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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 – November 22-28

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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

Foxwoods El San Juan Casino located at Fairmont El San Juan Hotel in Puerto Rico opened its doors for visitors on November 17. Thousands of visitors attended the public soft launch.

International Game Technology has announced that it will unveil the first-ever omnichannel Wheel of Fortune linked progressive for the US at the SBC Summit North America 2021, Nov. 30 – Dec. 2 at the Meadowlands Exposition Centre in Secaucus, N.J.

Bragg Gaming Group has announced that Yaniv Spielberg, the company’s Chief Strategy Officer, will participate in a fireside chat discussion at the Jefferies Sports Betting & iGaming Summit on Thursday, December 2 at 1:00 pm ET.

PointsBet Holdings Limited announced that through an exclusive partnership agreement with Colonial Downs Group and subsequent joint application for licensure, its wholly-owned subsidiary PointsBet Virginia has been awarded a temporary supplier license by the Virginia Lottery to offer online sports wagering in Virginia.

Google Ads has posted an update that bans the use of its platform to promote sports betting services or ads in Florida. Google made this change because of a ruling from a Washington D.C. federal court which invalidated the Florida-Seminole Tribal Gaming Compact and made sports betting in Florida illegal.

Sports betting in Florida is on hold after a federal court ruled that the compact between the state of Florida and the Seminole Tribe is vacated.

Nuvei Corporation has announced that its wholly-owned subsidiary has been granted an Event Wagering and Fantasy Sports Supplier license in Arizona.

New Partnerships

Orlegi Sports, in partnership with Chiliz, the leading blockchain provider for the sports and entertainment industry, has announced that they will be launching the official Fan Tokens of Atlas FC and Club Santos Laguna on Socios.com.

Igaming technology provider Huddle has signed terms to become an ongoing technology partner with betting and gaming operator Sporting Group as it expands its B2B offerings in North America.

Betway has signed a multi-year partnership with New Jersey Devils. As per the deal, Betway will receive dynamic brand exposure and TV-visible signage throughout Prudential Centre for Devils home games, including dasherboard, Zamboni tunnel and in-bowl staircase branding, as well as in-bowl LED ring and scoreboard advertising.

Caleta Gaming has signed a new content distribution deal with Jazz Gaming Solutions. The Brazilian provider’s full portfolio of video bingos, video slots, kenos, lottos and scratch cards will soon be available for partners connected to the Jazz GS network.

Ainsworth has partnered up with Colombia-based operator Virtualsoft to expand its content’s reach in Latin America.

Colorado Rapids has announced that Tipico, one of the largest online sports betting companies in the world, will serve as the presenting sponsor of the club’s Audi 2021 MLS Cup Playoffs run.

FanDuel, part of Flutter Entertainment, and Grupo Globo have signed a new multi-year agreement that will see FanDuel provide daily fantasy sports services to Grupo Globo’s Cartola FC brand.

USAbility has entered into a partnership with Fubo Gaming, a subsidiary of the live TV streaming platform dedicated to sports fuboTV Inc and developer and distributor of Fubo bookmaker.

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Gambling in the USA

Betting.com signs strategic commercial partnership with Denver Post Media

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Betting.com signs strategic commercial partnership with Denver Post Media
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We are excited to announce our first strategic partnership in the U.S. with Denver Post, the leading newspaper in the Colorado state. As part of the agreement, Betting.com will create a betting hub dedicated to articles and guides about online sports betting in the Centennial State on The Denver Post’s domain. Betting.com will also provide Denver Post with latest and most up to date betting odds.

The ambition is to educate readers about betting on all major sports leagues online, how to take advantage of picks from professional handicappers and how odds are compiled, as well as the legal aspects of online gambling in the state.

“We look forward to working together with The Denver Post in Colorado as part of our launch on the U.S. market. Our customers are always at the heart of what we do, and we want them to have the best possible tools and knowledge before they bet online.” said Betting.com CEO Martin Grozev.

The comprehensive community-based betting software has obtained licenses for multiple states and chose Colorado for its launch thanks to the deal with The Denver Post.

“Our partnership with Betting.com will offer them a channel to provide thought leadership in the ever-evolving world of sports betting. We wanted to ensure that we had the right partner to engage and educate our readership as they seek out resources in this space. With Betting.com, we feel that’s exactly what we have.” said Denver Post Director of Digital Advertising Sean Stead.

Game Lounge Group acquired Betting.com in 2020 as part of its diversification strategy and commitment to expanding into the U.S. market.

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Gambling in the USA

Gaming Americas Weekly Roundup – November 15-21

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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

Pragmatic Play has won two awards at the prestigious Gaming Intelligence Awards Latin America 2021, being crowned iGaming Supplier of the Year, and also receiving Game of the Year for its hit title Gates of Olympus.

Alpha Esports Tech, a technology company that focuses on emerging markets in esports, mobile gaming, commerce, blockchain and high growth opportunities, has announced that Alpha’s subsidiary Paradise City Gaming has begun the development of its Metaverse technologies, which are AR-based experiences that will bring the virtual world together with the physical world.

Wondr Gaming Corp, an entertainment company uniting brands and the global gaming community through its loyalty, NFT and growing media network, has launched its first NFT auction on sports.WondrNFT.com, showcasing Olympic decathlon gold medalist, and closing ceremonies flag bearer, Damian Warner.

Eagle Mountain Casino in Porterville has selected the full-suite of OPTX solutions for marketing, player development, slots and artificial intelligence. OPTX was recently honoured by being named one of the Most Promising Gaming Tech Solution Providers of 2021 by CIOReview Magazine.

Riot Games has promoted Senior Director of Global Esports and Global Head of VALORANT Esports Whalen Rozelle to the newly created position of Head of Global Esports Operations.

Prophet Exchange, the first pure peer-to-peer U.S. sports betting exchange, has announced that Victor Cruz has joined Prophet Exchange as a Strategic Partner and Advisor.

The Arkansas Racing Commission on 12th November accepted the application and $250,000 filing fee from Cherokee Nation Businesses to move forward on a casino license in Pope County.

New Partnerships               

Verasity has announced a partnership with the leading NFT-based online video game Axie Infinity for the upcoming FTX GalAxie Cup 2021. Verasity’s competitive esports and video streaming platform VeraEsports will be the official and exclusive broadcast and esports platform partner of the online tournament.

Socios.com announced its first foray into the worlds of American football and soccer via a groundbreaking partnership with Kraft Sports + Entertainment’s New England Patriots and New England Revolution.

DraftKings has announced a new mobile sports betting deal with BHCMC, a subsidiary of Butler National Corporation, manager of Boot Hill Casino & Resort, which could take the sportsbook to the state of Kansas. This is subject to sports betting legislation and regulations being adopted in the state, and the receipt of all applicable licenses and approvals.

SharpLink Gaming and Quintar have announced a partnership to integrate their respective technologies to produce an AR experience that combines live sporting events with real-time sports betting for sports fans. SharpLink’s technology development team will work with Quintar’s team to create a fully turnkey platform that will allow sports bettors to participate in live sports events via AR, check game data, compare betting lines, socialise with friends and place bets with multiple sportsbook operators.

International Game Technology has signed a multi-year agreement with Cliff Castle Casino in Camp Verde, Arizona. IGT PlaySports technology and trading advisory services will power Cliff Castle Casino’s retail sportsbook, enabling casino guests to place pre-match and in-game wagers over the counter or at the venue’s self-service PlaySports Kiosks.

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