Red Rock Resorts, Inc. ("Red Rock Resorts," "we" or the "Company")
(NASDAQ:RRR) today announced its financial results for the third
quarter ended September 30, 2016.
Key Highlights:
- Highest third quarter Adjusted EBITDA since 2008.
- Highest year-over-year net revenue growth in Las Vegas in over
sixteen quarters.
- Successfully completed the acquisition of Palms Casino Resort
(the “Palms”) on October 1, 2016, for a total purchase price of
$312.5 million.
- Commenced construction of a $115 million expansion and upgrade
at Palace Station Hotel & Casino ("Palace Station").
- Launched “My Rewards” enhancements to the award-winning
Boarding Pass loyalty program, allowing guests to earn points for
spend on non-casino amenities.
“Red Rock Resorts delivered an excellent quarter, as strong
trends in both our casino and non-casino segments helped produce
our highest year-over-year revenue growth in Las Vegas in over four
years,” said Marc J. Falcone, Executive Vice President, Chief
Financial Officer and Treasurer. “We believe this recent growth
demonstrates the strong underlying fundamentals of the Las Vegas
market, which continues to experience broad-based growth.”
Third Quarter Financial Highlights:
- Net revenues increased 7.3% to $347.1 million as compared to
$323.6 million in the prior year period, the fourteenth consecutive
quarter of year-over-year net revenue growth.
- Net income increased 59.2% to $33.4 million as compared to
$21.0 million in the prior year period.
- Adjusted EBITDA increased 13.7% to $109.0 million as compared
to $95.9 million in the prior year period, the twenty-third
consecutive quarter of year-over-year Adjusted EBITDA growth.
- Adjusted EBITDA margin increased 180 basis points
year-over-year to 31.4%, the sixteenth consecutive quarter of
Adjusted EBITDA margin growth.
“We are very pleased with our third quarter performance as we
achieved double-digit Adjusted EBITDA growth for the sixth time in
the last seven quarters,” said Mr. Falcone.
Las Vegas Operations
Net revenues increased $18.7 million or 6.2% year-over-year to
$318.3 million from $299.5 million in the prior year period.
Adjusted EBITDA increased $7.1 million or 8.2% year-over-year
to $94.3 million from $87.2 million in the prior year period.
Adjusted EBITDA margin improved 50 basis points to 29.6% in the
third quarter of 2016 as compared to the prior year period.
Casino revenues were up 5.8% in the quarter led by
strong results across all of the major casino categories.
Non-casino revenues were up 7.5%, driven by solid hotel and food
and beverage performance, as the Company continues to benefit from
its investments in non-casino areas. Margin improvements in
both casino and hotel were offset by lower food and beverage
margins related to the addition of several new restaurants, as well
as additional product enhancements to our food and beverage
offerings and service levels.
Native American Segment
Our Native American segment produced Adjusted EBITDA of $21.6
million, which was up $5.0 million or 30.5% year-over-year from
$16.6 million in the prior year period. The Company’s Native
American operations continued to produce excellent results and
should continue to experience positive growth with the upcoming
completion of their respective expansions. The Graton Resort
& Casino expansion will open as planned on November 15, 2016
and will include 200-hotel rooms, a luxurious spa, outdoor pool
area and over 20,000 square feet of event and convention
space. Gun Lake Casino’s casino expansion is expected to open
in the summer of 2017.
Corporate and Other
Corporate and other decreased by $1.0 million or 12.4% during
the third quarter to $6.9 million from $7.9 million for the prior
year period.
Adjusted EBITDA is not a generally accepted accounting principle
(“GAAP”) measurement and is presented solely as a supplemental
disclosure because the Company believes that it is a widely used
measure of operating performance in the gaming industry and is a
principal basis for valuation of gaming companies. Adjusted EBITDA
is further defined under the heading “Presentation of Financial
Information” and a reconciliation of Adjusted EBITDA to net income
is included in the financial information attached hereto.
Balance Sheet Highlights
As of September 30, 2016, the Company’s cash balance was $96.3
million, and the principal balance of outstanding debt was $2.4
billion, which excludes the non-recourse land loan of $115.9
million. At September 30, 2016, the Company’s $685 million
revolving credit facility had an outstanding balance of $130
million, which includes borrowings associated with the purchase of
the Palms. As of September 30, 2016, debt (net of excess
cash) to Adjusted EBITDA ratio was 4.6 times and interest coverage
was 4.3 times, excluding the non-recourse land loan and proforma
for the acquisition of the Palms.
Subsequent Events
In October, the Company broke ground on a $115 million expansion
and upgrade at Palace Station, which recently celebrated its 40th
anniversary. The expansion includes a completely new exterior
façade, bingo room, buffet, two new restaurants, additional gaming
space, improved parking and a new porte-cochère with improved
ingress/egress for guests. These upgrades will substantially
replace the original building from 1976 and will provide the
building with a fresh exterior and notable upgrade to its
amenity offerings.
In November, the Company announced that its Board of Directors
declared a cash dividend of $0.10 per Class A common share for the
fourth quarter. The dividend will be payable on November
30, 2016 to all stockholders of record as of the close of business
on November 15, 2016. 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 $11.6 million,
approximately $4.1 million of which is expected to be
distributed to the Company and approximately $7.5 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 1:30 p.m.
Pacific Time to discuss its third quarter financial results. The
conference call will consist of prepared remarks from the Company
and will include a question and answer session. Those interested in
participating in the call should dial (877) 793-4361 or (615)
247-0185 for international callers, approximately 15 minutes before
the call start time. A replay of the call will be available from
today through November 14, 2016 at www.redrockresorts.com. A live
audio webcast of the call will also be available at
www.redrockresorts.com.
Presentation of Financial Information
Adjusted EBITDA is a non-GAAP measure that is presented solely
as a supplemental disclosure. We believe that Adjusted EBITDA is a
widely used measure of operating performance in our industry and is
a principal basis for valuation of gaming companies. We believe
that in addition to operating income, Adjusted EBITDA is a useful
financial performance measurement for assessing our operating
performance because it provides information about the performance
of our ongoing core operations excluding non-cash expenses,
financing costs, and other non-operational items. Adjusted EBITDA
includes net income plus preopening, depreciation and amortization,
share-based compensation, a donation to UNLV, asset impairment,
write-downs and other charges, net, interest expense, net, loss on
extinguishment/modification of debt, change in fair value of
derivative instruments and provision for income tax, and excludes
the impact of a settlement agreement, Adjusted EBITDA attributable
to the noncontrolling interests of MPM and discontinued operations.
To evaluate Adjusted EBITDA and the trends it depicts, the
components should be considered. Each of these components can
significantly affect our results of operations and should be
considered in evaluating our operating performance, and the impact
of these components cannot be determined from Adjusted EBITDA.
Further, Adjusted EBITDA does not represent net income or cash
flows from operating, investing or financing activities as defined
by GAAP and should not be considered as an alternative to net
income as an indicator of our operating performance. Additionally,
Adjusted EBITDA does not consider capital expenditures and other
investing activities and should not be considered as a measure of
our liquidity. In addition, it should be noted that not all gaming
companies that report EBITDA or adjustments to this measure may
calculate EBITDA or such adjustments in the same manner as we do,
and therefore, our measure of Adjusted EBITDA may not be comparable
to similarly titled measures used by other gaming companies.
Company Information and Forward Looking
Statements
Red Rock Resorts manages and owns a significant indirect equity
interest in 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 hotel rooms, 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 and owns a 50%
interest in MPM Enterprises, L.L.C., which is the manager of Gun
Lake Casino in southwestern Michigan.
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 Company’s ability to successfully
integrate the Palms with our existing properties or realize
expected synergies; the strength and sustainability of the recovery
from the recent economic downturn, and the effects of the economy
generally, and in particular in Nevada, on consumer spending and
our business; the effects of intense competition that exists in the
gaming industry; the risk that new gaming licenses or gaming
activities, such as expansion of internet gaming, are approved and
result in additional competition; our substantial outstanding
indebtedness and the effect of our significant debt service
requirements on our operations and ability to compete; the risk
that we will not be able refinance our outstanding indebtedness or
obtain necessary capital to finance any development or investment
projects that we may decide to undertake in the future; the impact
of extensive regulation from gaming and other government
authorities on our ability to operate our business and the risk
that regulatory authorities may revoke, suspend, condition or limit
our gaming or other licenses, impose substantial fines or take
other actions that adversely affect us; risks associated with
changes to applicable gaming and tax laws that could have a
material adverse effect on our financial condition; the impact of
general business conditions including competitive practices,
changes in customer demand and the cyclical nature of the gaming
and hospitality business in general, on our business and results of
operations; the impact of volatility in the capital markets;
adverse outcomes of legal proceedings and the development of, and
changes in, claims or litigation reserves; risks, such as cost
overruns and construction delays, associated with development,
construction and management of new projects or the expansion of
existing facilities; and other risks described in the filings of
the Company with the Securities and Exchange Commission.
Red Rock Resorts, Inc. |
Condensed Consolidated Statements of
Income |
(amounts in thousands, except per share
data) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
September 30, |
|
September 30, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
Operating revenues: |
|
|
|
|
|
|
|
|
Casino |
$ |
232,584 |
|
|
$ |
219,861 |
|
|
$ |
706,151 |
|
|
$ |
683,598 |
|
|
Food and
beverage |
|
63,551 |
|
|
|
59,479 |
|
|
|
196,579 |
|
|
|
187,565 |
|
|
Room |
|
32,192 |
|
|
|
29,665 |
|
|
|
99,555 |
|
|
|
92,311 |
|
|
Other |
|
17,463 |
|
|
|
17,103 |
|
|
|
52,350 |
|
|
|
52,925 |
|
|
Management fees |
|
27,702 |
|
|
|
22,728 |
|
|
|
81,806 |
|
|
|
63,703 |
|
|
|
Gross revenues |
|
373,492 |
|
|
|
348,836 |
|
|
|
1,136,441 |
|
|
|
1,080,102 |
|
|
Promotional
allowances |
|
(26,352 |
) |
|
|
(25,239 |
) |
|
|
(78,568 |
) |
|
|
(75,918 |
) |
|
|
Net revenues |
|
347,140 |
|
|
|
323,597 |
|
|
|
1,057,873 |
|
|
|
1,004,184 |
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
Casino |
|
90,088 |
|
|
|
85,091 |
|
|
|
266,495 |
|
|
|
257,269 |
|
|
Food and
beverage |
|
44,888 |
|
|
|
39,443 |
|
|
|
131,913 |
|
|
|
121,197 |
|
|
Room |
|
12,036 |
|
|
|
11,672 |
|
|
|
36,314 |
|
|
|
34,762 |
|
|
Other |
|
6,411 |
|
|
|
6,499 |
|
|
|
18,438 |
|
|
|
19,537 |
|
|
Selling,
general and administrative |
|
82,739 |
|
|
|
85,323 |
|
|
|
237,981 |
|
|
|
253,941 |
|
|
Preopening |
|
10 |
|
|
|
707 |
|
|
|
731 |
|
|
|
1,121 |
|
|
Depreciation and amortization |
|
36,240 |
|
|
|
32,893 |
|
|
|
114,103 |
|
|
|
103,896 |
|
|
Asset
impairment |
|
- |
|
|
|
100 |
|
|
|
- |
|
|
|
2,101 |
|
|
Write-downs and other charges, net |
|
1,379 |
|
|
|
5,053 |
|
|
|
14,713 |
|
|
|
7,446 |
|
|
|
|
|
273,791 |
|
|
|
266,781 |
|
|
|
820,688 |
|
|
|
801,270 |
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
73,349 |
|
|
|
56,816 |
|
|
|
237,185 |
|
|
|
202,914 |
|
|
Earnings
from joint ventures |
|
346 |
|
|
|
253 |
|
|
|
1,386 |
|
|
|
1,070 |
|
Operating income and earnings from joint
ventures |
|
73,695 |
|
|
|
57,069 |
|
|
|
238,571 |
|
|
|
203,984 |
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income: |
|
|
|
|
|
|
|
|
Interest
expense, net |
|
(35,275 |
) |
|
|
(36,053 |
) |
|
|
(104,421 |
) |
|
|
(109,030 |
) |
|
Loss on
extinguishment/modification of debt |
|
(186 |
) |
|
|
- |
|
|
|
(7,270 |
) |
|
|
(90 |
) |
|
Change in
fair value of derivative instruments |
|
- |
|
|
|
- |
|
|
|
87 |
|
|
|
(4 |
) |
|
|
|
|
(35,461 |
) |
|
|
(36,053 |
) |
|
|
(111,604 |
) |
|
|
(109,124 |
) |
Income before income tax |
|
38,234 |
|
|
|
21,016 |
|
|
|
126,967 |
|
|
|
94,860 |
|
|
Provision
for income tax |
|
(4,790 |
) |
|
|
- |
|
|
|
(12,292 |
) |
|
|
- |
|
Income from continuing operations |
|
33,444 |
|
|
|
21,016 |
|
|
|
114,675 |
|
|
|
94,860 |
|
Discontinued operations |
|
- |
|
|
|
(6 |
) |
|
|
- |
|
|
|
(171 |
) |
Net
income |
|
33,444 |
|
|
|
21,010 |
|
|
|
114,675 |
|
|
|
94,689 |
|
|
Less net
income attributable to noncontrolling interests |
|
25,172 |
|
|
|
1,948 |
|
|
|
43,111 |
|
|
|
5,730 |
|
Net
income attributable to Red Rock Resorts, Inc. |
$ |
8,272 |
|
|
$ |
19,062 |
|
|
$ |
71,564 |
|
|
$ |
88,959 |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
Net earnings per share
of Class A common stock, basic and diluted |
$ |
0.20 |
|
|
$ |
0.21 |
|
|
$ |
0.55 |
|
|
$ |
0.99 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
41,137 |
|
|
|
9,888 |
|
|
|
27,070 |
|
|
|
9,888 |
|
|
|
Diluted |
|
41,288 |
|
|
|
9,888 |
|
|
|
27,174 |
|
|
|
9,888 |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
declared per common share |
$ |
0.10 |
|
|
$ |
- |
|
|
$ |
0.10 |
|
|
$ |
- |
|
Red Rock Resorts, Inc. |
|
Segment Information and |
|
Reconciliation of Adjusted EBITDA to Net
Income |
|
(amounts in thousands) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
|
|
|
|
September 30, |
|
September 30, |
|
|
|
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
Net
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Las Vegas
operations |
|
|
|
$ |
318,253 |
|
|
$ |
299,539 |
|
|
$ |
972,587 |
|
|
$ |
936,585 |
|
|
Native American
management |
|
|
|
|
27,597 |
|
|
|
22,619 |
|
|
|
81,404 |
|
|
|
63,288 |
|
|
Reportable
segment net revenues |
|
|
|
345,850 |
|
|
|
322,158 |
|
|
|
1,053,991 |
|
|
|
999,873 |
|
|
Corporate and
other |
|
|
|
|
|
1,290 |
|
|
|
1,439 |
|
|
|
3,882 |
|
|
|
4,311 |
|
|
Net
revenues |
|
|
|
|
$ |
347,140 |
|
|
$ |
323,597 |
|
|
$ |
1,057,873 |
|
|
$ |
1,004,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
Las Vegas
operations |
|
|
|
$ |
94,322 |
|
|
$ |
87,179 |
|
|
$ |
317,959 |
|
|
$ |
300,261 |
|
|
Native American
management |
|
|
|
|
21,624 |
|
|
|
16,576 |
|
|
|
62,152 |
|
|
|
45,332 |
|
|
Reportable
segment Adjusted EBITDA |
|
|
|
115,946 |
|
|
|
103,755 |
|
|
|
380,111 |
|
|
|
345,593 |
|
|
Corporate and
other |
|
|
|
|
|
(6,924 |
) |
|
|
(7,901 |
) |
|
|
(20,459 |
) |
|
|
(20,007 |
) |
|
Adjusted
EBITDA |
|
|
|
|
|
109,022 |
|
|
|
95,854 |
|
|
|
359,652 |
|
|
|
325,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating (expense) income |
|
|
|
|
|
|
|
|
|
|
|
Preopening |
|
|
|
|
|
(10 |
) |
|
|
(707 |
) |
|
|
(731 |
) |
|
|
(1,121 |
) |
|
Depreciation and
amortization |
|
|
|
|
(36,240 |
) |
|
|
(32,893 |
) |
|
|
(114,103 |
) |
|
|
(103,896 |
) |
|
Share-based
compensation |
|
|
|
|
(1,413 |
) |
|
|
(4,239 |
) |
|
|
(5,714 |
) |
|
|
(17,097 |
) |
|
Donation to UNLV |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,500 |
) |
|
Asset impairment |
|
|
|
|
|
- |
|
|
|
(100 |
) |
|
|
- |
|
|
|
(2,101 |
) |
|
Write-downs and other
charges, net |
|
|
|
(1,379 |
) |
|
|
(5,053 |
) |
|
|
(14,713 |
) |
|
|
(7,446 |
) |
|
Settlement
agreement |
|
|
|
|
- |
|
|
|
- |
|
|
|
1,133 |
|
|
|
- |
|
|
Adjusted EBITDA
attributable to MPM noncontrolling interest |
|
3,715 |
|
|
|
4,207 |
|
|
|
13,047 |
|
|
|
12,559 |
|
|
Operating income and
earnings from joint ventures |
|
|
73,695 |
|
|
|
57,069 |
|
|
|
238,571 |
|
|
|
203,984 |
|
|
Other (expense) income |
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net |
|
|
|
|
|
(35,275 |
) |
|
|
(36,053 |
) |
|
|
(104,421 |
) |
|
|
(109,030 |
) |
|
Loss on
extinguishment/modification of debt |
|
|
|
(186 |
) |
|
|
- |
|
|
|
(7,270 |
) |
|
|
(90 |
) |
|
Change in fair value of
derivative instruments |
|
|
- |
|
|
|
- |
|
|
|
87 |
|
|
|
(4 |
) |
|
Income before income tax |
|
|
|
|
38,234 |
|
|
|
21,016 |
|
|
|
126,967 |
|
|
|
94,860 |
|
|
Provision for income
tax |
|
|
|
|
(4,790 |
) |
|
|
- |
|
|
|
(12,292 |
) |
|
|
- |
|
|
Income from continuing operations |
|
|
|
33,444 |
|
|
|
21,016 |
|
|
|
114,675 |
|
|
|
94,860 |
|
|
Discontinued operations |
|
|
|
|
- |
|
|
|
(6 |
) |
|
|
- |
|
|
|
(171 |
) |
|
Net income |
|
|
|
|
$ |
33,444 |
|
|
$ |
21,010 |
|
|
$ |
114,675 |
|
|
$ |
94,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTACT:
Red Rock Resorts
Daniel Foley
Vice President, Finance & Investor Relations
(702) 495-3683
or
Lori Nelson
Vice President of Corporate Communications
(702) 495-4248
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