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Red Rock Resorts Announces Third Quarter 2018 Results

George Miller

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Red Rock Resorts Announces Third Quarter 2018 Results
Reading Time: 7 minutes

 

Red Rock Resorts, Inc. (“Red Rock Resorts,” “we” or the “Company”) (NASDAQ: RRR) reported financial results for the third quarter ended September 30, 2018.  The Company has adopted FASB’s new revenue recognition standard (“ASC 606”), effective January 1, 2018.  Certain prior period amounts have been adjusted to reflect the full retrospective adoption of ASC 606, with no material impact on operating income, net income or Adjusted EBITDA(1).

Net revenues were $412.3 million for the third quarter of 2018, an increase of 1.6%, or $6.4 million, from $405.9 million for the same period of 2017. The increase in net revenues was  primarily due to an increase in Las Vegas operations, partially offset by a decrease in Native American management fees.

Net income was $25.1 million for the third quarter of 2018, an increase of 12.3%, or $2.8 million, from $22.3 million for the same period of 2017. The increase in net income was primarily due to an increase in non-disrupted Las Vegas operations and an increase in the fair value of derivative instruments, partially offset by lower operating income and higher interest expense.

Adjusted EBITDA was $109.1 million for the third quarter of 2018, a decrease of 7.9%, or $9.3 million, from $118.4 million in the same period of 2017. The decrease in Adjusted EBITDA was primarily due to a decrease in Native American management fees and ongoing construction disruption at Palace Station Hotel & Casino (“Palace Station”) and the Palms Casino Resort (the “Palms”), partially offset by an increase in non-disrupted Las Vegas operations.

Las Vegas Operations

Net revenues from Las Vegas operations were $389.7 million for the third quarter of 2018, an increase of 3.9%, or $14.6 million, from $375.1 million in the same period of 2017.  Adjusted EBITDA from Las Vegas operations was $97.9 million for the third quarter of 2018, a decrease of 3.9%, or $3.9 million, from $101.9 million in the same period of 2017. The decrease in Adjusted EBITDA was primarily due to ongoing construction disruption at Palace Station and the Palms, partially offset by an increase in non-disrupted Las Vegas operations.

Native American Management

Adjusted EBITDA from Native American operations was $19.8 million for the third quarter of 2018, a 21.9% decrease from $25.3 million in the same period of 2017.  The decrease was primarily due to the expiration of the Gun Lake Casino management agreement in February of 2018, partially offset by continued strong performance at Graton Resort & Casino.

Palace Station and Palms Redevelopment Update

The Palace Station redevelopment project remains on schedule and on budget with all aspects of the project expected to be complete by the end of 2018.  As of September 30, 2018, the Company has incurred $179 million in costs against the $191 million project.

The Palms redevelopment project remains on schedule with the remaining components of phase two expected to be complete in the second quarter of 2019 and phase three expected to be complete by the third quarter of 2019.  The overall budget for the redevelopment project has been increased to approximately $690 million primarily due to increased construction costs driven by high demand in the Las Vegas market, as well as higher material costs. As of September 30, 2018, the Company has incurred $318 million in costs against the $690 million project.

Balance Sheet Highlights

The Company’s cash and cash equivalents at September 30, 2018 were $110.6 million and total principal amount of debt outstanding at the end of the third quarter was $2.77 billion. The Company’s debt to Adjusted EBITDA and interest coverage ratios were 5.1x and 4.4x, respectively.

Quarterly Dividend

The Company’s Board of Directors has declared a cash dividend of $0.10 per Class A common share for the fourth quarter of 2018. The dividend will be payable on December 31, 2018 to all stockholders of record as of the close of business on December 14, 2018.

Prior to the payment of such dividend, Station Holdco LLC (“Station Holdco”) will make a cash distribution to all unit holders of record, including the Company, of $0.10 per unit for a total distribution of approximately $11.7 million, approximately $7.0 million of which is expected to be distributed to the Company and approximately $4.7 million of which is expected to be distributed to the other unit holders of record of Station Holdco.

Conference Call Information

The Company will host a conference call today at 4:30 p.m. Eastern Time to discuss its financial results. The conference call will consist of prepared remarks from the Company and include a question and answer session.  Those interested in participating in the call should dial (888) 317-6003, or (412) 317-6061 for international callers, approximately 15 minutes before the call start time.  Please use the passcode: 7584099. A replay of the call will be available from today through November 14, 2018 at www.redrockresorts.com.

Presentation of Financial Information

(1) Adjusted EBITDA includes net income plus depreciation and amortization, share-based compensation, write-downs and other charges, net, including Palms redevelopment and preopening expenses, tax receivable agreement liability adjustment, related party lease termination, asset impairment, interest expense, net, loss on extinguishment/modification of debt, net, change in fair value of derivative instruments, provision for income tax and other, and excludes Adjusted EBITDA attributable to the noncontrolling interests of MPM.

Company Information and Forward Looking Statements

Red Rock Resorts owns a majority indirect equity interest in and manages Station Casinos LLC (“Station Casinos”). Station Casinos is the leading provider of gaming and entertainment to the residents of Las Vegas, Nevada.  Station Casinos’ properties, which are located throughout the Las Vegas valley, are regional entertainment destinations and include various amenities, including numerous restaurants, entertainment venues, movie theaters, bowling and convention/banquet space, as well as traditional casino gaming offerings such as video poker, slot machines, table games, bingo and race and sports wagering.  Station Casinos owns and operates Red Rock Casino Resort Spa, Green Valley Ranch Resort Spa Casino, Palms Casino Resort, Palace Station Hotel & Casino, Boulder Station Hotel & Casino, Sunset Station Hotel & Casino, Santa Fe Station Hotel & Casino, Texas Station Gambling Hall & Hotel, Fiesta Rancho Casino Hotel, Fiesta Henderson Casino Hotel, Wildfire Rancho, Wildfire Boulder, Wild Wild West Gambling Hall & Hotel, Wildfire Sunset, Wildfire Valley View, Wildfire Anthem and Wildfire Lake Mead.  Station Casinos also owns a 50% interest in Barley’s Casino & Brewing Company, Wildfire Casino & Lanes and The Greens.  In addition, Station Casinos is the manager of Graton Resort & Casino in northern California.

This press release contains certain forward-looking statements with respect to the Company and its subsidiaries which involve risks and uncertainties that cannot be predicted or quantified, and consequently, actual results may differ materially from those expressed or implied herein.  Such risks and uncertainties include, but are not limited to the effects of the economy and business conditions on consumer spending and our business; competition, including the risk that new gaming licenses or gaming activities are approved; our substantial outstanding indebtedness and the effect of our significant debt service requirements; our ability to refinance our outstanding indebtedness and obtain necessary capital; the impact of extensive regulation; risks associated with changes to applicable gaming and tax laws; risks associated with development, construction and management of new projects or the redevelopment or expansion of existing facilities; and other risks described in the filings of the Company with the Securities and Exchange Commission.  In providing forward-looking statements, the Company is not undertaking any duty or obligation to update these statements publicly as a result of new information, future events or otherwise, except as required by law.  If the Company updates one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those other forward-looking statements.

 

Red Rock Resorts, Inc.

Condensed Consolidated Statements of Income

(amounts in thousands, except per share data)

(unaudited)

Three Months Ended
September 30,

Nine Months Ended

September 30,

2018

2017

2018

2017

Operating revenues:

Casino

$      230,723

$      221,771

$      699,726

$      664,443

Food and beverage

94,666

87,311

280,226

277,453

Room

39,306

43,447

128,655

139,401

Other

26,385

23,817

73,858

70,027

Management fees

21,252

29,602

67,094

90,505

 Net revenues

412,332

405,948

1,249,559

1,241,829

Operating costs and expenses:

Casino

82,772

77,570

242,126

231,698

Food and beverage

87,097

80,019

252,320

247,663

Room

19,595

20,056

59,126

62,471

Other

13,216

11,013

34,111

30,258

Selling, general and administrative

104,360

98,840

297,540

288,715

Depreciation and amortization

44,235

42,661

133,391

134,721

Write-downs and other charges, net

6,439

15,239

21,070

25,931

Tax receivable agreement liability adjustment

214

(90,375)

(230)

Related party lease termination

1,950

100,343

Asset impairment

1,829

1,829

357,714

349,391

949,309

1,123,399

Operating income

54,618

56,557

300,250

118,430

Earnings from joint ventures

499

407

1,606

1,242

Operating income and earnings from joint ventures

55,117

56,964

301,856

119,672

Other (expense) income:

Interest expense, net

(33,590)

(31,330)

(96,299)

(100,127)

Loss on extinguishment/modification of debt, net

(558)

(3,552)

Change in fair value of derivative instruments

4,229

(310)

27,353

3,059

Other

(66)

(86)

(287)

(258)

(29,427)

(32,284)

(69,233)

(100,878)

Income before income tax

25,690

24,680

232,623

18,794

Provision for income tax

(623)

(2,364)

(26,324)

(1,230)

Net income

25,067

22,316

206,299

17,564

Less: net income attributable to noncontrolling interests

10,387

10,531

57,704

11,613

Net income attributable to Red Rock Resorts, Inc.

$        14,680

$        11,785

$      148,595

$          5,951

Earnings per common share:

 Earnings per share of Class A common stock, basic

$            0.21

$            0.17

$            2.15

$            0.09

 Earnings per share of Class A common stock, diluted

$            0.20

$            0.16

$            1.66

$            0.08

Weighted-average common shares outstanding:

 Basic

69,250

68,060

69,059

67,030

 Diluted

117,074

115,941

117,006

115,877

Dividends declared per common share

$            0.10

$            0.10

$            0.30

$            0.30

 

Red Rock Resorts, Inc.

Segment Information and Reconciliation of Net Income to Adjusted EBITDA

(amounts in thousands)

(unaudited)

Three Months Ended
September 30,

Nine Months Ended

September 30,

2018

2017

2018

2017

Net revenues

Las Vegas operations

$      389,668

$      375,071

$   1,178,520

$   1,147,457

Native American management

21,119

29,478

66,644

90,126

 Reportable segment net revenues

410,787

404,549

1,245,164

1,237,583

Corporate and other

1,545

1,399

4,395

4,246

 Net revenues

$      412,332

$      405,948

$   1,249,559

$   1,241,829

Net income

$        25,067

$        22,316

$      206,299

$        17,564

Adjustments

Depreciation and amortization

44,235

42,661

133,391

134,721

Share-based compensation

3,315

1,989

8,872

5,727

Write-downs and other charges, net

6,439

15,239

21,070

25,931

Tax receivable agreement liability adjustment

214

(90,375)

(230)

Related party lease termination

1,950

100,343

Asset impairment

1,829

1,829

Interest expense, net

33,590

31,330

96,299

100,127

Loss on extinguishment/modification of debt, net

558

3,552

Change in fair value of derivative instruments

(4,229)

310

(27,353)

(3,059)

Adjusted EBITDA attributable to MPM noncontrolling interest

(2,426)

(962)

(13,482)

Provision for income tax

623

2,364

26,324

1,230

Other

66

86

262

258

Adjusted EBITDA

$      109,106

$      118,420

$      373,827

$      374,511

Adjusted EBITDA

Las Vegas operations

$        97,942

$      101,873

$      336,408

$      327,850

Native American management

19,787

25,337

61,671

71,349

 Reportable segment Adjusted EBITDA

117,729

127,210

398,079

399,199

Corporate and other

(8,623)

(8,790)

(24,252)

(24,688)

 Adjusted EBITDA

$      109,106

$      118,420

$      373,827

$      374,511

 

Source: Red Rock Resorts, Inc.

George Miller started his career in content marketing and has started working as an Editor/Content Manager for our company in 2016. George has acquired many experiences when it comes to interviews and newsworthy content becoming Head of Content in 2017. He is responsible for the news being shared on multiple websites that are part of the European Gaming Media Network.

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Gambling in the USA

Legislators discuss bill to legalise sports betting in Montana

Niji Narayan

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Legislators discuss bill to legalise sports betting in Montana
Reading Time: 1 minute

 

Members of a legislative committee discussed a bill to legalise betting on college and professional sporting events in Montana. The bill proposes to allow betting in bars with full liquor licenses.

The bill is proposed by Republican Sen. Mark Blasdel of Kalispell after the 2018 U.S. Supreme Court ruling that allows states to legalise sports gambling.

Supporters told the Montana Senate Business, Labour and Economic Affairs committee that passing the bill would allow the state to legalise, regulate, and tax activity that is already happening.

The computerised wagering would be run by sportsbook companies that install equipment in bars. The bill calls for bars to receive 5 per cent of the net sportsbook income derived from the premises while operators would pay an 8.5 per cent state tax on adjusted gross betting receipts.

The committee did not vote on the bill which was drafted in consultation with the state Department of Justice, companies that provide gambling machines to casinos, and the Montana Tavern Association.

If passed, it would not take effect until June 2020, giving the state time to write rules and taverns time to install and test machines, Blaisdel said.

If problems arise, Blaisdel said, the Legislature would be back in session in six months and could address them.

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Gambling in the USA

William Hill US contributes $50,000 in New Jersey

Niji Narayan

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William Hill US contributes $50,000 in New Jersey
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William Hill, America’s premier sportsbook operator, has donated $50,000 to the Council on Compulsive Gambling of NJ. This fund helps conduct a campaign that supports people with gambling problems.

The campaign will produce an educational video that shows the family of a problem gambler and directs them to helpful resources. The video will be distributed online and via social media and promoted through ads on TV, on the radio, online and in movie theatres.

“We are proud to partner with the Council on Compulsive Gambling of New Jersey on bringing attention to this extremely important issue,” said Joe Asher, CEO of William Hill U.S. “When we settled a lawsuit recently, we said a portion of the proceeds would go to an organization that supports people with gambling problems. The Council on Compulsive Gambling of New Jersey saw the article about our intentions and reached out to us. We spent a lot of time working on best use and we decided to focus on reaching out to family members of those with a gambling problem. I know from personal experience that family members of problem gamblers can help push those that need help to seeking it.”

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Gambling in the USA

NY Governor declares himself “not a fan” of online sports betting

Niji Narayan

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NY Governor declares himself “not a fan” of online sports betting
Photo Source: newsday.com
Reading Time: 1 minute

 

New York governor Andrew M. Cuomo has categorically stated during WAMC News that he is “not a fan” online sports betting. He also downplayed the economic gains that could come with mobile wagering in New York.

The state regulators have already approved legislation for allowing sports gambling at Native American-owned casinos and the four private gaming halls upstate, including Rivers Casino & Resort in Schenectady.

Cuomo described the plan as an attempt to “fortify” the upstate casinos.

The limited blueprint, which will soon be subject to a 60-day public comment period, is based on the restrictive gambling language in the state constitution.

“If we want to expand it beyond the land-based casinos … we need a constitutional amendment,” state Budget Director Robert Mujica told reporters when the state budget was revealed in January.

Despite this interpretation, industry stakeholders and some state legislators are still pushing for online sports wagering.

The budget resolution approved by Senate Democrats last week would allow the full-scale upstate casinos to offer sports gambling online. Other gambling operators — including off-track betting corporations, the New York Racing Association and the video lottery terminal parlors known as racinos — would still be excluded from participating.

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