Red Rock Resorts Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 3, 2023

There are 9 speakers on the call.

Operator

Good afternoon, and welcome to Red Rock Resorts Second Quarter 2023 Conference Call. All participants will be in listen only mode. Please note this conference is being recorded. I would now like to turn the conference over to Steven Cudi, Executive Vice President, Chief Financial Officer and Treasurer of Red Rocks Resorts. Please go ahead.

Speaker 1

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for Red Rock Resorts' 2nd quarter 2023 earnings conference call. Joining me on the call today are Frank and Lorenzo Portita, Scott Krieger and our executive management team. I'd like to remind everyone that our call today will include forward looking statements under Safe Harbor provisions of the United States Federal Securities Laws. Developments and results may differ from those projected.

Speaker 1

During this call, we will also discuss non GAAP financial measures. For definitions and a complete reconciliation of these figures to GAAP, please refer to our financial tables in our earnings press release, Form 8 ks and investor deck, which were filed this afternoon prior to the call. Also, please note that this call is being recorded. Before we get into any of the details, the 2nd quarter represented yet another strong quarter for the company. The quarter represented our 3rd best second quarter in the history Our company in terms of same store net revenue, adjusted EBITDA and adjusted EBITDA margin only surpassed for the extremely strong Q2 of 2021 2022.

Speaker 1

Within the quarter, the month of April provided a particularly tough year over year comparison and accounted for the majority of the year over year decline in our results within the quarter, With May June performing more in line with last year's stellar results. Despite a tough April, the management team executed on our core strategy of keeping the properties fresh and relevant for our guests And delivering another extremely strong quarter with the quarter marking the 12th consecutive quarter that the company delivered adjusted EBITDA margins in excess of 45%. Now let's take a look at our Q2 results. On a consolidated basis, 2nd quarter net revenue was $416,000,000 down 6,100,000 Prior year's Q2, adjusted EBITDA was $175,300,000 down $13,600,000 year over year. Adjusted EBITDA margin was 42.1 percent for the quarter, a decrease of 260 basis points year over year.

Speaker 1

With respect to our Las Vegas operations, 2nd quarter net revenue was $412,600,000 down $7,500,000 from the prior year's 2nd quarter. Adjusted EBITDA was $193,100,000 down $14,800,000 year over year. Adjusted EBITDA margin was 46.8 percent, a decrease of 2 68 basis points year over year. In the quarter, we converted 29% of our adjusted EBITDA to operating free Cash flow generating $51,000,000 or $0.49 per share. Our free cash flow conversion was lower in the quarter due to the timing of our estimated tax payments.

Speaker 1

When combining the 1st and second quarters, it shows that we continue to generate strong cash flow, converting 54% of our adjusted EBITDA to operating cash flow, generating Always return to our stakeholders via debt pay down or dividends. Throughout the quarter, we remain operationally disciplined And focused on our core local gas as well as continue to grow our regional and national segments. When comparing our results to last year's Q2, we continue to see upside Strong visitation in our regional and national segments. This strength coupled with strong pet spend per visit across our entire portfolio Allowed us to enjoy near record second quarter revenue and adjusted EBITDA results across our gaming segments. Turning to our non gaming segments, both hotel and food and beverage Quarterly revenue and profit in our company's history, driven by higher occupancy and ADR across our hotel portfolio.

Speaker 1

Food and beverage experienced near record second quarter revenue and record second quarter profitability driven by higher check average across food and beverage outlets and continued strength of our catering business. Our catering revenue continues to surpass 2019 levels As this quarter represented the 8th consecutive quarter of double digit year over year growth of

Speaker 2

the business

Speaker 1

segment. With regard to our group sales business, we continue to see Positive momentum driven by growth in both room nights and ADR as the pipeline continues to grow into the back half of twenty twenty three. As we begin the Q3, our business across our gaming and non gaming segments remain stable, but we will continue to face challenging year over year comparisons for the remainder of the year. On the expense side, we remain operationally disciplined and continue to look for ways to become more efficient while providing best in class customer service to our guests And continue to be the top employer of choice in Las Vegas Valley. Despite a tougher year over year comparable, the company was able to generate near record financial performance and continue return capital to our shareholders.

Speaker 1

These results demonstrate the resilience of our business model, the sustainability of our operating margin and The ability of our management team to execute on our long term growth strategy and take a balanced approach in returning capital to our shareholders. While we remain vigilant to the macroeconomic picture, We are committed to disciplined investing in our core strategy, which includes expanding our footprint in Las Vegas and investing in new amenities To our guests, bring new amenities to our guests at our existing locations. Building upon the successful openings of our high limit table and slot rooms As well as new casino bar at our Red Rock Casino Resort, this quarter we opened up Polaris, a high end casino bar located at our Green Valley Ranch Resort. The early results from this new amenity have been very promising, and we look forward to bringing additional complementary amenities to our Green Valley property later this year. Now let's cover a few balance sheet and capital items.

Speaker 1

The company's cash and cash equivalents at the end of the second quarter were $100,900,000 The total principal amount of debt outstanding was $3,200,000,000 resulting in net debt of $3,100,000,000 As of the end of the second quarter, the company's net debt to EBITDA Coverage ratios were 4.25x and 4.4x respectively. As we stated on our previous earnings calls, Our leverage will continue to tick upwards as we complete the construction of our Durango project. On the completion of Durango, we expect to delever towards our long term net leverage target of 3x net Capital spend in the 2nd quarter was $201,600,000 which includes approximately 172 point $7,000,000 in investment capital inclusive of Durango as well as $28,900,000 in maintenance capital. For the full year 2023, We expect to spend between $70,000,000 $90,000,000 in maintenance capital and a total of $600,000,000 to $650,000,000 in growth capital, inclusive of Durango. Now let's provide an update on our development pipeline.

Speaker 1

Starting with our Durango development, we are excited to announce that we are targeting Monday, November 20, As the opening date for the Durango Resort, as we've mentioned before, we're extremely excited about this project, which is situated on a 50 acre Ideally located off the 215 Expressway in Durango Drive in the Southwest Las Vegas Valley. The project is located in the fastest growing area in the Las Valley with a very favorable demographic profile and no unrestricted gaming competitors within a 5 mile radius. This quarter, we completed the enclosure of the resort as well as powered The central plan as we move to commence the fit out of the resort. As we progress through the current quarter, we are beginning to hand over key areas of the resort to our operational staff In order to stop preparing for our resort opening. The current budget remains unchanged at approximately $780,000,000 which includes all design costs, construction hard and soft costs, preopening expenses and any financing costs associated with the project.

Speaker 1

The company still anticipates the return profile for Durango to be consistent with our prior greenfield developments. Turning now to North Fork. As we noted last quarter, after favorably resolving all of its other litigation, the tribe has a single remaining case in the California courts. We do not believe this case will interfere with the right or the ability of North Fork to conduct gaming on its federal trust land, and we continue to work with the tribe progress our efforts with respect to this project, including working toward approval of the management agreement, continuing our work on the development and design and having On the real estate front, you may have read in the press that we have made significant progress with respect to the sale of our former Texas Station and Fiesta Rancho Properties. While we cannot disclose the terms, we believe we may be in a position to report on the closing of these two real estate parcels in the coming months.

Speaker 1

These potential transactions represent the continued execution of our long term real estate development strategy as we look to reposition and upgrade our real estate portfolio for the next chapter of growth at Station Casinos. Lastly, on August 2, the company's Board of Directors declared a cash dividend of $0.25 per Class A common share payable on September 29 to Class A shareholders of record on September 15. With our current best in class assets and locations, coupled with our development pipeline of 7 owned development sites located in the most desirable locations in Las Vegas Valley, We have an unparalleled growth story that will allow us to double the size of our portfolio and capitalize on the very favorable long term demographic trends and high barriers to entry To characterize the Las Vegas locals market, we would like to recognize and extend our thanks to all of our team members for their hard work. Our success starts with them, and they continue to be the primary reason why our guests return time after time. We would like again to thank them for voting as Top casino employer in the Las Vegas Valley for the 3rd consecutive year.

Speaker 1

We are also very proud to share that Forbes selected us selected Red Rock Resort and Spa is the top overall casino resort hotel in Las Vegas, which we consider a tremendous recognition of our efforts and those of our team members. And finally, we'd like to thank our guests for their loyal support each of the last 6 decades. Operator, this concludes our prepared remarks for today, and we'd like to turn the call over to take questions.

Operator

Thank you. We will now begin the question and answer session. The first question comes from Joe Greff with JPMorgan. Please go ahead.

Speaker 3

Good afternoon, everybody. Steve, your comments about the majority of the 2Q declines Took place in April. Obviously, our friends at Boyd said the same thing, when they reported. What do you think happened in April? I don't think either one of you really kind of called that out a quarter ago on prior earnings calls.

Speaker 3

What do you think actually transpired with your consumer in April? And why do you think it's changed in May June July? And I have a follow-up.

Speaker 1

Sure. I mean, I'll start and then I'll hand it over to Scott. I mean, I think the first and foremost, we're dealing with incredibly tough comparables, particularly March, I mean, particularly in April. If you look back at April 'twenty one and April 'twenty two and the history of our 46 years, on an EBITDA per day basis because We've got a 30 day calendar. April 'twenty two represents the best month in the history of our company.

Speaker 1

April 'twenty one represents the 2nd best history of the company. So think it's less to do about the consumer and more to do with just it's a huge uphill climb we're making.

Speaker 4

Yes. I think I could add a bit to that. Just the quantum of that Represents about 85% of the decline for gaming in the quarter was in April. And there's another Piece of nuance in that we did have unfavorable hold through the Golden Knights Road to the Stanley Cup. So we had a lot Local folks on the Golden Knights side just didn't hold well as it relates to that and that attributed As well.

Speaker 4

But if you parse out April and look at the May, June and even into July, We see that gaming revenues are in line with what we've been experiencing for the rest of the year.

Speaker 3

Great. That's helpful. And then How do you see the relationship between year over year variance in revenues versus year over year variance in operating expense? Obviously, you had revenues down and OpEx up in the 2Q. How do you do you see that to be more In line, is there a way that if we are say flattish or down a little bit in revenues, can OpEx Sort of match that year over year revenue trend or is there something just whether it's labor, whether you're carrying more cost In front of Durango, which I guess with that those expenses will be capitalized.

Speaker 3

But can you help us understand that Steve going forward in terms of Sort of margin trends if we're in a revenue environment where things are down a little bit year over year.

Speaker 1

Sure. I mean, again, I just want to reemphasize this is the 12th quarter in a row that we've held margins over 45%. And yes, while we did experience a slight Margin, as Scott mentioned, and you pointed out as well, April was the majority of that margin decline. And you're dealing with really And the majority of that decline was due to the not only the gaming issues, but also the hold issue that Scott And additionally, we spent $2,100,000 in repairs and maintenance year over year. And that is a long it's not a Quarter by quarter decision we're making that is core to our operating strategy of keeping our properties fresh and inviting to our guests.

Speaker 1

And our view on that is dealing with small problems now prevents larger problems down the road. And it's important to know we own our real estate. So that's why We take good care of it. That said, R and M, we feel we have our properties are in fantastic shape. There are no deferred maintenance costs.

Speaker 1

So that is a lever that we can pull going forward if we needed to get going down the road. The other kind of material cost I'd point out that degraded margins slightly was we experienced roughly a $700,000 increase in utilities, and I think that's going to be consistent Across the entire Las Vegas Valley. So that's not a station, a nuanced station.

Speaker 3

Great. And then my last question with respect to the November 20 Durango opening. I'll book my flight after I get off the call with you guys To go to that, is that a full fledged opening? Is that a soft opening? Can you help us explain That versus opening later in the year around New Year's?

Speaker 3

And that's all for me. Thanks.

Speaker 2

Yes. Sure, Joe. This is Lorenzo. Yes, that will be a full fledged opening. When we open properties, every aspect of the property is open, ready to go.

Speaker 2

We'll open the doors and Let her rip for customers. So it will be full on that day.

Speaker 3

Great. Thanks, guys.

Operator

Our next question comes from Carlo Santarelli with Deutsche Bank. Please go ahead.

Speaker 5

Hey, guys. Good afternoon. When you guys and I know, look, last year was somewhat unusual, right? Everybody benefited from That really strong 2Q that followed a tougher 1Q. But when you look at kind of last year in review, Obviously, the Q2, I would imagine you would say was your most challenging comparison of the year.

Speaker 5

I just want to verify that that's The way that you're looking at it and how you would categorize kind of the 3Q and the 4Q of 2022 in terms of The current levels of demand that you're seeing and some of the cost headwinds that are currently involved?

Speaker 4

Yes, I can take that. Carlo, this is Scott. Yes, look, I think when we look at where we've been and where we're headed, We've been mentioning that we're up against tough comps and April certainly was one of the tough ones. If we look at Forward projections, call it, a 90 day look inclusive of July. We like where we're headed.

Speaker 4

We like where we are At the midpoint of the year against what we expect to do for the full year. But we all In consensus feel like the rest of the year has tough comps as well. So while we are encouraged with where we are Year to date and our operating teams are ready to face the challenge of any necessary Expense management, they're already doing a great job of that. When you're talking about labor, cost of sales, all of these things are being managed Very well, all of these inflationary pressures, but we're very focused on what we think is going to be Pretty competitive comps for the remainder of the

Speaker 6

year. Great.

Operator

Thank you for that, Scott. And then if

Speaker 5

I could, just As you guys start to you're in the kind of 90 day stretch or maybe less until Durango opens. Could you talk a little bit about the hiring environment or the experience thus far in terms of staffing up that property?

Speaker 4

Yes. This is Scott again. You're right. We're down to the final stretch. I think we're inside of about 100 days.

Speaker 4

So we have done our internal recruitment campaign. We had a lot of interested team members To come over to the new property, so that's the base of our employee pool and that's an employee that understands our brand, is Loyal to the company and really kind of brings over the DNA of what we do. We are about to kick off the campaign on the 14th, and we're already getting unsolicited interest. So we feel confident that we're going to be able to fill our needed employment with high quality employees. If you go back and look at what we've said in previous calls, a long time ago, we right sized our pay ranges, our benefits.

Speaker 4

We are a Best in class employer in the market and we knew this was coming and we got ahead of this probably well over a year ago, so that we had Competitive wages, competitive benefits, and they're not to be completely Immune to the other factors, we do have FountainBlue coming online. We do have the Sphere Coming online. So there is a competitive market out there, but we think we're going to compete very well.

Speaker 5

Thanks again. Thank you, guys.

Operator

Our next question comes from Steve Wieczynski with Stifel. Please go ahead.

Speaker 5

Yes. Hey, guys. Good afternoon. So it's going to be another margin question, so bear with me. So Steve, you mentioned the majority of the margin pressure occurred in April.

Speaker 5

So based on what you witnessed in May June and now you have Do you think it's possible to have margins For the back half of the year be in the range of last year or you called out things like higher utilities and Or are there other factors that might not allow you to do that? And this is assuming what you saw in May, June and I assume July is It's kind of status quo.

Speaker 1

Yes. I mean, I think that the top line answer is yes, we can. We've been very consistent with that message that we expect to be in that The new historical range, right? And as Scott alluded to, we have a lot of the inflationary pressures already built in. I think the team is doing a fantastic job managing through them.

Speaker 1

Labor, for the most part, we are now driven by volume based labor. So payroll is going up as we bring on more people Due to fuel demand, particularly in our non gaming segments, cost of goods sold relatively flat. And so we are managing through those. So we and then As I mentioned with R and M and there's probably a variety of other levers that we could pull. So there's a lot of controllables that We feel we could pull out of the cost structure if need be.

Speaker 1

But right now, we feel pretty good in the business and we don't see any reason to change our current strategy.

Speaker 2

Yes, Steve. I mean, this is Lorenzo. I think as we have mentioned in prior calls as well, Part of the margin question is going to be determined by gaming revenue as well, right? So if we're able to and we believe that we will be able Maintain the trends that we're on, and we should be able to maintain the margins. As Steve said, we have a very laser focus On expenses throughout the company.

Speaker 4

And one last factor is acquisition costs. We still are enjoying a very stable and rational And we don't expect that to change through the rest of the year.

Speaker 5

Okay. Got you. Thanks for that color. And then Second question on the hotel side. I'm not sure, Steve, if you mentioned where ADRs were in the quarter, but it seems like they were probably up Slightly is kind of my guess.

Speaker 5

And I don't know, Scott, if you can yes, go ahead.

Speaker 1

No, go ahead. I cut you off.

Speaker 5

No, no. So I just wanted to see if Scott could kind of comment on how he views taking price action at this point in terms of On the room side and basically just trying to understand if there's been any real pushback yet on you guys continuing to push room rates?

Speaker 1

I'll start with the facts and then Scott can get at least the hard question, Scott. So I mean ADR is up about 5.2%. So we're almost at that $194 mark, which is we're well above where pre COVID levels go. But from an occupancy standpoint, I think that's What Scott is going to say on pricing is we're in that 88%, 88.5% occupancy. So overall, we're up 3 40 basis points.

Speaker 1

We're Still below our pre COVID, so there's still room to grow on the occupancy side.

Speaker 4

Yes. I'll Jump in here, just that all comes down to RevPAR. So RevPAR was up by 9%. And then if you look at A little deeper into the components of that, catering was up 40% year over year. And so catering is also associated with group room nights.

Speaker 4

And there's always a question As it relates to 2019 and where are we in comparison to 2019, and I recall Saying at one point, we're about to get there to be comparable. I can tell you at this point, this year, we're about 78% Above 2019 numbers in catering sales. As we look forward Into what we call same time last year, meaning what's on the books now forward looking and what was on the books Forward looking last year, sales revenue was up about 43% and catering revenue is up about 56%. So we're really encouraged not only with the quarter's performance on hotel And catering, but also the forward look. And to add

Speaker 1

to Scott's point, again, going back to the mix of in that group sales, You're now predominantly corporate and corporate is a great, great mix because that leads to other ancillary revenue throughout the casino floor.

Speaker 5

Okay, got you. Great color guys. Appreciate it. Thanks.

Operator

Our next question comes from Barry Jonas with Truist Securities.

Speaker 6

This is actually Ramin Savani on for Barry. Can you talk about some what you think the impact will be from the event calendar with F1 and Super Bowl coming up on?

Speaker 2

Yes, I know there's been this is Lorenzo. There's been a lot of talk about F1 and Super Bowl. And obviously, we're excited For both of those weekends as is everybody in the industry. But when we talk about it around here, I mean, it's Las Vegas It's unbelievable in the sense that it seems like there's something major going on almost every weekend. So it's really it's just 2, 4 data points that We're going to be great, but for us, as we see our business unfolding, it just is 2 weekends out of a lot of great weekends that are coming up for us.

Speaker 2

I think that's part of why our forward look looks as it does, as Scott kind of outlined in the last question.

Speaker 6

Got it. And just a quick follow-up. Now that the As are out On the potential of VIVA land sale, what's your view on including gaming entitlements to increase value there?

Speaker 2

Well, the problem listen, we were obviously excited about the opportunity that We were talking to the Aesabaum. It didn't obviously end up happening. I can tell you one thing from a positive standpoint that has come out of that is that now A lot of people are aware of how great of a site that it is with 100 acres there right off of the Las Vegas on the corner of I-fifteen and Tropicana. The property currently has gaming entitlements associated with it Because we have the Wild West Casino on that property for some time, which was a full casino license here, And we've worked on that property for a number of years and currently it's held for development, but also We've had a number of inbounds of people that are also interested in the entire property or parts of the property. So we'll just continue having those discussions.

Speaker 2

But Like I said, I think the real big positive that came out of that is it kind of put a spotlight on how valuable that piece of property is and how rare it is to be able to have 100 acres of property of that magnitude within what is essentially the resort corridor.

Speaker 1

Got it. Thank you so much.

Operator

Our next question comes from Dan Pitzer with Wells Fargo. Please go ahead.

Speaker 7

Hey, good afternoon, everyone. Thanks for taking my questions. Just wanted to touch on Durango. I mean, after you saw that blip in April, As you think about demand maybe being a little bit more fragile than 3 months ago, is it still how are you thinking about cannibalization at this And are you still thinking about full speed ahead on in terms of Phase 2 of that property expansion?

Speaker 2

So we're currently working on Phase 2 from a planning standpoint, which is just kind of how we always have operated. Our anticipation is that we're going to open Durango on November 20th, and it's going to be a successful opening, and there's going to be sufficient demand for that to be able to hit our targeted returns. We want to be in a position that we can pull the trigger on a potential Phase 2. As soon as that makes sense for us Do that, we would be looking to add some gaming capacity as well as some additional entertainment options. As we had mentioned in the past as well, we're also working on plans and entitlements for the Inspirato project, Which is located in Henderson, another great area without a lot of gaming capacity in a great location in an area that's got great demographics as well.

Speaker 2

So those are kind of the 2 that of the 8, if you include Durango Phase 2, gives us Essentially, 8 projects for us to grow the company that we actually control as a company that we can roll out Over a number of years here, but those would be the 2 that would be next in line in our minds. Did I answer your question? Yes.

Speaker 1

And the other point I would add though too, I mean, you mentioned the blip in April. We don't view Durango as a blip in April. I mean, when I look at like Red Rock Casino Resort, it And it's been growing ever since. So these are 40 year assets. So that one blip, which it was a blip, It's not a blip.

Speaker 4

It's like a blip from the greatest month in the history of the company.

Speaker 1

Yes, that's right.

Speaker 4

It's not a blip. And you did mention cannibalization. And look, we hope everybody wants to go and check out Durango. That's our expectation and they will. But when you look

Speaker 5

at

Speaker 4

Red Rock and the dynamic growth that we're seeing in Red Rock and the surrounding Residential Development. Red Rock's on its own growth trajectory relative to Summerlin West and High network people moving into the valley. So any cannibalization that comes, it's going to be a short term, right? It will be short term and backfilled very quickly.

Speaker 7

Got it. And then just for my follow-up, obviously, there's been some pretty extreme heat, out west. I mean, has there been any impact in terms Driving customer or alternatively more locals leaving town that would result in maybe pronounced seasonality?

Speaker 1

No, I think seasonality of Q2 is in line with what we've seen in the past.

Speaker 2

Maybe not in the past relative to 2021 to 2022, but Historical seasonality, yes. I mean, typically, Las Vegas locals do tend to go on vacation in the summertime. It is very Todd here, wherever they go to get out of the heat or just have their summer vacation. But as we mentioned, I don't think it's Anything out of the norm of what we've seen outside of 2021 2022, which obviously, we didn't see any seasonality in those years.

Speaker 7

Thanks. Appreciate all the detail.

Speaker 1

Appreciate it.

Operator

Our next question comes from Chad Beynon with Macquarie, please go ahead.

Speaker 8

Afternoon. Thanks for taking my question. Just wanted to dig a little bit more into the Gross gaming revenue, I know roughly 80% to 85% of your GGR comes from slots and we've seen Probably some stronger numbers on slots versus maybe some deteriorating numbers on tables. Not sure if that is really just kind of highlighting how Strong. Some of the table revenues were last year from a retail customer.

Speaker 8

But is that kind of what you guys were seeing in your business? Is the core slot business, did that hold up well, in the months that you were talking about? Thanks.

Speaker 4

Hey, this is Scott. I think if we look at look, on absolute dollar, the slots were the largest decline.

Speaker 2

When you

Speaker 4

look at table games, Actually, from a volume perspective, game games dropped. We're actually up. So we had some hold issues of games that contributed to the And then when we look at Sports, as we said, it's really a function of the Golden Knights. We can triangulate right against that and a whole percentage

Speaker 5

That's

Speaker 1

It's kind of conducive to our core strategy as tables is up, we've invested a lot of money in our table rooms.

Speaker 4

Yes. We have a new high limit room for slots and a new high limit room for tables coming on in Green Valley Ranch towards the end of the year. And then we also have a new high limit room at Santa Fe coming online. So this is all part of us investing in High net worth, high profit customer segments.

Speaker 8

Okay. Thank you. And then from a capital allocation and leverage standpoint, Could you just kind of remind us when you would start moving forward on the next project or when you would start returning To share repurchases after Durango opens in the 4th quarter? Thank you.

Speaker 1

I think from a leverage standpoint, as we've kind of walked through, we're going to get Durango open. So leverage peak out Q4. And then as Durango loads up, it ramps up, we will start to naturally delever down. The Board considers Capital allocation every quarter, both from a dividend perspective and a share repurchase perspective. And we've made it very clear, we've halted the share repurchases program in the past because we're in the throated Durango.

Speaker 1

And once that launches, to your point, I think we're going to return to a more balanced approach to returning capital to our shareholders.

Speaker 8

Thanks, Steve. Looking forward to the opening. Appreciate it.

Operator

Our next question comes from David Katz with Jefferies.

Speaker 8

Afternoon, everyone. Thanks for taking my questions. You covered a lot of ground already. What I wanted to ask about is how you're thinking about omni channel strategy and technology, digital, etcetera. I know digital wallet was something you were Working out, rolling out, etcetera, an update there would be helpful too.

Speaker 4

Yes. It's a great We're rolling out a bunch of new tech and it all revolves around transaction Ease and less friction for the customer and mobile device. So we have A complement of products starting with a new mobile app that will bring transactional Features for the customer, this would include digital cash, digital wallet, Markertrax, which is retail credit lines up to $5,000

Speaker 2

Micro credit, yes.

Speaker 4

Micro credit. We'll also add a bunch of new functionality into the app related to booking reservations and different things like that. And then it will also incorporate the new sports mobile system. And then all of This will be under a singular wallet and a singular password construct enrollment construct that allows you to not have to enroll separately in all of these different applications. So, It was our target to have all of that online before the opening of Durango, and we're in the throes of Having either rolled those things out or rolling them out.

Speaker 5

Thank you.

Speaker 1

Thanks, David.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Stephen Cootey for any closing remarks.

Speaker 1

Thank you very much for everyone joining the call, and we look forward to talking more as Durango approaches later this fall. Take care.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Key Takeaways

  • In Q2, consolidated net revenue was $416 M (down $6.1 M yoy) and adjusted EBITDA was $175.3 M (down $13.6 M), while Las Vegas operations delivered an adjusted EBITDA margin of 46.8% and the company maintained its run of 12 consecutive quarters with margins above 45%.
  • Despite a challenging April—driven by record‐high comps in April ’21/’22 and an unfavorable Golden Knights Stanley Cup hold—the business rebounded in May and June, reflecting strength in regional/national gaming segments and robust pet spend.
  • Non-gaming segments achieved near-record performance, with hotel occupancy in the high 80s and ADR up ~5% to $194, and food & beverage revenue hit near-record levels driven by higher check averages and an 8th straight quarter of double-digit catering growth.
  • The November 20 opening of the $780 M Durango Resort remains on schedule and budget in a high-growth SW Las Vegas market with no nearby unrestricted gaming competition, and planning is underway for Phase II and the North Fork tribal project.
  • Balance sheet highlights include net debt of ~$3.1 B (4.25x trailing EBITDA), Q2 capex of $201.6 M, full-year guidance of $70–90 M maintenance and $600–650 M growth capex, plus a declared dividend of $0.25 per share with share buybacks pausing until Durango ramps up.
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Earnings Conference Call
Red Rock Resorts Q2 2023
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