Red Rock Resorts, Inc. ("Red Rock Resorts" "we" or the "Company")
(NASDAQ:RRR) today announced financial results for the first
quarter ended March 31, 2017.
Financial Highlights:
- Consolidated net revenues increased 16.3% to $417.7 million as
compared to $359.2 million in the prior year quarter, the sixteenth
consecutive quarter of year-over-year consolidated net revenue
growth.
- Consolidated net income decreased 24.0% to $45.2 million as
compared to $59.5 million in the prior year quarter, primarily
attributable to the inclusion of the provision for income tax.
- Consolidated Adjusted EBITDA increased 2.0% to $135.9 million
as compared to $133.2 million in the prior year quarter, the
highest first quarter Consolidated Adjusted EBITDA in nine
years.
- Las Vegas net revenues increased 16.5% to $386.2 million as
compared to $331.5 million in the prior year quarter.
- Las Vegas Adjusted EBITDA increased 1.3% to $120.6 million as
compared to $119.0 million in the prior year quarter.
- Completed a series of opportunistic debt transactions that
enhanced our balance sheet and reduced our annual interest expense
by approximately $22.8 million.
“During the first quarter, we continued to see
solid results in our Las Vegas operations with same-store revenues
up 3.0%, demonstrating the underlying strength of our core
business,” said Marc J. Falcone, Executive Vice President, Chief
Financial Officer and Treasurer. “We believe these results are
directly correlated to the ongoing expansion of the Las Vegas
economy, which continues to see strong population growth, robust
employment numbers, increasing wages, an improving housing market,
and a large pipeline of planned and under construction development
projects, all of which attract new residents and businesses to the
Las Vegas market,” said Mr. Falcone.
Las Vegas Operations Segment
Net revenues from our Las Vegas operations,
including the Palms, increased $54.8 million or 16.5% to $386.2
million for the first quarter, from $331.5 million in the prior
year period. Despite the impact of construction disruption at
Palace Station, same-store gaming and non-gaming revenues were up
2.2% and 5.0%, respectively. Adjusted EBITDA, including the
Palms, increased $1.6 million or 1.3% to $120.6 million from $119.0
million in the prior year period. Adjusted EBITDA margin
decreased 470 basis points to 31.2% for the first quarter,
primarily due to the inclusion of the Palms, construction
disruption at Palace Station, and the ongoing impact of
enhancements made to our food and beverage offerings and service
levels.
“We continue to make significant progress on our
numerous technology and development initiatives, as well as the
finalization of our future development plans for the Palms,” added
Mr. Falcone. “We believe these initiatives and our
substantial prior investments in our market-leading properties,
combined with the solid outlook for the Las Vegas economy,
positions our company well for future growth.”
Native American Segment
The Company’s Native American segment produced
Adjusted EBITDA of $23.3 million for the first quarter, up $2.9
million or 14.1% from $20.4 million in the prior year period.
Results were driven by strong performances at both Graton Resort
& Casino and Gun Lake Casino. Graton Resort & Casino
benefited from its first full quarter of its recent hotel and
resort expansion, which has performed better than expected.
Corporate and other was $8.0 million for the first
quarter, an increase of $1.8 million or 28.3% as compared to the
prior year period, primarily due to higher costs associated with
being a public company.
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 net
income to Adjusted EBITDA is included in the financial information
attached hereto.
Balance Sheet Highlights
As of March 31, 2017, the Company’s cash balance
was $119.4 million, and the principal balance of outstanding debt
was $2.4 billion. As of March 31, 2017, debt (net of excess cash)
to Adjusted EBITDA ratio was 4.8 times and interest coverage was at
4.5 times, proforma for the acquisition of the Palms.
“Over the past few months, we have entered into
several balance sheet transactions to opportunistically improve our
financial position. The net effect has resulted in
significantly lower borrowing costs and increased flexibility in
our overall capital structure,” said Mr. Falcone.
Second Quarter
Dividend
On May 3, 2017, the Company announced that its
Board of Directors declared a cash dividend of $0.10 per Class A
common share for the first quarter. The dividend will be
payable on May 30, 2017 to all stockholders of record as of the
close of business on May 16, 2017. 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 $6.8 million of which is
expected to be distributed to the Company and approximately $4.8
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
2:00 p.m. Pacific Time to discuss its 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 May 11, 2017 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 net 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, 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
Adjusted EBITDA attributable to the noncontrolling interests of
MPM.
Company Information and Forward Looking
Statements
Red Rock Resorts manages and owns a majority
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 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. |
|
Consolidated Statements of
Income |
|
(amounts in thousands, except per share
data) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
|
|
March 31, |
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
Operating revenues: |
|
|
|
|
|
Casino |
$ |
262,972 |
|
|
$ |
239,771 |
|
|
|
Food and
beverage |
|
80,115 |
|
|
|
66,620 |
|
|
|
Room |
|
49,764 |
|
|
|
34,384 |
|
|
|
Other |
|
22,820 |
|
|
|
17,182 |
|
|
|
Management fees |
|
30,227 |
|
|
|
26,649 |
|
|
|
|
Gross revenues |
|
445,898 |
|
|
|
384,606 |
|
|
|
Promotional
allowances |
|
(28,166 |
) |
|
|
(25,359 |
) |
|
|
|
Net revenues |
|
417,732 |
|
|
|
359,247 |
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
Casino |
|
101,654 |
|
|
|
87,421 |
|
|
|
Food and
beverage |
|
55,046 |
|
|
|
42,524 |
|
|
|
Room |
|
20,067 |
|
|
|
12,385 |
|
|
|
Other |
|
7,833 |
|
|
|
5,722 |
|
|
|
Selling,
general and administrative |
|
94,423 |
|
|
|
75,090 |
|
|
|
Preopening |
|
30 |
|
|
|
348 |
|
|
|
Depreciation and amortization |
|
45,253 |
|
|
|
39,427 |
|
|
|
Write-downs and other charges, net |
|
1,024 |
|
|
|
2,368 |
|
|
|
|
|
|
325,330 |
|
|
|
265,285 |
|
|
|
|
|
|
|
|
|
Operating income |
|
92,402 |
|
|
|
93,962 |
|
|
|
Earnings
from joint ventures |
|
415 |
|
|
|
612 |
|
|
Operating income and earnings from joint
ventures |
|
92,817 |
|
|
|
94,574 |
|
|
|
|
|
|
|
|
|
Other (expense) income: |
|
|
|
|
|
Interest
expense, net |
|
(34,944 |
) |
|
|
(35,068 |
) |
|
|
Loss on
extinguishment/modification of debt |
|
(2,019 |
) |
|
|
- |
|
|
|
Change in
fair value of derivative instruments |
|
39 |
|
|
|
(3 |
) |
|
|
|
|
|
(36,924 |
) |
|
|
(35,071 |
) |
|
Income before income tax |
|
55,893 |
|
|
|
59,503 |
|
|
|
Provision
for income tax |
|
(10,679 |
) |
|
|
- |
|
|
Net
income |
|
45,214 |
|
|
|
59,503 |
|
|
|
Less net
income attributable to noncontrolling interests |
|
25,431 |
|
|
|
1,864 |
|
|
Net
income attributable to Red Rock Resorts, Inc. |
$ |
19,783 |
|
|
$ |
57,639 |
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
Net earnings per share
of Class A common stock, basic and diluted |
$ |
0.30 |
|
|
$ |
0.64 |
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
Basic |
|
65,692 |
|
|
|
9,888 |
|
|
|
|
Diluted |
|
65,837 |
|
|
|
9,888 |
|
|
|
|
|
|
|
|
|
|
Dividends
declared per common share |
$ |
0.10 |
|
|
$ |
- |
|
|
Red Rock Resorts, Inc. |
|
Segment Information and |
|
Reconciliation of Net Income to Adjusted
EBITDA |
|
(amounts in thousands) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
|
|
|
March 31, |
|
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
Net
Revenues |
|
|
|
|
|
|
|
Las Vegas
operations |
|
|
|
$ |
386,238 |
|
|
$ |
331,458 |
|
|
Native
American management |
|
|
|
|
30,105 |
|
|
|
26,487 |
|
|
Reportable segment net revenues |
|
|
|
416,343 |
|
|
|
357,945 |
|
|
Corporate
and other |
|
|
|
|
1,389 |
|
|
|
1,302 |
|
|
Net revenues |
|
|
|
$ |
417,732 |
|
|
$ |
359,247 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
$ |
45,214 |
|
|
$ |
59,503 |
|
|
Adjustments: |
|
|
|
|
|
|
|
Preopening |
|
|
|
|
30 |
|
|
|
348 |
|
|
Depreciation and amortization |
|
|
|
|
45,253 |
|
|
|
39,427 |
|
|
Share-based compensation |
|
|
|
|
1,412 |
|
|
|
620 |
|
|
Write-downs and other charges, net |
|
|
|
1,024 |
|
|
|
2,368 |
|
|
Interest
expense, net |
|
|
|
|
34,944 |
|
|
|
35,068 |
|
|
Loss on extinguishment/modification of debt |
|
|
2,019 |
|
|
|
- |
|
|
Change in fair value of derivative instruments |
|
|
(39 |
) |
|
|
3 |
|
|
Adjusted EBITDA attributable to MPM noncontrolling
interest |
|
(4,638 |
) |
|
|
(4,121 |
) |
|
Provision
for income tax |
|
|
|
|
10,679 |
|
|
|
- |
|
|
Adjusted
EBITDA |
|
|
|
$ |
135,898 |
|
|
$ |
133,216 |
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
|
|
|
|
|
|
|
Las Vegas
operations |
|
|
|
$ |
120,566 |
|
|
$ |
119,010 |
|
|
Native
American management |
|
|
|
|
23,317 |
|
|
|
20,432 |
|
|
Reportable segment Adjusted EBITDA |
|
|
|
143,883 |
|
|
|
139,442 |
|
|
Corporate
and other |
|
|
|
|
(7,985 |
) |
|
|
(6,226 |
) |
|
Adjusted EBITDA |
|
|
|
$ |
135,898 |
|
|
$ |
133,216 |
|
|
|
|
|
|
|
|
|
|
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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