, look, the REITs are very helpful partners to the sector in terms of unlocking value. But quite frankly, I don't see there being a slowdown in terms of the appetite for those collective businesses to be acquiring real estate.

So from where we sit right now, and again as we think about how we position the business heading into 2020, it's about getting to the point where we see what we have in terms of The Strat earning the return on the investments that we've made and evaluating where we are from an EBITDA and cash generation standpoint in the first half of the year, and that will allow us to look at a bunch of opportunities, including potentially exploring alternatives with our real estate.

Blake Sartini -- Founder, Chairman and Chief Executive Officer

John, in terms of what we do with that excess real estate, I think to the second half of your question, I would note that we have excess real estate at a number of our properties, in regards to The Strat in particular, as that strip momentum moves north with Genting, which is a real project, fills new purchase of the surface, a surface that -- one may happen all the way to the Sahara Avenue corridor there. With the Drew now having a management -- a well-known management team and becoming a reality, we are looking at various ways to generate value out of that real estate, which to me -- I mentioned at this point, but suffice to say, there's quite a bit -- the activity that's being presented coming north on the Strip is creating real opportunities for us on the excess acreage we have at The Strat, from high-density to entertainment to other options.

John DeCree -- Union Gaming -- Analyst

That's really good color, guys. And maybe just one more question on your outlook for The Strip. And you talked a little bit about the events calendar next year, and I realize at your property a little bit shorter of a booking window than some of the larger peers on the Strip. But with some big citywide conventions coming in next year, do you have a little bit of a longer booking window, a little bit more visibility? And just any kind of thoughts you have for the outlook over the next 12 months.

Blake Sartini -- Founder, Chairman and Chief Executive Officer

Yes, I think as you mentioned, our visibility primarily comes from the citywide numbers that we're seeing looking into the future. And as -- to digress for just a minute, you've seen record airport numbers, traffic to the McCarran Airport recently. Charles mentioned that the calendar next year will -- just two or three of the events that are highlighted. Our visibility into what we can see currently is -- looks very good for 2020 given the specifics that we've outlined in terms of a couple of the events.

And we -- I would hesitate just to get over our spiels here and say we're -- other than what I mentioned in my comments, in my written comments, about some of the positives we're seeing in the hotel. Between our internal efforts on the casino marketing side and, ultimately, a retail campaign and what we're seeing citywide, we think 2020 lines up well for the property.

John DeCree -- Union Gaming -- Analyst

Thanks, Blake. Thanks, Charles.

Operator

Next question will be coming from the line of Ricardo Chinchilla with Deutsche Bank. Your line is open.

Ricardo Chinchilla -- Deutsche Bank -- Analyst

Hey, guys. Thank you so much for taking the question. I was hoping that you guys would help us, I think, a little bit more in terms of potential M&A in the sector. Would you guys be willing to increase significantly, leverage to complete an acquisition, a significant acquisition in a market like Illinois given like that national has his legacy city state gaming slow route for sale? Or would you rather explore like the smaller transactions that ultimately would allow you guys to have a larger presence?

Charles Protell -- President, Chief Strategy Officer, and Chief Financial Officer

Let me just answer it this way. We're not looking to increase leverage beyond where we are right now. And so we're actually, as we said, we're looking to put cash on our balance sheet to delever the business through the first half of next year.

Ricardo Chinchilla -- Deutsche Bank -- Analyst

Got it. And in terms of -- how do you guys think about -- and you addressed this a little bit in one of the previous questions. How do you guys think about a partnership with a REIT? Do you see this as a way to -- a decent way to finance your operations compared to traditional debt? Or would you guys see this as a vehicle to complete additional acquisitions rather than just to delever at this point?

Charles Protell -- President, Chief Strategy Officer, and Chief Financial Officer

So for us, we look at all strategic options. We get all of the calls. But I think the refinancing is certainly very interesting if you were considering an acquisition as a way to finance that cash flow at an attractive way that could be accretive to existing shareholders. So obviously, we look at that.

In terms of funding the ongoing operations of the business, even with the elevated level of capex related to the Stratosphere, we're self-funding all of that capex right now. So I don't see it really from that perspective. And I think that for a lot of businesses, including ours, you have to really think about what is that implied rate relative to the rev if you're using it just as a pure refi vehicle. So I think those are the considerations for everyone who looks at that from a financing perspective.

But clearly, there's some very attractive features from real estate financing that has obviously helped fuel M&A in the sector, which ultimately is a good thing.

Ricardo Chinchilla -- Deutsche Bank -- Analyst

Thanks so much.

Operator

Next question will be coming from the line of David Katz with Jefferies. Your line is now open.

David Katz -- Jefferies -- Analyst

Hi, everyone. Good afternoon. I wanted to go back to the distributed business and just speak about that and maybe a bit more candid fashion, right? The capital markets, obviously, has some heightened focus on it in some respect. And candidly, we occasionally debate with investors the notion of whether the combination of your casinos and those businesses together is the most efficient way to structure the company.

Do you think about that or explore that at all? And what would be your sort of latest thoughts or views on it?

Charles Protell -- President, Chief Strategy Officer, and Chief Financial Officer

So we do, like we think about all of our businesses, but we are actually pretty excited to roll out our TrueRewards one-card into our taverns by the end of this year. So to us, that's really the true test. And we do think that the ecosystem that we will build here in Southern Nevada, particularly in Las Vegas, will demonstrate there is a hub-and-spoke model with the distributed business and having owned casinos in jurisdictions where that's allowed. So I guess TBD, to be seen.

But we're excited, and we think that there's real prospects to what we're doing here, particularly in Southern Nevada.

Blake Sartini -- Founder, Chairman and Chief Executive Officer

Yes. And, David, I think the -- is it -- I think I don't use the word efficient. But is it the most efficient way or the best way to operate the company combined, meaning traditional casino assets and restricted gaming? That's what I've always done. And by the way, I think, at this point, as Charles said, we do look at -- and we get a lot of calls on strategic alternatives.

But it's not lost on us, the valuations that are being placed on some of these distributed businesses now, which highlights the fact that we think being the largest, which I've always said, deserves a premium. It's now being -- it's now materializing, whether through quasi public offerings or transactions at these valuations, are going up for the distributed businesses. And in that context, to answer your question, I think we're well-positioned.

David Katz -- Jefferies -- Analyst

Nice quarter. Thanks very much.

Operator

There are no further questions at this time. Please continue, Mr. Sartini.

Blake Sartini -- Founder, Chairman and Chief Executive Officer

Thank you, operator, and thanks, everyone, for joining. We look forward to updating everyone on our fourth-quarter call. Thank you.

Operator

[Operator signoff]

Duration: 38 minutes

Call participants:

Joe Jaffoni -- Investor Relations

Charles Protell -- President, Chief Strategy Officer, and Chief Financial Officer

Blake Sartini -- Founder, Chairman and Chief Executive Officer

Carlo Santarelli -- Deutsche Bank -- Analyst

Chad Beynon -- Macquarie Research -- Analyst

Dan Politzer -- J.P. Morgan -- Analyst

John DeCree -- Union Gaming -- Analyst

Ricardo Chinchilla -- Deutsche Bank -- Analyst

David Katz -- Jefferies -- Analyst

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