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Golden Entertainment (NASDAQ:GDEN)
Q4 2019 Earnings Call
Mar 12, 2020, 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 fourth-quarter 2019 Golden Entertainment earnings conference call. [Operator instructions] Please be advised that today's conference is being recorded, March 12, 2020. Now it's my pleasure to turn the call over to Joe Jaffoni with Investor Relations.

Joe Jaffoni -- Investor Relations

Thank you, Carmen, and good afternoon everyone. By now, everyone should have access to our fourth-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 the 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 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 discussion 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 measures is available in our fourth-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 and chief financial officer. Charles will start the call, after which Blake will make some comments, and we'll then open the call to your questions. With that, it's my pleasure to turn the call over to Charles Protell.

Charles, please go ahead.

Charles Protell -- President and Chief Financial Officer

Thanks, Joe. Gold delivered record fourth-quarter revenue and adjusted EBITDA as we grew both our casino and distributed gaming operations. We also made further progress across several initiatives, primarily the completion of our major renovations at The Strat and the rollout of our new loyalty program, TrueRewards. For the fourth quarter, net revenue grew 15.2% to $242.1 million and adjusted EBITDA rose 25.1% to $43.1 million.

For Nevada casinos, fourth-quarter revenue was $133.9 million, up 24.1% from the prior year, while adjusted EBITDA grew 18.6% to $36.9 million. Growth from our Nevada casinos reflect the contribution from the Edgewater and the Colorado Belle at Laughlin, as well as year-over-year increases in revenue and adjusted EBITDA across the rest of our Nevada casinos segment. The disruption on this track casino floor for the second half of '19 impacted the property's performance, despite strong room and F&B revenue growth at the property. At the end of December, we completed the majority of the renovations at The Strat and are now operating in 2020 without construction disruption.

For our Laughlin properties, we continue to see increased cross-play between our three assets, since we consolidated our loyalty programs and rationalize promotional spending. We are focused on bringing more entertainment to the market and expect our loss in operations to benefit from a stronger than calendar compared to 2019. Our local Arizona Charlie's casino has performed very well. Growing revenue mid-single digits and EBITDA by double digits for the quarter.

At Rocky Gap in Maryland, Q4 revenue increased 3.2% on a year-over-year basis, while EBITDA increased over 24% to $4.8 million. This growth reflects the property lapping some of its regional competitive pressures that emerged in '19 in our efforts to rightsize its marketing spend. In our Nevada distributed business, total revenues during the fourth quarter grew 4.6% to $72.8 million, adjusted EBITDA of approximately $11 million was up more than 16% over the prior year. This reflects stabilized performance from our chain-store locations, the healthy local economy and contributions from six new taverns opened in 2019.

In Montana, our distributed operations generated revenues of $19 million in Q4, up 13.2% year over year. Adjusted EBITDA for the Montana distributed gaming business grew 6.7% to $2.3 million. Our growth in Montana is a result of new locations, as well as the exclusive gains we are offering that are currently generating the highest win per unit in the state and double the state average. In December, we rolled out our TrueRewards players club, which became the first loyalty program to link points earned at resort casinos and distributed gaming locations.

In doing so, we've created the industry's largest physical network with over 140 gaming locations, mostly in Southern Nevada. Our distributed customers are now able to earn rewards at our taverns and local supermarkets that they can redeem at any of our properties, and we're excited about this new opportunity to drive revenues across our platform. Our loyalty program allows us to reward our customers with a variety of experiences from a show of The Strat to a tater and happy hour with the Golden Knights. We believe this unique offering can drive wallet share gains with our existing customers and attracting patrons.

Our properties saw new card sign-ups increased over 25% year over year in January, and by 30% in February. Moving to the balance sheet, at year end, we had $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. Our term loan has no financial covenants and matures in October of 2024, while our unsecured bonds matured in April of 2026.

We ended the fourth quarter with cash and cash equivalents of $112 million, resulting in net leverage of approximately 5.6 times. Reducing leverage is a priority and with our continued significant free cash flow, our goal is to be below five times within 12 months. Total CAPEX for the quarter was $32 million with approximately $21 million spent on The Strat, since starting our renovations in June of '18, we spent approximately $90 million on property renovations through December and expect to spend approximately $20 million of additional CAPEX on The Strat in the first half of this year, bringing the total spend to about $110 million on The Strat. The Strat spend primarily relates to payments for renovations completed in the fourth quarter and will continue to be funded with cash flow through operations through the first half of this year.

Many of you have seen the work we've done, and if you haven't yet, please come visit the property, so we could give you a tour. Based on the reaction from others, I'm confident you will be impressed with the results particularly relative to our total spend of $110 million. With feedback from our debt to renovations, The Strat is now positioned to be a more attractive option for visitors to Las Vegas. As we have said several times, our goal with these renovations is to provide our current customers with opportunity to spend just a little more.

With over 2 million annual visitors to The Strat, only a modest incremental spend per guest will drive an attractive return on our investment. For 2020, we plan to harvest free cash flow from our operations, which will position us to allocate capital accretively for our shareholders. We have a diverse portfolio of businesses, including casinos, with wholly owned real estate. With about 80% of our EBITDA generated from local and regional casinos, as well as distributed gaming operations.

At The Strat, which accounts for about 20% of our property-level EBITDA, most of our guests live in the U.S. with only 7% of our room nights coming from international guests. Last weekend, the property was sold out. Obviously, at this time, it is tough to handicap the duration and severity of the coronavirus, but we aren't seeing any impacts to our business that is remotely proportionate to the impact on our equity valuation.

I'll now turn the call over to Blake to provide additional comments.

Blake Sartini -- Founder, President, and Chief Executive Officer

Thanks, Charles. As Charles mentioned, we're coming off a very strong fourth quarter and are continuing to make progress on all of our company initiatives. Having operated in Nevada for over 30 years, I've managed through other local and world events in each and every case, Las Vegas has proven its resiliency and has come back bigger and stronger than before. I'd like to remind everyone, I am the largest shareholder of build and entertainment and have an obvious at best interest, along with all other shareholders to see our valuation grow.

I can't control the coronavirus, and unfortunately don't have a cure, but we do have one of the most highly regarded management teams and boards in the gaming industry, which together have significant equity ownership that is aligned with all of our public shareholders. As we've communicated in the past, we are a different gaming company, and we have deliberately built Gold Entertainment with a focus on positioning ourselves to profit from the fastest-growing region in the country. That being Southern Nevada, which has the most stable regulatory environment, highest population growth, as well as other positive economic factors all of which have been key drivers that have led to consistent organic growth for Nevada businesses. While we have a Strip asset, we are not a Strip company.

Not one of our business units requires air traffic to visit. And in addition, each of our local and regional properties are not dependent on any large group business. As I've said, we built this diverse gaming platform by design to include the local and regional markets, mostly here in Nevada, as well as our operations in Maryland and Montana. I think it's extremely important to point out, but along with our unique gaming platform, we own 100% of the real estate under each of our casinos.

Other than in Maryland, where we have a 50-plus year ground lease with the state. All of which is to say, we have the asset mix, including owned real estate and the market leadership to best deal with the impact of the coronavirus and to continue to harvest the strong free cash flow we will generate into the future. Finally, just a bit of additional color on what's actually happening here in Southern Nevada. As of lunchtime today, people are out in public, and people are generally going about their lives in a normal manner.

Our properties are not ghost steps, and seemingly normal activity is taking place. Most guests are existing conscious efforts to mitigate their own risk, along with the heightened efforts of our best-in-class team members. There is no shortage of traffic on major thoroughfares, including I-15, as well as local traffic corridors. Our locals properties are convenient and easy to drive to.

Construction activity remains robust with the new Las Vegas Convention center, the MSG Sphere, the Resort world project and the now very visible new Allegion stadium for the Las Vegas Raiders will play. These large projects, along with significant commercial and residential activity, continue uninterrupted. Restaurants at frequent are busy and activity is consistent. I was in a local with casino restaurants this past Saturday night, and it was completely full with a weight while the casino was very busy.

I was at my local Starbucks this morning, and waited 10 minutes for a latte and met a dozen or so more people all pretty much carrying on as normal. I'm not trying to minimize the challenges that this current environment presents or will continue to present. Quite the contrary, as we're all taking our responsibilities very seriously and we are not blind to the business and individual threats that are clearly off it. I simply wanted to share with you some firsthand observations in real time, and the reality that Golden Entertainment and certainly the Las Vegas local and Southern Nevada regional markets in general, I'm maneuvering through this macro challenge at this time with some form of normalcy.

In summary, we had a strong fourth quarter, and we have a very clear set of operating priorities for 2020. We will finally operate the portfolio without construction or integration disruption, while leveraging our new and uniquely integrated players club. In addition, we continue to have real growth opportunities and potential new distributed gaming markets. We have one of the highest free cash flow yields in the industry, and we own all of the real estate associated with our casinos.

I'm bullish on our future. With that, operator, please open the call for questions.

Questions & Answers:


Operator

[Operator instructions]Our first question is from Carlo Santarelli with Deutsche Bank. Please go ahead.

Carlo Santarelli -- Deutsche Bank -- Analyst

Yeah. Thank you so much. Blake, Charles, thank you both very much for all of the perspective that you provided. Both of you in your remarks, they referenced the real estate several times.

And my question is more along the lines of in the changing conditions like we have today and that continue to evolve on a daily basis. The presence of your real estate and your views of your real estate change in what manner in terms of how you think about its value to you?

Blake Sartini -- Founder, President, and Chief Executive Officer

Carlo, this is Blake. I think first of all, all options are on the table at this point in time, given, as you've mentioned, kind of the day-to-day moving the goalpost that's occurring as a result of this macro environment. And as a company, we're looking to grow long-term shareholder value. We have no short-term plans to do anything other than what we're doing in operating our business as it is currently.

But we do see, I mean, the share price, today, in fact, all of our compatriots on the phones, share prices are trading today like we're closing forever. And I think the reality is I try to give some perspective and some pick a pause here. The reality is, in a company like ours, not only are we diversified, as I have mentioned, given the distributed gaming, local and regional properties that can be driven to. We also own our own real estate to your question.

I see that as an advantage. I see that as flexibility. I see that as variability for us. And as we continue through this, depending upon how long this lasts or if we continue to be underappreciated in our share price, we'll consider all of that.

Carlo Santarelli -- Deutsche Bank -- Analyst

Great. That's very helpful. And the second question is, and I want to be very careful in how I word this, but I actually want to kind of get your opinion. What do you view as the likelihood with everything that's going on from the NCAA tournament being canceled to schools being canceled and closed.

In your opinion, looking at the broad picture of the United States, do you believe there is the potential and possibly even a welcome relief to potentially close regional casinos and/or Las Vegas casinos for a brief period of time until things were to cool off a little bit. Do you believe that potentially exists at this point?

Blake Sartini -- Founder, President, and Chief Executive Officer

It's hard for me to comment on that. At this time, I mean, from a personal perspective, we're not anticipating that. However, again, as this goal post move daily, we're not going to and I think it's a response for us to comment. I think in the moment, that's built into our share price, if that occurs.

Charles Protell -- President and Chief Financial Officer

A week ago, we wouldn't just possibly be talking about the NCAA canceling a national championship and not playing games. So yes, in the vein of anything's possible, sure, but we're not planning for it at this point in time.

Carlo Santarelli -- Deutsche Bank -- Analyst

And I think Charles and to both of your points, I mean, it does feel at this point like we're pricing in things beyond that. So if that were to be the start of the healing process here for all of this and the bigger picture thing. So my point was not 1 of trying to be negative and/or alarmist, it was more of 1 that could potentially be the solution of this problem in the near term as we get things closed and then start to come out of this as we move further down the road and figure out how everything works at that in time. But I appreciate your perspective on all of it.

Thank you, guys.

Blake Sartini -- Founder, President, and Chief Executive Officer

Thanks, Carlo.

Charles Protell -- President and Chief Financial Officer

Thanks.

Operator

Our next question is from Chad Beynon with Macquarie.

Chad Beynon -- Macquarie Research -- Analyst

Thanks for taking my question.

Blake Sartini -- Founder, President, and Chief Executive Officer

Hey, Chad.

Charles Protell -- President and Chief Financial Officer

Hi.

Chad Beynon -- Macquarie Research -- Analyst

Charles, I wanted to focus on, I guess, fourth quarter, particularly at The Strat, if you could maybe just provide some additional KPIs? Anything to kind of help us think about how the property uptick or uptake occurred? Anything like RevPAR or restaurant covers? I know there was some disruption, I believe, early on in the quarter, but could you help us think about any of those data points that gave you the confidence that things were moving in the right direction? And then maybe even anything in January or February before we started to see the impact from the current situation?

Charles Protell -- President and Chief Financial Officer

Sure. Chad, it's Charles. For the fourth quarter, we're still maintaining a $20 ADR premium on the rooms that we've been renovating, and we sell all our hotel revenues up, call it, mid-single digits over the quarter, despite disruption that was going on at the property. We've got some of our table games.

So we're back online. That business has been doing very well for us. Revenues on the table gaming side, again, up high-single digits in the quarter. And in the F&B revenues that we've touched, those are also depending on the venue, mid-to-high single digits from that perspective.

We had a little erosion in terms of slot performance with the casinos to down, particularly through October, and disruption throughout the front desk and other areas that casino created a little bit of a drag on EBITDA that we talked about. But for where we've touched, and it's a little bit of trying to find our footing as we've very easily touched, we've seen very good results. Now for January and February, those numbers for us, clearly, are on the plan. So I feel very good about the investment that we've made in the property up into this point in terms of in talking through our spend, and what we've seen there through the fourth quarter and January, February of 2020.

Chad Beynon -- Macquarie Research -- Analyst

OK. Great. And then without, I guess, telling your competitors' secrets of how you're going to handle the situation. It was probably about a year and a half ago when there was some weakness on the Strip and some of the bigger players were discounting heavily.

If that starts to happen over the next quarter or maybe even beyond that, and those operators are digging deeper into their database and you guys, just given a different type of mix with your FIT customers and gaming customers. How should we expect for you guys to run the business from a discounting standpoint or will you be going for occupancy? Will you be trying to kind of hold your own on pricing because this hopefully will be a short term blip? Just maybe help us think about if there is massive discounting, how you guys will handle maybe March and the second quarter?

Charles Protell -- President and Chief Financial Officer

Listen. I think, Chad, that's a good period to use as a reference point. And so I think at that time, everyone was fighting for occupancy based on rate driving that occupancy on a retail perspective as group business did not materialize as others had anticipated. So from our perspective, what does that do to The Strat, you had within that quarter, EBITDA was down about 18%, which, to give sense of magnitude was around $2 billion to $2.5 billion of EBITDA.

So if we're at that point in time, it's our view that those are the type of impacts we're looking at. Given the current situation with groups that are canceling. And then you'd see that for a quarter potentially.

Chad Beynon -- Macquarie Research -- Analyst

OK. And then lastly, just on the state of Maryland, your property that Rocky gap. Could you just update us on where that is from a sports betting standpoint legislatively?

Charles Protell -- President and Chief Financial Officer

The legislation is being proposed. It's working its way through at this point. We're obviously excited about it. There's a limited number of casino gaming licenses in the state right now.

We're one of them. So stay tuned for that.

Chad Beynon -- Macquarie Research -- Analyst

OK. Thank you very much, guys. Best of luck.

Charles Protell -- President and Chief Financial Officer

Thanks.

Operator

Our next question is from Dan Politzer with JP.Morgan.

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

Hey. Good afternoon, guys, and thanks for taking my questions. And certainly, I appreciate all the color on the current situation there and Southern Nevada. So I wanted to touch on the free cash flow.

Obviously, that's been a big part of the story for your stock. I mean, how should we be thinking about free cash flow for next year? And on the past, we've talked about maybe being in that mid-$3 range. And granted today, the world looks a lot different than it did maybe a few months ago when we last spoke. But I guess, how should we be thinking about that? And I guess, what leverage do you have here to fully unlock the value in your stock, given it seems that investors are not really appreciating it, given where it's been trading?

Charles Protell -- President and Chief Financial Officer

So, Dan, we have less than $60 million of debt obligations, largely cash interest expense costs. Other than that, we don't have to really spend the dollar. So I think that everyone has their models, we're not giving guidance. You, guys, obviously, the sector has taken a haircut for views on what that's going to be for this year.

Yes, at this point, it's priced in, that we may as well not even have to strap within our portfolio at this point in time, to do anything with or without real estate. So from my perspective, we can certainly manage our cash flow, and we can manage our obligations. And like I said, right now, all the 80% of our EBITDA really isn't seeing much of an impact to our expectations, if at all, some assets are even up, particularly on the local side. So again, I'm not going to give guidance.

But you should have that as a data point that $60 million is what we have to cover. So you guys could do the math in there.

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

OK. And then I just wanted to follow-up on the real estate. Obviously, that's been topical here. And as you think about options there to maybe monetize that.

I mean, will you look at your entire portfolio? Is it certain properties, certain properties in certain markets? Can you kind of maybe frame how you're thinking about that?

Blake Sartini -- Founder, President, and Chief Executive Officer

Yes, Dan. As I said in my prior comments, pretty much all at this particular time, all options are out on the table. I see this flexibility. I see it as that's certainly a very valuable asset to our portfolio.

And I think over time, if we see share prices continue to be underappreciated and businesses continuing to be traded in line, although, they are very different in many cases. We'll make that so it will drive a conclusion at that point in time. As I said right now, we're not anticipating doing anything. But I like having that.

I like having wholly owned real estate as a part of our portfolio.

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

All right. I appreciate the color. Thanks so much, guys.

Blake Sartini -- Founder, President, and Chief Executive Officer

Thanks.

Operator

[Operator instructions] Our next question is from David Katz with Jefferies.

David Katz -- Jefferies -- Analyst

Hi. Good afternoon, everyone, and thank you for the commentary. I know you've talked around about this a bit, Charles, but can you talk about the book of business that you may have? And visibility that you may have or at least that you appear to have at the moment at the Stratosphere? And the degree to which you've been able to separate your performance or at least the trajectory of your performance relative to the rest of the Strip or are you really tethered to whatever the environment is? How correlated are those?

Charles Protell -- President and Chief Financial Officer

So as you know, we have a relatively short booking window at The Strat. We do not have a group business. So Strat becomes the derivatives, Strip as it relates to that. So as rate and occupancy go within the town, and within the Strips.

So does the Strats here. We compete at the levels with our peers. Like I said, the property we sold out last weekend. We're tracking to relatively high occupancy rates this weekend.

Look, this is obviously evolving every hour and every minute with each new announcement of, hence, can they cancel and other things. I'd say that the TAM is the context that I gave to chat is probably the right one as we've seen this before. We saw it in the summer as 8K. We saw price competitiveness, competing for occupancy along the Strip, and it impacted various properties in different ways.

And some people report those very specifically. So folks could go check that. But for us, it was about an 18% drop in EBITDA for the quarter on a year-over-year basis for this Strat. And Strat's figures are now $50 million of EBITDA annually.

So you guys could then do the math and what the impact is on a quarterly basis.

David Katz -- Jefferies -- Analyst

Right. And if I can just follow that up with respect to sort of OTA business being able to drive more direct versus OTA. The quarter was quite good. Can you sort of talk about progress there also?

Charles Protell -- President and Chief Financial Officer

Yes. I mean, look, we made a lot of progress. If you looked on a percentage basis, it's up quite a bit. So remember, our direct bookings are relatively low.

We're actually seeing direct bookings still increase, particularly as we rolled out our TrueRewards player loyalty program. It's giving us more access to customers, we're getting crossovers in terms of marketing and other people in the database coming from other assets. So that's all helpful. I think those are the kind of relatively small numbers to the overall booking, we're still highly an OTA-dependent type of property.

Depending on the time, if it's anywhere from 65% to 70% of the bookings are coming on OTA channels still. But that's improving over time. And like I said, we're pretty encouraged with the rollout through rewards and our ability to drive more direct casino bookings. It all ties into some of the metrics we talked about in terms of driving more table gameplay.

So we're pushing that, refining those players. And that should get us a little less reliant on them, but that will be a process over time.

David Katz -- Jefferies -- Analyst

Got it. One last one, if I may. Laughlin, having been there, the degree to which it is connected, plugged into and/or tethered some of the goings-on within Las Vegas meaning impact from events, etc., it struck me as somewhat separated from kind of the vibe of the Las Vegas Strip. What are you seeing there in the past week or so in reaction to the situation?

Charles Protell -- President and Chief Financial Officer

Listen, we had a meeting yesterday with all of our GMs to ask that very question. And quite frankly, our customers down there was nothing to do with Las Vegas. They see it as a value play, less crowd, less hassle, easier to get in out of, drive to, not fly to and they're comfortable there. So we don't see that changing.

We're still seeing them coming. We have a big concert event this weekend, that's on. So we're just not seeing the adverse impact, yet still over to that market.

David Katz -- Jefferies -- Analyst

Thank you. Great quarter.

Charles Protell -- President and Chief Financial Officer

Thanks, David.

Operator

And our next question comes from John DeCree with Union Gaming. Please go ahead.

John DeCree -- Union Gaming -- Analyst

Hi, Blake. Hi, Charles.

Blake Sartini -- Founder, President, and Chief Executive Officer

Hi, John.

John DeCree -- Union Gaming -- Analyst

Thanks for taking my question.

Blake Sartini -- Founder, President, and Chief Executive Officer

Yes.

John DeCree -- Union Gaming -- Analyst

I wanted to talk about the distributed business a little bit and any opportunities that you're monitoring kind of outside of Southern Nevada right now? Pennsylvania is kind of up and going. There have been some talks about Missouri possibly considering this. And I wanted to know if you guys had updated thoughts on some of those opportunities? And if you think the kind of current situation with coronavirus might kind of distracts politicians at this point? And kind of what the prospects are for that business outside of Nevada for you guys right now?

Blake Sartini -- Founder, President, and Chief Executive Officer

Yes, John. So as we've spoken in the past on the last, I think, a couple of quarterly calls, we continue to be very active and very involved in pursuing distributed gaming opportunities wherever they may arise, in particular right now in the short term, Pennsylvania that we've discussed, and Missouri, seems to be two places that in the near term, have real possibilities of expanding and/or legalizing this form of gaming. We will have a lot more of an update to your point on our next call. I think the session runs through June in Pennsylvania.

There are a lot of catalysts that we're monitoring there that are positioning this legislative effort positively. I don't want to get too far in front of it, but the skill game issue in this, not only Pennsylvania, but other states. Has caught the proliferation of those gains, which are not tracking any revenue back to the state in the form of any tax and are being placed in literally the hot tuck shops and barbershops and elsewhere are creating a situation where the states, ultimately, are having to deal with this. And I think Pennsylvania has reached that nexus.

And that being a catalyst, and also the potential revenue being generated from these games, from the BGT legalization is proving to be a catalyst, not only there, but in Missouri as well. So without repeating myself, we are very involved. We are in real time, speaking to folks back there on pretty much a daily basis, and we will have an update for you with much more detail on our next call.

John DeCree -- Union Gaming -- Analyst

That's a good update, helpful. Same business in Las Vegas, you guys have had a pipeline of new openings for a while on the TAVR segment, kind of 4% to 6% over the last couple of years. Can you talk about your pipeline, do you still expect some openings in 2020? And kind of still targeting a handful of new openings every year at this point? Or kind of what's the latest in terms of unit growth?

Blake Sartini -- Founder, President, and Chief Executive Officer

Having been a continuing significant bright spot in our portfolio. We now have approximating 66 taverns in the market, in the Southern Nevada or Clark County, I guess, market. As Charles mentioned in his comments, our focus this year is on debt reduction and not necessarily on growth capital spend, and the taverns would fall into the growth capital spend category. So specifically, we are not anticipating any new openings this year.

We are always looking for what we call three-star AAA locations to put our brand. Having said that, we don't have really anything in the pipeline at the moment. It is an opportunity for us to operate that business. As I mentioned in my written comments, uninterrupted this year without having to take a lot of energy to open a tavern, believe it or not, and six of them in one year puts a lot of stress on the off-stream.

So we're focused on that operation as it is. We're focused on paying down debt and there's nothing right now in the foreseeable future for new openings.

John DeCree -- Union Gaming -- Analyst

Great. Thanks, Blake. I appreciate the additional color.

Operator

Our next question is from Dennis Farrell with Wells Fargo.

Dennis Farrell -- Wells Fargo Securities -- Analyst

Thank you, operator. Hey, Charles. I was just wondering, we've seen a bunch of companies across all the industries, like kind of our gaming, lodging, leisure, starting to draw down our revolvers just as precautionary liquidity move just given the uncertainty in the environment. I wanted to get your thoughts about if you think that's a logical thing to do or if you've done that already and your plan there?

Charles Protell -- President and Chief Financial Officer

Look. I think that's probably important for companies to do that have liquidity or maturities or that have issues with their financial covenants that they see in the future. I mean, look, we're fortunate, we have no financial covenants in our current debt structure. We think we have plenty of liquidity.

We have an undrawn $200 million revolver, as you noted. We have cash on the balance sheet. So look, we're kind of comfortable where we are right now. But, look, we'll obviously, we'll watch it.

It's certainly always an option for us as we look going forward. But I think it's situational dependent on companies' internees, what's coming up in the future.

Dennis Farrell -- Wells Fargo Securities -- Analyst

OK. And then would you say that your age of your customers, I guess, SKU like a higher age? Or just kind of like is it like the average 55-year-old? Or do you say, it's like SKUs older?

Charles Protell -- President and Chief Financial Officer

I think it depends on the business you're looking at. So our locals' properties on the casino side are certainly, SKU older, our Tavern SKU younger. Strat ended up being somewhere in the middle of this.

Dennis Farrell -- Wells Fargo Securities -- Analyst

Oka. All right. Thank you, very much guys. Good luck to you.

Charles Protell -- President and Chief Financial Officer

Thanks.

Operator

And at this time, I will turn the call back to Mr. Sartini for his closing comments.

Blake Sartini -- Founder, President, and Chief Executive Officer

Thank you, operator, and thank you for joining us today. We anticipate hosting you on our next call for the next quarter and look forward to updating everyone when we report our first-quarter results in 2020. Thank you.

Operator

[Operator signoff]

Duration: 40 minutes

Call participants:

Joe Jaffoni -- Investor Relations

Charles Protell -- President and Chief Financial Officer

Blake Sartini -- Founder, President, and Chief Executive Officer

Carlo Santarelli -- Deutsche Bank -- Analyst

Chad Beynon -- Macquarie Research -- Analyst

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

David Katz -- Jefferies -- Analyst

John DeCree -- Union Gaming -- Analyst

Dennis Farrell -- Wells Fargo Securities -- Analyst

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