Red Rock Resorts Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 7, 2024

There are 11 speakers on the call.

Operator

Good afternoon, and welcome to Red Rock Resorts Third Quarter 2024 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 Stephen Feudy, Executive Vice President, Chief Financial Officer and Treasurer of Red Rock Resorts. Please go ahead.

Speaker 1

Thank you, operator, and good afternoon, everyone. Thank you for joining us today on Red Rock Resorts' Q3 2024 earnings conference call. Joining me on the call today are Frank and Lorenzo Fertitta, Scott Krieger and our executive management team. I would like to remind everyone that our call today will include forward looking statements under the 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 complete reconciliation of these figures to GAAP, please refer to the 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. Let us start off by stating that the Q3 represented another strong quarter for the company by any measure. In terms of net revenue and adjusted EBITDA, our Las Vegas operations had their best Q3 in our history, while operating at near record adjusted EBITDA margin in the quarter.

Speaker 1

In addition to showing strong financial results in the quarter, we continue to be pleased with the financial performance of our Durango Casino Resort. Durango continues to grow the Las Vegas locals market as the team continues to execute and improve the property's operational performance,

Speaker 2

while at

Speaker 1

the same time driving incremental play from our existing customers and attracting new customers to our brand. With 3 full quarters under our belt, the property increased visitation and net theoretical win in the surrounding Durango area by approximately 91% 92% respectively, while signing up over 70,000 new customers to our database. Durango continues to ramp up and remains on track to become one of our highest margin properties as well as generate a return of approximately 15% net of cannibalization through its 1st year of operation. Cannibalization remains in line with our expectations and its impact is primarily felt at our Red Rock property. Consistent with our past performance history, we expect to backfill this revenue over the next couple of years given the strong long term demographic growth profile of Las Vegas Valley and in particular within the Summerlin area, which between downtown Summerlin and the Summerlin West communities, we expect to have approximately 34,000 new households upon final build out.

Speaker 1

As stated on our last earnings call, we are planning to move forward with the expansion of our Durango property later this year. Our current plans for the next phase of Durango will add over 25,000 square feet of additional casino space, including a new high limit slot and bar area. In total, the expansion will add 2 30 slot machines to the Durango Casino floor, including 120 slot machines dedicated to our new high limit room. In addition to the expanded casino space, we will be adding an additional covered parking garage with almost 2,000 convenient parking spots, significantly improving customer access to the property while providing us flexibility for future expansions at Durango. The current budget for the project is approximately $116,000,000 and the expansion is expected to take around 12 months to complete.

Speaker 1

We are expecting some disruption to the south side of the property during the construction period. Regarding the rest of the portfolio, we remain operationally disciplined within the quarter and continue to execute on our core strategy of reinvesting in our existing properties to deliver fresh and relevant amenities to our guests, all while remaining focused on best in class customer service. As we return to a more traditional seasonal pattern, the company continues to manage our expenses, generate record financial performance, maintain near record margins, reinvest in our properties and return capital to our shareholders within the quarter. Now let us take a closer look at our Q3. With respect to our Las Vegas operations, our 3rd quarter net revenues was $464,700,000 up 13.9% from the prior year's Q3.

Speaker 1

Our adjusted EBITDA was $202,600,000 up 5.8 percent from the prior year's Q3. Our adjusted EBITDA margin was 43.6%, a decrease of 333 basis points from the prior year's Q3. On a consolidated basis, our 3rd quarter net revenue was $468,000,000 up 13.7 percent from the prior year's Q3. Our adjusted EBITDA was $182,700,000 up 4.3% from the prior year's Q3. Our adjusted EBITDA margin was 39% for the quarter, a decrease of 3 53 basis points from the prior year's Q3.

Speaker 1

In the quarter, we generated operating free cash flow of $46,400,000 or $0.44 per share. This brings our year to date cumulative free cash flow to $292,600,000 or $2.70 per share. The significant level of year to date free cash flow was either reinvested in our long term growth strategy, reinvested into our existing properties or return to our stakeholders via debt pay down, share repurchases and dividends. As we finish the Q3, we remain focused on our core local guests as we continue to grow our regional and national segments across our portfolio. When comparing our results to last year's Q3, we continue to see strong visitation in card slot play across the majority of our database, including our regional and national segments.

Speaker 1

This strength coupled with a strong spend per visit across majority of our database allowed us to enjoy near record revenue and profitability across our gaming segments in the quarter. Turning to non gaming segments, both our hotel and food and beverage continue to grow year over year and deliver record revenue and profitability in the Q3. Our hotel division experienced its highest 3rd quarter revenue and profit in our history, driven by the team success and continued to drive higher ADR while maintaining occupancy across our hotel portfolio. Not to be outdone, our food and beverage division also experienced its highest ever Q3 revenue and near record profit driven by higher average check and cover counts across our food and beverage outlets. With regard to our group sales and catering business, as mentioned on our last earnings call, we face a tough Q3 comparable and expect to face tough comparables for the remainder of the year.

Speaker 1

As we look forward to the Q4, other than playing unlucky and sports in October and the previously discussed softness in our group sales and catering business lines, we are seeing strength and stability in our core slot and tables business in the locals market and across our carded database as we remain confident in our business prospects moving forward. Now let's cover a few balance sheet and capital items. The company's cash and cash equivalents at the end of the Q3 was $117,500,000 and the total principal amount of remaining was $3,480,000,000 resulting in net debt of $3,350,000,000 As of the end of the third quarter, the company's net debt to EBITDA ratio remained flat at 4.2 times. Also during the Q3, we made distributions of approximately $72,800,000 to the LOC unit holders of Station Holdco, which included a distribution of approximately 42,400,000 dollars to Red Rock Resorts. The company used the distribution to make its required tax payment and pay its previously declared dividend of $0.25 per Class A common share.

Speaker 1

Capital spend in the Q3 was $80,400,000 which includes approximately $47,400,000 in investment capital inclusive of Durango project retainage as well as $32,900,000 in maintenance capital. For the full year 2024, not including the spend to close out our Durango project, we now expect capital spend to be between $185,000,000 $195,000,000 spread between maintenance and investment capital. We also remain committed to strategically investing and offering new amenities to our guests in order to drive incremental visitation and spend to our properties. Last month, we successfully opened a Yard House restaurant at Sunset Station. While we are in early days, we are pleased with the guest response and the early results from this new amenity.

Speaker 1

We expect to continue to invest in our existing properties throughout 2024 including adding local favorite China Mama at our Palace Station property later this year. In addition to these amenities, we expect to make investments in both our Sunset Station and Green Valley Ranch properties in 2025. At our Sunset Station property, we are building up the success we are seeing with our recently renovated race and sports book and partial casino remodel by continuing to refresh the podium in order to better position the property to capture the continued growth in Henderson, including the master planned communities of the Sky and Cadence, which are expected to add over 12,500 new households upon final completion of both communities. As part of this project, we'll be adding in an all new country western bar, a new Mexican restaurant and all new center bar along with completely renovated casino space. Workers already commenced on this project and the total cost of the renovation is expected to be approximately $53,000,000 At our Green Valley Ranch property, we're expecting to start a complete refresh of our room product, aligning the hotel with our most recent renovations made to our well received high limit table and slot rooms at the property.

Speaker 1

Work is expected to start in June of 2025 and will continue through November of 2025. The cost of the room renovation is expected to be approximately $150,000,000 Like our other recently introduced amenities, we expect these to be solid investments and are looking forward to moving beyond the disruption challenges of these properties as we introduce these new amenities to our customers next year. Turning now to North Fork. We are extremely excited about this project, which is situated on a 305 Acres site located north of Fresno, California. With great ingressegress of the heavily traveled Highway 99, the project is one of the most convenient and accessible locations in Central California with over 5,800,000 people located within 2 hours of the development site.

Speaker 1

When complete, this best in class resort will include approximately 100,000 square feet of casino space with over 2,400 slot machines, including 2,000 Class 3 games, 42 table games and 2 food and beverage outlets and a food court with many exciting options. We have started site work and construction as we continue to finalize design. The total construction time for the project is currently anticipated between 18 20 months putting the opening of the resort into 2026. The current cost of the project is expected to be approximately $785,000,000 which includes all design costs, construction hard and soft costs, preopening expenses and any financing and development fees associated with the project. We are excited to be making progress and we'll continue to provide further updates on our quarterly earnings calls.

Speaker 1

Lastly, the company's Board of Directors have declared a cash dividend of $0.25 per Class A common share payable on December 31 to Class A shareholders of record as of December 16. When we combine our share repurchases with our special and regular dividends, as we have returned approximately $194,800,000 to shareholders in 2024. The company continues to have a strong year and Durango continues to validate our long term growth strategy and demonstrate the power of our own development pipeline and real estate bank, which consists of over 4.50 acres of developable land positioned in highly favorable areas across the Las Vegas Valley. This pipeline coupled with our current best in class assets and locations gives us 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 the high barriers to entry that characterize the Las Vegas locals market. We would like to recognize and extend our thanks to our team members for their hard work.

Speaker 1

Our success starts with them and they continue to be the primary reason why our guests return time after time. We thank them again for voting as top casino employer in the Las Vegas Valley for the 4th consecutive year as well as being certified by Great Place to Work for a 3rd year in a row. Finally, we thank our guests for their loyal support in each of the last 6 decades. Operator, this concludes our prepared remarks and we are now ready to take questions.

Operator

Thank Today's first question comes from Joe Greff at JPMorgan. Please go ahead.

Speaker 3

Good afternoon, guys. Looking back at the performance in the 3Q, is there anything that you would call out as sort of one time or kind of a unique trend change outside of normal seasonality, whether that's extreme heat or renovation disruption? And maybe a sort of directional or mathematical way of answering it is if you look at the performance of Durango less Red Rock cannibalization, how did the rest of the portfolio perform? I know in the 2Q, you basically mentioned that the $30,000,000 year over year EBITDA delta was basically Durango net of Red Rock cannibalization with the balance of portfolio flat. Maybe you can answer it in that way.

Speaker 3

And then I have a quick follow-up.

Speaker 1

Hopefully, it's just quick, Joe. Let me start with the first piece of the question. There's no real unusual items throughout the quarter other than just that return of that typical Q3 seasonality. For example, if you look at past years in 2019, Q2 to Q3 was down almost 19%. So when you kind of look at Durango, what we talked about here is we expect to deliver about net 15% of net 15% return on our investment in the 1st year investment.

Speaker 1

So it's actually higher than we promised. We actually promised 10%. So when you do the quick math, if you have an $800,000,000 cost, it's applying $120,000,000 net of direct net of cannibalization. When you apply some impact to cannibalization, what you end up getting is that the core portfolio was down low single digits in terms of revenue.

Speaker 3

Great. And then margins 43.3 percent or 43%, what sort of expenses sort of drove that increase? And then how do you think about flow through or margins going forward, particularly as we think about 2025 as maybe being more of a reinvestment in existing assets kind of year and maybe you can talk about 2025 in terms of renovation impact disruption that you might anticipate? So in terms

Speaker 1

of just the margin, I'll just kind of frame it very simply. I think about 150 basis points of that margin is contributed to cannibalization. So revenue moving to our existing properties over to Durango. And then you couple that with lower revenues as part of Q3 seasonality. And then we did we are bearing the brunt of minimum wage, which cost us about $1,200,000 for the quarter.

Speaker 3

And then maybe you can touch on 2025 in terms of anticipated renovation impacts?

Speaker 1

Yes. Sorry about that. Sorry. So in terms of the renovation impact, if I run it down by property, so our initial estimates on GVR roughly about $11,500,000 from an EBITDA impact. Sunset Station, approximately $5,400,000 and then Durango, above $5,900,000

Speaker 2

Thank you, guys.

Speaker 3

You're welcome.

Operator

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

Speaker 2

Hey, guys. Good evening. Steve, obviously, in the Q3 seasonality, as you said, kind of returned to normal. And when you go back and look at your model in particular the local segment, a lot of noise with Palms and that stretch. How do you generally think about 4Q seasonality relative to 3Q?

Speaker 2

And obviously acknowledging the moving parts of the stub period of Durango last year makes that a little bit harder for comparability. But just thinking about 3Q relative to 4Q seasonality?

Speaker 1

So what you got a couple of factors in here, Carlo. But in general, if you took a pre COVID year taking out the noise of the Palms, EBITDA is up usually around 12%. But you have to factor in that we did play a little bit unfriendly in terms of sports to this tune about $7,600,000

Speaker 4

October. In October, sorry.

Speaker 2

Okay. So think about it as kind of up 12 less almost $8,000,000 from the sports assuming that that doesn't reconcile in November December?

Speaker 1

Correct.

Speaker 2

Okay. And then just this is just an item of just to clarify something. CapEx for the year, you said $185,000,000 to $195,000,000 Am I correct? And that excludes Durango closeout. Durango closeout for the year was about $95,000,000 Is that accurate?

Speaker 1

Yes. Durango close-up for the year is about almost $97,000,000 We still have about $1,000,000 left to close that out.

Speaker 2

Perfect. Thank you, guys.

Operator

And our next question today comes from Steve Wieczynski with Stifel. Please go ahead.

Speaker 5

Hey, guys. Good afternoon. Steve, you mentioned that group sales have been a little bit softer than I think you guys have been expecting. And just wondering if you could give some more color on potentially what you guys think are driving that softness. And if we look at the margin on that food and beverage line, it's been a little bit lower than what we've been expecting over the last couple of quarters.

Speaker 5

I'm just wondering if that's somewhat due to that lower group business?

Speaker 6

Yes, Steve, this is Scott. Let me take that one. We'll take it into 2 pieces. 1, group sales hotel and then we'll corresponding catering. When you look at the quarter, probably the most notable piece of the quarter is we still are digesting a tough comp year over year as it relates to COVID rebooking.

Speaker 6

So there's about $1,000,000 of good news in last year's number relative to COVID re bookings. If you were to add that in and adjust, we're basically flat when it comes to hotel sales, room nights. We expect that we're going to have tough comps into the 4th quarter and somewhat into the Q1 because of Super Bowl as well in hotel. But if you look a little farther out to 2025 and 2016, we're very encouraged with our on the books pace as we go into those future years. And then catering really kind of mirrors the same effect as group room night sales does as well, where we're going to have a tough comp in the next two quarters and then better outcomes into 2020 5 and 2026.

Speaker 1

And Stephen, to answer that last follow-up, in terms of the softness you're seeing in F and B, it's exactly what Scott said, it's pretty predominantly all catering as F and B experienced a record revenue quarter.

Speaker 5

Okay. Thanks for that guys. And then, Steve, I understand you guys don't give formal guidance, but as we start to think about next year in 2025, is there anything you would call out in terms of whether it's headwinds, whether it's tailwinds or anything that would disrupt the normal cadence as we start to think about 2025?

Speaker 1

Yes. I think what you're I mean from a group perspective or entire or the entire company?

Speaker 5

The entire company, sorry.

Speaker 1

Okay. I think the one we just talked about with Graf is probably one of the bigger one time issues. If you kind of add all that together, you're going to experience about $23,000,000 worth of disruption as we start the room remodel at Green Valley, continue to podium our remodel at Sunset and then we attach the garage to and the high limit room at Durango. That's really those are really the big one time items.

Speaker 6

You're not going to you're going to go up against Super Bowl in Q1. Correct.

Speaker 1

So there will be As well as CONAG and a couple others like it.

Speaker 4

I think generally, Flores, it's important to note that I think most all the operators have said that Q3 that seasonality seems to have come back. It's a bit of a challenge. But October, a bit of a challenge. But October

Speaker 1

has bounced

Speaker 4

back and is very stable both

Speaker 1

on slots, table games, sports

Speaker 4

handle right. Obviously, the whole percentage

Speaker 1

due

Speaker 4

to the NFL hasn't been great, but our core business feels good going into Q4.

Speaker 5

Okay. Thanks for the color guys. Appreciate it.

Operator

The next question comes from David Katz at Jefferies. Please go ahead.

Speaker 7

Hi, evening everyone. Thanks for taking my question. Can we just dive into the Super Bowl comps a little bit? It came up a couple of times. Was the Super Bowl volume levels in terms of hospitality strong and perhaps the sports betting was not.

Speaker 7

What's the hard part and what's the easy part within the Super Bowl piece?

Speaker 4

Well, this is Lorenzo. I think if you look at obviously hotel, food and beverage, things like that, not having the Super Bowl,

Speaker 6

it's going to

Speaker 4

be a tough comp versus last year. I would say of all the events that the city has had, citywide events, whether it be F1 or you name it, I think Super Bowl was just a huge benefit to the overall city and obviously we benefited from that as well. Actually, I think we lost money on the game last year. So that hopefully will not be a headwind or repeated, but from a comp

Speaker 7

perspective. I see. I see. So the overall volume levels were very strong, but there was some sports betting impact that came out of the It was

Speaker 4

negative last year. Historically, over time, we typically would win money to the Super Bowl and just that last drive by.

Speaker 8

Okay. Perfect.

Speaker 7

And just as my follow-up, the last time we walked through Durango, we talked about sort of longer term with expansions, etcetera. Anything today that would characterize how soon or what those extensions could would look like and when you'd get to them?

Speaker 6

Yes, David, this is Scott. First, just want to reiterate that the garage and casino and high limit expansion is really kind of a preliminary phase for Durango. We need to do that in order to set ourselves up for the optionality of the other two phases. And as we look at those phases, we also compare our greenfield opportunities as well. I know we've spoken about Inspirada and Cactus as potential opportunities.

Speaker 6

I think what we want to do is we've got a lot of irons in the fire into the 1st and second quarter with the existing property remodels in the garage, probably you're going to want to see how the market is going into the first half of the year before we make a decision.

Speaker 7

I think that's fair. Thank you very much.

Operator

And our next question comes from Stephen Grambling of Morgan Stanley. Please go ahead.

Speaker 5

I guess when we think about the election, and some of the policies that put out there, aside from perhaps corporate taxes, what is on your radar that could impact your business?

Speaker 6

I think go ahead. No tax on tariffs, I think, would be a positive for our business.

Speaker 4

Yes. We've looked at some economic analysis. Not I don't know if anything's really been published on it. We think it could add somewhere in the neighborhood of about $200,000,000 a year to the local economy here, which obviously we would benefit from.

Speaker 1

Yes. I think it would save the company about $2,000,000 to $3,000,000 in payroll tax as well.

Speaker 5

That's helpful. And is there anything that's on the radar in terms of accelerated depreciation or other tax incentives for investment?

Speaker 1

No. I mean, I think we've accomplished that with Durango. That's our effective tax rate is below 13%. And that's due to, I think, some good work on the tax side for Durango. But so my sense is that we'll look to do that on our Sunset asset as well in GVR and the Durango garage once they're put in service later in 2025.

Speaker 5

Makes sense. Thanks. I'll jump back in the queue.

Operator

Thank you. And our next question comes from Barry Jonas with Truist Securities. Please go ahead.

Speaker 2

Hey, guys. You added a new slide in the deck on Cactus at the front of the new development pipeline section. Just curious where this stands in terms of what you'll be focused on next? Thanks.

Speaker 6

Yes. I think that as we look at all of our Greenfield projects, the good thing about a lot of them is the population growth is getting to a maturity point where they're up for consideration. So when we look at cactus, it has different positive attributes than say in Ensenada or Kyle Canyon site. The specifics around Cactus are that it is a hybrid location. It sits on the Las Vegas Strip as well as it is surrounded by a very lucrative local market as well.

Speaker 6

So it makes it a unique development opportunity because you can take advantage of the hybrid aspect of the property or the location. It would probably be something of larger scale than say an Inspirada. So we weigh the pros and cons of that capital contribution as well.

Speaker 1

Got it. Got it. And then just

Speaker 2

so there are any other tribal or non Vegas deals you're looking at the moment or is really the focus just your Las Vegas development pipeline?

Speaker 1

Well, no, as I think we mentioned during the prepared remarks, we're incredibly excited about North Fork. So after working on this project over 20 years, we're in ground looking forward and we have an we're in the throes of an 18 to 20 month construction period.

Speaker 6

Yes. And 5,800,000 people in a 2 hour drive and we think we're going to have the dominant property in the market by far the best designed and built product in the market.

Speaker 1

Exactly. Sorry, I was just going

Speaker 2

to clarify outside of North Park.

Speaker 4

Yes. I mean our core focus obviously is Las Vegas, Las Vegas locals market. However, we do have a core competency of developing and managing tribal casinos.

Speaker 6

That's right.

Speaker 4

So in addition to North Fork, which Steve and Frank mentioned, we're in the ground with, it's a great location. We are active on the development side looking for new opportunities as we have been for the last 25 years on the tribal side. But it's just got to be the right opportunity, the right timing and it all has to kind of line up. But I mean we've actively looked probably at 5 or 6 just over the last year just we haven't found one that works for us yet. But we'll continue to look from a development standpoint.

Speaker 2

That's really helpful. Thank you.

Operator

And our next question today comes from Brandt Montour with Barclays. Please go ahead.

Speaker 9

Hello, everybody. Thanks for taking my question. I'm curious, we went through a lot of the headwinds next year, potential headwinds. Maybe we could talk a little bit about the tailwinds, specifically what you would typically see getting added back to Red Rock mitigating that cannibalization you've seen so far in sort of a year 2 as well as Durango or a new greenfield year 2 growth before the construction disruption there?

Speaker 6

Yes, this is Scott. Great question. If you take Red Rock first, we spoke in the past about Summerlin West, which is the final phase of the Howard Hughes Summerlin project. In its completion over the next few years, it will add an incremental 34,000 households just up behind the Red Rock location. So not only do we have a great story as it relates to household growth, but the average income in the area is one of the highest in the valley and we continue to see growth in average income in that area.

Speaker 6

So we're optimistic about the Red Rock backfill in the near term. When you look at Durango, Durango sits in what's called the enterprise district of the city. It is by far the fastest growing area of the city and probably has the largest amount of remaining buildable acreage in the surrounding area. So we're excited about Durango continuing to have its own growth story into the next year as well. If you switch gears a little bit and you look at Sunset, it's one of the key reasons we're refreshing Sunset is the Henderson area around Cadence is got quite dynamic growth and we think we're going to see upside from that continued growth in that area of the valley as well.

Speaker 9

That's helpful. Thanks for that. A second question, the election just now behind us, I can't remember it well. I'm sure you guys can remember elections that had distractions to your database and your players before. But have you gone back and looked at sort of how in your state in the state of Nevada swing state is that the activity pickup that you've traditionally seen post election and if you think you'll see a similar sort of pickup post this election?

Speaker 6

Well, when we looked at previous elections, there is definitely an impact, if you will, during an election year and quite honestly during an Olympics year as well. In previous years, it did drag on into December. But right now, as Lorenzo said, we're pretty encouraged with more losses at this point.

Speaker 8

Yes. Thanks, everyone.

Operator

Our next question today comes from John DeCree with CBRE. Please go ahead.

Speaker 8

Good afternoon, everyone. Covered a lot of ground, maybe one on the promotional environment, largely speaking across locals market. I guess, a couple of your peers have talked about it, maybe stabilizing or abating and I guess some of the single asset operators in the neighborhood have been a little bit more aggressive. So curious what you're seeing if you think it's died down at all and or stabilized and if it's had any impact one way or another on your business?

Speaker 6

Yes, it remains unchanged in our view. And what we think is a stable rational environment that is very manageable.

Speaker 8

Got it. Thanks for that. And maybe one for Steve, just maybe a clarification if I missed it on the CapEx for next year. I think I heard $150,000,000 for GVR and was it $160,000,000 for Durango? And a quick follow-up, Steve, would be the disruption.

Speaker 8

Would we I'm sorry, Steve?

Speaker 1

Yes. So it was $116,000,000 for Durango.

Speaker 8

$160,000,000 for Ring

Speaker 1

Valley and $53,000,000 for Sunset.

Speaker 8

That's future Sunset. Okay. And the disruption that you've outlined, I appreciate that. That's really helpful. The timing of those projects, should we expect that to kind of be kind of straight line throughout the year?

Speaker 8

Is there going to be a 1H or 2H where maybe some of the heavier disruption occurs?

Speaker 1

Well, Green Valley is really going to be focused in that June to November period. So that's the that one is really you can really pinpoint. Sunset is most likely going to bleed throughout the year as the last construction project expected to come online before Hawley at the end of the year. And Durango, I would say similar, it's probably in the middle part of the year is where the yeoman's portion of the construction is being done.

Speaker 8

Got it. Okay, great. Thanks.

Operator

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

Speaker 10

Hey, good afternoon, everyone, and thanks for taking my question. First, you've talked a bit about taverns in the past. I mean, can you just give us an update on how you're thinking about that element of your strategy in terms of CapEx or units that you expect to open over the next few years?

Speaker 6

Yes, Dan, it's Scott. Happy to say that a few weeks back, we opened our first tavern in the north part of town. So early performance is outpacing our expectation. So, we're happy about that. We have 2 more coming online in the general area in North Las Vegas, which happens to be a very underpenetrated area for us.

Speaker 6

We have a product coming online in January and then a third tavern coming online in June. And then we have a total of 7 opportunities and the remaining 3 will be scattered over the next year, year and a half. I think in large part, we're attributing the early successes of the first tavern because of the inter linkage of the boarding pass program and the fact that we're relatively under penetrated out in that market.

Speaker 10

Got it. Thanks. And then just on the North Fork, the 4% development fee on presumably the $750,000,000 is that do you get do you receive that upon the property opening or is it along the way do you get kind of pieces of

Speaker 1

that? Yes, it's on the construction financing and it's not going to be on the full $750,000,000 There's some puts and takes there.

Speaker 10

Got it. Thanks so much.

Operator

Thank you. And this concludes our question and answer session. I'd like to turn the conference back over to the management team for any closing remarks.

Speaker 1

Thank you everyone for joining the call and we look forward to talking to you again in about 3 months. Take care.

Operator

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful evening.

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Key Takeaways

  • Record Q3 performance: Las Vegas operations achieved their best third quarter ever with net revenue up 13.9% to $464.7 million and adjusted EBITDA up 5.8% to $202.6 million, driving a near-record margin of 43.6%.
  • Durango ramp and expansion: After three quarters, visitation and net theoretical win at Durango Casino Resort rose ~91%–92% with 70,000 new loyalty customers, and a $116 million 12-month project will add 25,000 sq ft of casino space, 230 slots and 2,000 parking spots.
  • Strong cash generation: Q3 operating free cash flow was $46.4 million (YTD $292.6 million), which funded reinvestment, debt paydown, share repurchases and dividends, while net debt remained at 4.2× EBITDA.
  • Investing for growth: 2024 capital spend is guided to $185–195 million (ex-Durango closeout), including new amenities like Yard House, China Mama and major remodels at Sunset Station and Green Valley Ranch, plus ongoing development of the $785 million North Fork resort opening in 2026.
  • Shareholder returns: The board declared a $0.25 per share dividend payable December 31, bringing 2024 total returns through dividends and buybacks to approximately $195 million.
AI Generated. May Contain Errors.
Earnings Conference Call
Red Rock Resorts Q3 2024
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