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Red Rock Resorts Announces Third Quarter 2018 Results

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Red Rock Resorts Announces Fourth Quarter and Year End 2019 Results
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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.

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Gambling in the USA

Gaming Americas Weekly Roundup – July 12-18

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Welcome to our weekly roundup of American gambling news again! Here, we are going through the weekly highlights of the American gambling industry which include the latest news and new partnerships. Read on and get updated.

Latest News

International Game Technology PLC (IGT) has announced that the Company is expanding its U.S. sports betting footprint to Washington to power sports betting at Snoqualmie Casino in Snoqualmie. As part of this agreement, IGT will deliver its proven PlaySports turnkey solution, including its trading advisory services, for retail and on-premise mobile sports betting.

Aristocrat Gaming has broken ground on a new operations centre facility in Tulsa. The new Tulsa Operations Centre will offer a consolidated campus for the 300 employees of VGT Class II Innovations by Aristocrat Gaming and will house light manufacturing, a warehouse and office space.

Set to celebrate 40 iconic years on the world-famous Atlantic City Boardwalk this fall, Tropicana Atlantic City has launched an exciting series of dining and entertainment options for the guests to experience this summer. Whether it is hitting the dance floor at the Boogie Nights, watching New Jersey’s premier fireworks on the Boardwalk, lounging by the beach, catching a headliner perform in the Tropicana Showroom, or having a delicious meal al fresco at one of seven of the City’s top casual and fine dining restaurants, guests can customise their itinerary to make it their ideal stay.

Las Vegas Sands has announced an effort that will see the company become a strategic investor in digital gaming technologies focused primarily on the business-to-business space. As part of this effort, the company is building a digital gaming investment team, which will be led by Davis Catlin. Catlin is joining Sands after fourteen years with a leading investment firm. For the last decade, Mr. Catlin led that firm’s investments in both public and private companies in digital gaming.

Allied Esports Entertainment has completed the sale of World Poker Tour to Element Partners. The transaction was approved at a special meeting of the Company’s stockholders. As previously announced, the purchase price of the transaction totaled $105 million and included 100% of the outstanding capital stock of each of the legal entities that collectively operated or engaged in the Company’s poker-related business and assets.

JCM Global (JCM) is going to unveil new technologies designed to enhance the guest experience, increase efficiencies and boost security across the casino floor and count room, at the 2021 Indian Gaming Tradeshow & Convention.

Partnerships

National Basketball Association (NBA) team Boston Celtics has partnered with blockchain provider Socios.com. Socios.com will have a digital presence on Celtics.com and serve as the presenting partner of the team’s website, placing it at the forefront of the Celtics’ primary hub for relevant news, updates, video highlights and information pertaining to the franchise.

DraftKings has announced a strategic sportsbook expansion and an extension of its existing Daily Fantasy Sports and sports betting partnership with Major League Baseball (MLB) to now include expanded promotional rights and content inclusive of the sports betting category. Among the key components of the expanded relationship are rights to an innovative “Bet & Watch” streaming integration where fans with open and active MLB.com and DraftKings accounts will be able to watch a free, live MLB game within the DraftKings app.

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Gambling in the USA

Gaming Americas Weekly Roundup – July 5-11

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Welcome to our weekly roundup of American gambling news again! Here, we are going through the weekly highlights of the American gambling industry which include the latest news, new appointments and new partnerships. Read on and get updated.

Latest News

The Pokagon Band of Potawatomi Indians has installed Evolv Technology weapons detection systems at all four of its Four Winds Casinos.

International Game Technology PLC (IGT) has announced that the Company will power sports betting at Coushatta Casino Resort in Kinder, Louisiana. As part of this agreement, IGT will deliver its proven PlaySports turnkey solution, including its trading advisory services.

Caleta is celebrating the newest launch of its new video bingo titled Halloween Bingo. Halloween Bingo is developed in partnership with RCT Gaming.

FBM Gaming has confirmed that it will install 300 Galaxy II cabinets in different facilities of the Caliente Group in the coming months.

Z Capital Partners, the private equity arm of Z Capital Group, has announced the completion of the merger of its affiliated portfolio companies Affinity Gaming (Affinity) and Sports Information Group (SIG), creating Affinity Interactive.

Elys Game Technology has entered into a deal to acquire Bookmakers Company, the Nevada-based sports betting services provider trading as US Bookmaking (USB).

The Ontario Government has launched iGaming Ontario, a new subsidiary of Ontario Alcohol Games Commission to create a safe, regulated and competitive online game market.

Partnerships

NASCAR has entered into a content marketing agreement with BettorView, an in-venue sports betting marketing and technology platform. The partnership marks BettorView’s first with a professional sports league.

International Game Technology (IGT) has entered a new deal with the Western Canada Lottery Corporation (WCLC) to provide 700 CrystalDual 27 video lottery terminals (VLTs).

FanDuel Group and Mohegan Gaming & Entertainment (MGE) have announced plans to bring America’s #1 Sportsbook to the state of Connecticut.

New Appointment

Team 33, an eSports team based out of Los Angeles, has appointed Luis “Rodz” Rodriguez (33 Rodz) as its President. Before joining Team 33, Luis was working on creating one of the best LATAM teams at TWSTD.

Compliance Updates

Wisconsin Governor Tony Evers and the Oneida Nation signed an agreement allowing sports betting and other event wagering at the tribes’ casinos and associated locations.

Genius Sports Limited, the official data, technology and commercial partner that powers the ecosystem connecting sports, betting and media, has secured a permanent sports wagering license from the West Virginia Lottery Commission.

Yahoo has stopped conducting paid fantasy sports contests in the Connecticut fantasy sports marketplace in response to the state’s new law that requires any sports gambling or fantasy sports operator to first reach a cooperative agreement with either the state lottery or one of its two sanctioned tribes.

Two US Congressmen have proposed a bill that essentially introduces online tribal gaming in the US. Any wager placed on a site with a server located on tribal lands would be considered to be betting on tribal lands – something already legal across many US states.

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Gambling in the USA

Gaming Americas Weekly Roundup – June 28-July 4

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Welcome to our weekly roundup of American gambling news again! Here, we are going through the weekly highlights of the American gambling industry which include the latest news and new partnerships. Read on and get updated.

Latest News

Sportradar has announced the launch of emBET, an industry-first product that integrates live betting content into OTT streaming in real-time. Sportradar created emBET in partnership with leading technology company LiveLike.

Horseshoe Hammond Casino will remain under current ownership after a ruling from the Indiana Gaming Commission. The commission amended its order requiring Las Vegas-based parent Caesars Entertainment to divest the casino as part of its 2020 merger with Eldorado Resorts.

Gambling.com Group Limited has filed a registration statement on Form F-1 with the U.S. Securities and Exchange Commission (SEC) relating to a proposed initial public offering (IPO) of its ordinary shares. The number of shares to be offered and the price range for the proposed offering have not yet been determined.

Gaming Realms has launched its Slingo Originals content in Michigan with BetMGM. Under the terms of the direct integration agreement between BetMGM and the Company, BetMGM has launched with an initial three Slingo games, with more games scheduled to follow shortly.

Scientific Games Corporation has announced that the Company, with the support of its Board of Directors, including Executive Chair Jamie Odell and Executive Vice Chair Toni Korsanos, intends to divest its Lottery and Sports Betting businesses.

Mobile Premier League (MPL), Asia’s largest esports and skill gaming platform, has announced the official launch of the MPL App in the US with nine casual games. The app is now available on the Apple App Store and Android for users to download.

Scientific Games Corporation has installed its Mural cabinet at Pechanga Resort Casino. This is the first installation of Mural in California. Mural features dual 55-inch, ultra-high-definition curved displays with popular game titles such as WILLY WONKA – Dreamer of Dreams and Emperor’s Coins – 88 Fortunes.

VegasSlotsOnline News has published its research on average yearly spend per gambler in each of the five US iGaming markets. With total US iGaming handle exceeding $54bn at the time of this research, VegasSlotsOnline News has assessed which states top the list of biggest online casino markets.

Partnerships

Caleta Gaming has entered into a software distribution deal with Virtualsoft. As per the deal, Caleta’s games will be available for Virtualsoft clients such as DoradoBet, Netabet, Ecuabet and many more.

Esports media group Gaming Community Network (GCN) has entered into a partnership with Black Fire Innovation. This team effort is anticipated to unite GCN’s gaming and esports expertise with Black Fire Innovation’s state-of-the-art facilities.

Pizza company Domino’s has teamed up with American sports betting giant DraftKings to launch “Domino’s Carside Delivery 2-Minute Guarantee Over/Under Challenge”. The free-to-play prediction game asks customers to predict whether Domino’s Carside Delivery nationwide will go faster than two minutes, more or less than 80% of the time, for the chance to win a $ 200,000 share.

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