Red Rock Resorts Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 11, 2025
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Operator

Good afternoon, and welcome to the Red Rock Resorts Fourth Quarter and Full Year twenty twenty four 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 Couty, Executive Vice President, Chief Financial Officer and Treasurer of Red Rocks Resorts. Please go ahead.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for Red Rock Resorts' fourth quarter and full year twenty twenty four earnings conference call. Joining me on the call today are Frank and Lorenzo Pretida, Scott Krieger and our Executive Management team. I'd 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.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

During this call, we will also discuss non GAAP financial measures. Definition and complete reconciliation of these figures to GAAP, please refer to the financial table in our earnings press release, Form eight K and investor deck, which were filed this afternoon prior to the call. Also, please note that this call is being recorded. Let's start off by stating that the fourth quarter was another very strong one for the company by all measures. Our Las Vegas operations achieved its highest fourth quarter net revenue and adjusted EBITDA in our history, while maintaining near record adjusted EBITDA margin.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

For the year, our Las Vegas operations delivered their best performance ever in terms of net revenue and adjusted EBITDA, while achieving their record adjusted EBITDA margin for the year. In addition to showing strong financial results, 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, while at the same time driving incremental play from our existing customers and attracting new customers to our brand. For the full year under our belt, the property continues to increase visitation and that theoretical win from our carded customers in the surrounding area, while signing up over 85,000 new customers to our database. The property continues to ramp up and remains on track to become one of our highest margin properties, as well as generate a return of almost 16% net of cannibalization in 2024.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Cannibalization is tracking as expected, mainly affecting our Red Rock property. Like we've seen in the past, we expect to backfill this revenue over the next few years given the strong long term growth in the Las Vegas Valley, especially in Summerlin, where Downtown Summerlin and Summerlin West are set to bring in around 34,000 new households. As stated on our last earnings call, we began construction last month on the next phase of our Durango master plan. This expansion will add over 25,000 square feet of casino space, including a new high limit slot area and bar. In total, two thirty new slot machines will be added with 120 dedicated to the high limit room.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Additionally, we'll be constructing a covered parking garage with nearly 2,000 spaces, proving customer access and providing flexibility for future expansions. The project with a budget of approximately $120,000,000 is expected to be completed in January of twenty twenty six. Some disruption on the south side of the property is anticipated during construction. Across our portfolio, we remain operationally disciplined, executing on our core strategy of reinvesting in existing properties to enhance amenities, while maintaining a focus on best in class customer service. Despite the return to more typical seasonal patterns, we effectively manage expenses, delivered record financial performance with near record margin, reinvested in our properties and returned capital to our shareholders.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Now let's take a look at our fourth quarter and full year results. With respect to our Las Vegas operations, our fourth quarter net revenue was $492,600,000 up 7.2% from the prior year's fourth quarter. Adjusted EBITDA was $223,900,000 up 1.6% from the prior year's fourth quarter. Our adjusted EBITDA margin was 45.4% a decrease of two fifty basis points from the prior year's fourth quarter. On a consolidated basis, our fourth quarter net revenue was $495,700,000 up 7.1% from the prior year's fourth quarter.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Our adjusted EBITDA was $202,400,000 up 0.5% from the prior year's fourth quarter. Our adjusted EBITDA margin was 40.8% for the quarter, a decrease of two sixty seven basis points from the prior year's fourth quarter. Let's turn to our full year performance. With respect to our Las Vegas operations, our full year net revenue was $1,900,000,000 up 12.6% from the prior year. Full year adjusted EBITDA was $879,400,000 up 7.4% from the prior year.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Our adjusted EBITDA margin was 45.7% a decrease of two twenty two basis points from the prior year. On a consolidated basis, our full year net revenue was $1,900,000,000 up 12.5% from the prior year. Our full year adjusted EBITDA was $795,900,000 up 6.7% from the prior year. On a full year adjusted EBITDA margin was 41% a decrease of two twenty two basis points from the prior year. In the quarter, we converted 78% of our adjusted EBITDA to operating free cash flow generating $158,600,000 or $1.5 per share.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

When looking at our 2024 Q and A free cash flow, we converted 57% of our adjusted EBITDA to operating cash flow generating $451,000,000 or $4.27 per share. This significant level of free cash flow was either reinvested in our long term growth strategy, reinvested into our existing properties or returned to our stakeholders via debt pay down, share repurchases and dividends. As we finish 2024, we remain focused on our core local gas as we continue to grow our regional and national segments across our portfolio. In comparing our results to last year's fourth quarter, we continue to see strong carded slot play across the database, including our regional and national segments. Driven by strong customer engagement and robust spend per visit across our database, we achieved record revenue and profitability in our gaming segment this quarter.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

This was accomplished despite the broader market experiencing unfavorable hold in sports betting during the quarter. Turning to the non gaming segments, both hotel and food and beverage continued to grow year over year and deliver record revenue and near record profitability in the fourth quarter. Our hotel division experienced its highest fourth quarter revenue and near record profit, driven by our team's success and continue to drive occupancy across our hotel portfolio. Not to be outdone, our Food and Beverage division also experienced its highest ever fourth quarter 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 businesses, as mentioned on our last earnings call, we faced a tough fourth quarter comparable.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

That said, we are seeing positive momentum in both of these business lines as we continue to build our pipeline into 2025. As we look ahead to the first quarter, we are seeing stability in our core slot and tables business in the locals market and across our Carter database. We remain confident in our business prospects moving forward. Now let's cover a few balance sheet and capital items. Company's cash and cash equivalents at the end of the fourth quarter was $164,400,000 and the total principal amount of debt outstanding was $3,400,000,000 resulting in net debt of $3,300,000,000 At the end of the fourth quarter, the company's net debt to EBITDA ratio was 4.1 times.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Also during the fourth quarter, we made distributions of approximately $39,000,000 to the LLC unitholders of Station HoldCo, which included distribution of approximately 22,700,000 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. During the quarter, the company repriced its Term Loan B credit facility, which is now bears interest at 2% over SOFR. This The pricing further strengthens our balance sheet and reduces our interest expense by approximately $4,000,000 per year. Capital spend in the fourth quarter was $26,000,000 which included approximately $16,800,000 in investment capital, inclusive of Durango project for TainEdge as well as $9,200,000 in maintenance capital.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

For the full year 2024, capital spend was $283,900,000 which includes approximately $172,300,000 in investment capital, inclusive of the Rango project pertaining as well as $111,600,000 in maintenance capital. As we look into our capital spend for 2025, we expect to spend between $375,000,000 to $425,000,000 which includes $285,000,000 to $325,000,000 investment capital as well as $90,000,000 to $100,000,000 in maintenance 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. In the fourth quarter, we've successfully opened a Yard House restaurant at our Sunset Station and added local favorite China Mama at our Palace Station property. We are pleased with the results and the guest response booking our guest response and early results in these new amenities.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

In addition to these amenities and as discussed in our last earnings call, we've been making investments into both our Sunset Station and Green Valley Ranch properties into 2025. At our Sunset Station property, we'll be building off the success we are seeing with our recently renovated Race and Sportsbook and partial casino remodel by continuing to refresh 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 both expected to add over 12,500 new households upon final completion of both communities. As part of the project, we'll be adding in an all new country western bar and nightclub, a new Mexican restaurant and all new center bar along with a completely renovated casino space. Work has 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 are expecting to start a complete refresh of our room and suite product as well as our convention space aligning the hotel with our most recent renovations made to our well received high limit table and slot rooms at the property.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Work is expected to start in June of twenty twenty five with the majority of our rooms being back in service by year end. The cost of the room and convention renovation is expected to be approximately $180,000,000 Like our other recently reduced introduced amenities, we expect these to be solid investments, however, we do expect some disruption challenges at 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 three zero five acre site located in North Fresno, California with great ingress and egress off the heavily traveled Highway 99. The project is one of the most convenient and accessible locations in Central California with over 4,200,000 people located within two hours of the development site. 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 three games, 42 table games, and two food and beverage outlets and a food pool with many exciting options.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Construction is progressing well and we anticipate topping off the facility later this month, keeping us on schedule for a mid-twenty twenty six resort opening. The total project cost is expected to be approximately $750,000,000 which includes all design costs, construction hard soft costs, pre opening expenses and any financing and development fee costs associated with the project. We are also making steady progress on project financing and anticipate closing on the facility later this quarter. We're excited about these developments and we will continue to provide these updates during our quarterly earnings call. Lastly, the company's Board of Directors has declared a cash dividend of $0.25 per Class A common share, payable on March 31 to Class A shareholders of record as of March of the record of March.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

When we combine our share repurchases with our special and regularly declared dividends, we returned approximately $224,000,000 to our shareholders in 2024. The company had a strong year and we remain confident in our business model as we head into 2025. We continue to validate our long term growth strategy and demonstrate the power of our own development pipeline and real estate bank, which consists of over four fifty acres of developable land positioned in highly favorable areas across the Las Vegas Valley. This pipeline coupled with our 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 a very favorable long term demographic trends and 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.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Our success starts with them and they continue to be the primary reason why our guests keep coming back. We thank them again for voting us top casino employer in the Las Vegas alley for the fourth consecutive year, being certified by Great Place to Work for a third year in a row, as well as being recognized by Forbes as one of America's best in state employers. Finally, we thank our guests for their loyal support in each of the last six decades. Operator, this concludes our prepared remarks for today, and we're now ready to take questions.

Operator

We will now begin the question and answer session. Our first question comes from Carlo Santarelli with Deutsche Bank. Please go ahead.

Carlo Santarelli
Carlo Santarelli
Analyst at Deutsche Bank

Hey guys, thank you for taking my question. Steve, you alluded to it a little bit, but didn't quantify. And I know back in November, coming off of the tough October on the sports side, I think you called out $6,000,000 or $7,000,000 from a hold impact there. Incrementally, December was a struggle, I think, for the books in town. Anything you can kind of quantify in terms of maybe the total sports betting hold impact, whether it's year over year or relative to normal in the fourth quarter?

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Yes. No problem, Karl. And I guess one thing to mention is the sports business overall is healthy with Wright being up 10%. But as I mentioned in previously disclosed earnings, we coupled $8,000,000 in October and an additional $6,000,000 in December year over year. Okay,

Carlo Santarelli
Carlo Santarelli
Analyst at Deutsche Bank

great. And then if I

Carlo Santarelli
Carlo Santarelli
Analyst at Deutsche Bank

could just to follow-up, obviously,

Carlo Santarelli
Carlo Santarelli
Analyst at Deutsche Bank

a lot of moving parts with the 4Q just in terms of Durango being in for a stub period this year. As we move into the first quarter and you talked a lot last call about kind of some of the seasonality that you anticipated in the 4Q. Would you be able to do something similar as it pertains to the 1Q acknowledging kind of low sports hold, the disjointed year over year comparison that we obviously saw with Durango and how you kind of see seasonality playing out quarter to quarter?

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Yes, I mean, I think seasonality, it just look back to history, right? Generally, Q4 to Q1 from EBITDA perspective is usually about up about 6.6%, somewhere in that range.

Operator

And the next question comes from Sean Kelly with Bank of America. Please go ahead.

Shaun Kelley
Shaun Kelley
Managing Director, Equity Research Analyst at Bank of America Merrill Lynch

Hi, good afternoon, everyone. Thanks for taking my question. Steve, wondering if we could get a little bit more color just on state of the consumer. I think most of us that stare at regional gaming data noticed a bit of an acceleration post election. The locals is a little harder to glean just traffic trends from given sort of the macro nature, but we don't get property specific details.

Shaun Kelley
Shaun Kelley
Managing Director, Equity Research Analyst at Bank of America Merrill Lynch

So what did you see? Did you guys see something similar in terms of maybe a pickup there in some of your core righted play after the election? And just how has the mood felt maybe subsequent to that so far in Q1? Thanks.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

Yes, this is Scott. I'll take that one. From a database perspective, we're seeing consistent positive trends across the database and we've seen that in the past quarters and continuing to look into the beginning of the first quarter, we see consistency there predominantly led by our high end network customer segments, our regional and national. So across the database, we see stability. As it relates to Durango, we continue to grow our new to brand customers.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

We're up to about 85,000 new sign ups at the Durango zone. And at the same time, we've seen really strong increases in new member sign ups across the core properties ex Durango.

Lorenzo Fertitta
Vice Chairman of the Board at Red Rock Resorts

And this is Lorenzo, relative to the election, we did see an acceleration, which is typical. We expected that. Typically, we get a low leading up to presidential election. People are not focused. But after the election, we definitely saw some acceleration.

Shaun Kelley
Shaun Kelley
Managing Director, Equity Research Analyst at Bank of America Merrill Lynch

Thank you very much.

Operator

The next question comes from Jordan Bender with Citizens JMP. Please go ahead.

Jordan Bender
Equity Analyst at Citizen JMP

Good afternoon, everyone. On the backfill comments, you guys have previously said that that could take about two to three years to backfill Red Rock. Steve, in the prepared remarks, you said that you could be a couple of years away from forward backfilling that. I might be splitting hairs with this question, but is that taking maybe a little bit more time than anticipated to kind of get back to pre during the levels?

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

No. Sorry, Dan. Go ahead. Yes, my apologies. It was confusing.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

I think with the statement being on track, we generally have seen historically this takes backfill. It takes about two to three years. And that was our experience at our past openings and we are on pace to hit those targets.

Jordan Bender
Equity Analyst at Citizen JMP

Understood. Thanks. And then just the commentary around the quarter over quarter into 1Q with seasonality. Just keeping in mind that we did have Super Bowl in the prior year. Is there any way to kind of quantify what kind of positive impact that did have in the prior year as we think about modeling?

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Yes. I mean the Super Bowl I think from a whole perspective across the street it wasn't a very good

Lorenzo Fertitta
Vice Chairman of the Board at Red Rock Resorts

it wasn't a very good Yes. Last year was not a good outcome. This year

Lorenzo Fertitta
Vice Chairman of the Board at Red Rock Resorts

was a better outcome.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Yes. This year was a better outcome. We needed a 49 win last year. But from a hotel perspective probably costs about $1,000,000 across the board.

Jordan Bender
Equity Analyst at Citizen JMP

Understood. Thank you very much.

Operator

And the next question comes from Steve Wieczewski with Stifel. Please go ahead.

Steven Wieczynski
Steven Wieczynski
Managing Director at Stifel Financial Corp

So Steve or Scott, whoever wants to take this, maybe from a high level perspective, just wondering if you can give us some color on how you're thinking about your customer base for this year. It sounds like per Scott's commentary, stable seems to be the words I guess you guys would describe. But just trying to gauge how you guys are kind of thinking about that spend level across maybe rated play versus non rated play and then maybe how you're thinking about the group business for 2025 as well?

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

Yes, this is Scott. I'll take it. We'll start out with just the core customer. As I said, we've seen stability. We continue to anticipate the market to be stable with some green shoots.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

We're looking forward to the year. Like Lorenzo said, coming out of the election, it seems like we picked up some steam. And so if you look at all of our kind of customer and consumer metrics, they're all positive going forward. As you look at group, I think you mentioned, I think we had mentioned on previous calls that the fourth quarter was going to be a little tough for us from a group perspective and that will fade into the first quarter as well. And then for the remaining three quarters of '25 and into '26, we see strong pickup in the group segments.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

The good note about the fourth quarter was we still had a record hotel revenue in the fourth quarter because we were able to make up the gap in group through higher OTA mix and other strategies. So we like where that's headed. There is a direct correlation between hotel and catering. So the fourth quarter, we were a little light in catering, but actually in the third quarter, we make it up and we're seeing positive year over year increases in catering going forward. So we like the Seattle market group business.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

We like the regional and national business right now. So we're optimistic.

Steven Wieczynski
Steven Wieczynski
Managing Director at Stifel Financial Corp

Okay, great. Thanks for that, Scott. And then second question, Steve, just in terms of there always seems to be rumors out there kind of around the M and A potential M and A across the gaming space. And just maybe wondering if you could kind of give us your updated thoughts around current appetite for M and A. And I'm guessing you guys probably still don't have much of an appetite for buying versus building given your large land bank, but just wondering if wanted to hear if anything has changed on that front?

Steven Wieczynski
Steven Wieczynski
Managing Director at Stifel Financial Corp

Thanks.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Overall, we look at everything, but I think you hit the nail on the head. We are sitting in probably the best regional gaming market in The United States with six parts of the land ready, prime and ready for development.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

Thanks.

Operator

And the next question comes from Stephen Grambling with Morgan Stanley. Please go ahead.

Stephen Grambling
Stephen Grambling
Managing Director at Morgan Stanley

Hi, thanks. I know you don't really provide explicit guidance, but just wondering if you could provide additional color on the puts and takes impacting EBITDA in 2025 versus 2024 as we think through all the different renovations that you've got going on underlying growth in Durango ramping?

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

Yes. I'll take some of it and then I think Steve might be able to add some color. I'll take the disruption piece. I think we mentioned in the last call that we may see as much as twenty five million dollars of disruption in the year as we continue to add new amenities enhancements to the property. The flip side of that is that we are very encouraged by the capital investments that we've made thus far, mainly our high limit rooms and some of the new restaurant amenities that we've put forth.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

So we anticipate that as these new capital investments come online, we're going to see incremental growth. So Steve maybe you can add some color.

Stephen Grambling
Stephen Grambling
Managing Director at Morgan Stanley

Yes, absolutely. I mean the biggest put

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

and take is we are lapping Durango. And so we were very happy that the team achieved 16% cash on cash return in year one. We are pushing to the 20% return over the next three years in order to hit our targets. So there's still room to grow on the Durango front. And then we're obviously very heavily focused on the backfill of RedRock.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

I think from an expense standpoint, I think one of the things we are lapping is that in order to be competitive, we proactively raise salaries and salaries were up on a same store sales basis up 3.1%. We feel that the labor market is moderating some. So we're not only going to lap the salary increases, but also that we have to deal with the minimum wage increases in July. So there's a put and a take.

Stephen Grambling
Stephen Grambling
Managing Director at Morgan Stanley

Helpful. Thanks. And one quick follow-up. Just that $25,000,000 is that incremental to any of the impact that you've seen this year. Is that right?

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Yes. So far we've seen very little impact. So the disruption expect to be spread throughout the year with Green Valley obviously not really hitting until June. Got it. Thank you so much.

Operator

And the next question comes from Barry Jonas with Truist Securities. Please go ahead.

Barry Jonas
Barry Jonas
Managing Director at Truist Securities

Hey, guys. The deck mentions eight acres in Reno that are ready for development. I don't believe that was in last quarter's deck. Can you maybe talk about your current thoughts on developing that market overall and where it fits priority wise?

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

This is Scott. You're correct. I do think it's always been in our deck as an available site of land. It may be on the actively marketed side. So we've gone back and forth.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

We've looked at developing that project. It is gaming entitled. It is a great location in Reno. And it does, as I said, have the entitlement. From a priority perspective, we like the development opportunities we have in Las Vegas.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

But we're always open to developing that at the right time and the right place given the priorities or if we get an attractive offer for it that we would divest and sell.

Barry Jonas
Barry Jonas
Managing Director at Truist Securities

Great. Thanks for that clarification. And then just a question on North Fork. North Fork, can you talk about where the tribe is at with compact discussions? And to what extent does that influence the timing or gaining composition when the casino opens?

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Yes, we actually went through secretary procedures, so there's no compacts play. And ultimately, while it took us a little bit longer to get to this play, ultimately that leads to a bit higher margin when we start operating.

Barry Jonas
Barry Jonas
Managing Director at Truist Securities

So you'll be able to

Barry Jonas
Barry Jonas
Managing Director at Truist Securities

have Class III games with no limitations, just to be clear?

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

2,000 Class

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

III. 2,000 and change. For two years.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

And that's for two years, Ari, and then we then there's no limit.

Barry Jonas
Barry Jonas
Managing Director at Truist Securities

Excellent. All right. Thank you so much, guys.

Operator

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

Daniel Politzer
Daniel Politzer
Director, Equity Research Analyst at Wells Fargo

Hey, good afternoon, everyone. Thanks for taking my question. First, in terms of the cadence for next year, is it fair to say that the peak disruption periods from Green Valley Ranch and Sunset construction will take place in the third and fourth quarter?

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

Yes.

Daniel Politzer
Daniel Politzer
Director, Equity Research Analyst at Wells Fargo

Okay. And then if you we're coming off the Super Bowl. Obviously, we had F1 in Vegas again in the fourth quarter.

Daniel Politzer
Daniel Politzer
Director, Equity Research Analyst at Wells Fargo

Can you maybe talk about kind

Daniel Politzer
Daniel Politzer
Director, Equity Research Analyst at Wells Fargo

of what you observed over the valley for these two big events obviously to evolve? It's typically a big event in Vegas, didn't take place there this year. But if you could just maybe opine on the demand level that you've seen across your properties in the last few months for these peak events?

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

For F1, I think we're going to continue with the same answer. We think it's a wonderful event for Vegas and we're proud that the city host the event. It really is a non event for Red Rock Resorts. So I don't think we see any real impact or noticeable impact. Super Bowl is a different story.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

And I'll be kind of answering the question, I think a couple of questions before. We did need the 49ers to win. But this year, I think we performed a little bit better from a gaming perspective. And then from a hotel perspective, I earlier quantified that we lost we got to make

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

up about $1,000,000 of hotel business with us hosting the Super Bowl in Las Vegas last year.

Lorenzo Fertitta
Vice Chairman of the Board at Red Rock Resorts

This is Lorenzo. The Super Bowl was a significant impact for our business. Gaming and non gaming regardless of how the game turns out or whether we hold on whatever happens. But it was a significant positive impact.

Lorenzo Fertitta
Vice Chairman of the Board at Red Rock Resorts

And as Steve said, F1 while it's amazing and great for the city, just is absolutely zero impact on our business either way whether it's strong or not strong.

Daniel Politzer
Daniel Politzer
Director, Equity Research Analyst at Wells Fargo

Got it. And just one last quick housekeeping. Any pointers on how to think about corporate expense growth for 2025?

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Yes. I think right now, I think it's about $21,000,000 that's probably expected we continue to expect to be at that level.

Operator

And the next question comes from Chad Beynon with Macquarie. Please go ahead.

Chad Beynon
Chad Beynon
Managing Director, Analyst at Macquarie Group

Wanted to ask on margins for 25%. Steve, you mentioned that labor is up a little over 3%. As we think about some of the other components, whether it's utilities, insurance, marketing, etcetera, should we expect any major kind of inflationary growth in 'twenty five or have those settled down pretty significantly? And if we see revenue growth in 'twenty five, we could actually hold margins all else equal? Thanks.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Yes. I mean, I think what you're seeing is from a marketing perspective, the market continues to be rational. I think from a labor perspective, we did we are overlapping not only the minimum wage, but a large a proactive large increase to make sure that we're competitive in the market. So we hope that that goes away. Obviously, sports was about 150 basis points of margin degradation just this quarter.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

So we are hoping for not only the better Super Bowl, which I think we got, we are hoping for a better beverage madness as well. I think the thing that I think that is that we are nervous about or just looking at is the COGS and food cost continues to be elevated, eggs, proteins, etcetera, continue to be elevated. So that's something we're on the lookout for.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

And we do have one outlier, the GaN Sports Wagering System. Once we get that out of Nevada Gaming Control Board audit, there'll be a good chunk of duplicate expenses that we're incurring right now

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

that will go away, which will help margins. But overall, we do like where our margins profile is. Sometimes it always helps to look back. When you look back at our fourth quarter pre COVID, our margins were at 36%. And so sitting here today, people continue to ask about the sustainability margins and being north of 45%.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

We like the structural changes that this team put in place during the COVID period to continue to execute

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

on.

Chad Beynon
Chad Beynon
Managing Director, Analyst at Macquarie Group

Great. Thank you. And then given the projects that you have right now, do you have any updated views on the plans to grow the tavern business bigger? Or is the focus on the internal projects and Durango two point zero and

Chad Beynon
Chad Beynon
Managing Director, Analyst at Macquarie Group

then activating the land bank? Thank you.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

This is Scott. We're excited to say we are bringing online two more taverns or we brought online two taverns, we're bringing online six more taverns within the year. So that's pretty full play for us. The first two taverns have been very pleasingly above our expectation and performance. So we think we're on to something there and we're working hard to make sure that we open the six additional taverns in the right manner.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

And look, opportunistically, these things come up and we look at these opportunities that they fit our investment profile on the tavern, then we may acquire more or build more.

Chad Beynon
Chad Beynon
Managing Director, Analyst at Macquarie Group

Great. Thank you very much. Nice quarter.

Operator

And the next question comes from Joe Stoff with Susquehanna. Please go ahead.

Joseph Stauff
Institutional Investment Analyst at Susquehanna

Okay. Thank you. I wanted to ask about just visitation levels in general, you're lapping Durango. And is it fair to say that, say, the overall level of visitation given the different regions of the locals market, have they stabilized in terms of Durango now a year later? And then how do you drive additional growth in your database from here?

Joseph Stauff
Institutional Investment Analyst at Susquehanna

Is it more about just pushing people up at different levels or do you feel as though there's more organic growth to realize?

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

Yes, this is Scott. Let's take visitation just in its raw data. Visitation is generally flat within the database. But we are seeing With that being said though, Scott, that's against like the grand opening of Durango. So that's good news to be confident against that.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

That's right. So we do see consolidation of visits, but we do see it to the upside of spend per visit. So in totality, we see upside. And to Frank's point, we are seeing one, our un carded customers settle back in to what might be their home property as they went and gave Durango trial. And then as Frank mentioned as well, you are looking at kind of that year over year bump to Durango.

Joseph Stauff
Institutional Investment Analyst at Susquehanna

Got you.

Joseph Stauff
Institutional Investment Analyst at Susquehanna

And go

Joseph Stauff
Institutional Investment Analyst at Susquehanna

on, I'm sorry, Scott.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

As far as growth, we continue to lean into regional and national. That's an area of upside for us, especially through our hotel product. And we mentioned that after the first quarter, we're going to see really strong increases in group sales and strong increases in hotel visitation in general. As it relates to our core and VIP customers, products like the High Limit rooms continue to grow incremental revenue and the new amenities that we're bringing online as well as refreshing the products at TBR and Sunset will bring incremental visitation and growth as well.

Lorenzo Fertitta
Vice Chairman of the Board at Red Rock Resorts

Yes. Okay. No, it's Lorenzo. And the market continues to be dynamic. There continues to be population growth.

Lorenzo Fertitta
Vice Chairman of the Board at Red Rock Resorts

And as we talked about before, I mean, the interesting thing is that we are seeing it in our high limit rooms and some

Lorenzo Fertitta
Vice Chairman of the Board at Red Rock Resorts

of our

Lorenzo Fertitta
Vice Chairman of the Board at Red Rock Resorts

offerings, higher income person moving and relocating to Las Vegas. We are continuing to see that. Obviously, we keep our eye on home prices. There is a little bit of a supply demand issue right now. We are just hoping that the BLM releases more land so that more housing can be developed and that's my understanding of what the Governor is working on right now and we think that gets done.

Lorenzo Fertitta
Vice Chairman of the Board at Red Rock Resorts

But there is certainly no lack of demand as far as people wanting to relocate here. So the market is dynamic and we think it's going to continue to grow as it has over the last twenty twenty.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

And the good news is the majority of the growth that's taking place is in the suburbs where our properties are located off of the beltways and major infrastructure.

Joseph Stauff
Institutional Investment Analyst at Susquehanna

Got you. And if I could squeeze an additional one, you've got $350,000,000 of project capital between the three during your Phase II GVR and Sunset. Some of that spend kind of based on your guidance, Scott, goes into the first quarter of next year. Any preview of how you're thinking about additional projects at this point?

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

No. I think we'll be in a position probably by this time next year to give guidance on what the next project is going to be. But we're working very hard right now, but we're not in a position to disclose it right now.

Operator

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

Brandt Montour
Director, Equity Research Analyst at Barclays Corporate & Investment Bank

Good afternoon, everybody. Thanks for taking my question. So this isn't a it's like splitting hairs, but it looks like the CapEx expectation for GVR went up just a slight amount. I'm just curious if there's been any sort of change in scope to the project or maybe add ons or that's just sort of normal way inflation or what that is?

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

I think, Brad, when I think when we were taking a look at the hotels and the timing of the hotel construction, I think the team thought that adding in and refreshing the meeting space was very important to the hotel and the meeting space really work together. So that was added to the project since the last earnings call.

Brandt Montour
Director, Equity Research Analyst at Barclays Corporate & Investment Bank

That's perfect. Thanks for that. And then just a follow-up on the post election commentary. You did give some color on the broad stability of the market, but the pre election law was well documented. When you the post election behavior, can you maybe talk rated versus sort of unrated behavior and what specifically you saw accelerate visits or spend per visit?

Brandt Montour
Director, Equity Research Analyst at Barclays Corporate & Investment Bank

And then if it's sustained into January, what parts of that equation sustained and which parts may have fallen back off?

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

Yes. Our percentage of carded and uncarded remains consistent. We're about 26.5% uncarded in the database. And as it relates to post election, we continue to see strength in like I said the VIP which is our highest in segment, our core segment and regional and national. We expect to see that continue into the rest of 2025.

Operator

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

John Decree
John Decree
Director - Equity Research at CBRE Group

Maybe one more for you on the group sales business. You talked quite a bit about that today and the momentum you're seeing in the back half. And I'm curious if you could speak to the capacity you have to grow that. So do you have a group room night target? Or how do you think about kind of balancing that with keeping rooms for your casino customer?

John Decree
John Decree
Director - Equity Research at CBRE Group

And just trying to get a sense of how many more group styles you could do, how much headway you have or if it's more on pricing that you're getting on rooms and catering business that's driving that momentum or just more groups that you're going out and getting?

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

Well, I think it's both. One, we have capacity still to go. So we're probably 7060%, seventy % of array there in the year for the year on occupancy of the meeting space. The other thing is because we have a premium product that we would put up against anybody in the market, we compete on price. And so there is an opportunity to continue to grow price.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

There was a little bit of a low in the back half of twenty four where people were spending right to their minimums and they weren't going over their minimums. So I think there's an opportunity to get incremental in trip revenue out of these customers as we go forward. So I think there is upside there.

John Decree
John Decree
Director - Equity Research at CBRE Group

Got it. Thanks, Scott. Maybe one quick follow-up on the same topic. What are you guys seeing from those group customers that come in and what they do on the gaming floor? Are they gaming more?

John Decree
John Decree
Director - Equity Research at CBRE Group

Are they kind of turning into gaming customers, like repeat groups? And are you getting new gaming customers? Are those periods of time good sign ups for you for gaming customers? Curious how you're kind of cross selling from the group sales to gaming?

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

Yes, a couple of things. One, we have the benefit of being predominantly corporate in our group mix, which comes with expense accounts and a customer that's more willing to gamble and eat in the restaurant. So it's a better quality customer than say an association customer. So we lean into that and we capture them through all the great new restaurants that we have, specifically at Durango and at Red Rock and now Green Valley Ranch has Ortequia, a Mediterranean restaurant and brewer than sushi. So we have amenities to continue to grow that.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

You had asked about kind of yielding rooms. It's our philosophy that putting the most profitable customer in the room is the goal. And that sounds a little obvious, but it's a nuance and an art, right? So we're constantly looking at the overall work of the gaming customer compared to a conventioneer or a group customer with probably a little bit more favoritism to the gaming customer because we have an opportunity for repeat visitation.

Operator

And the next question comes from Ben Cheikhin with Mizuho. Please go ahead.

Benjamin Chaiken
Benjamin Chaiken
Equity Analyst at Mizuho Financial Group, Inc.

Just one quick one for me. I believe you

Benjamin Chaiken
Benjamin Chaiken
Equity Analyst at Mizuho Financial Group, Inc.

have a development note associated with the North Fork development. Can you remind us the value of that? And then is that still a twenty twenty event ballpark to get that back? Thanks.

Lorenzo Fertitta
Vice Chairman of the Board at Red Rock Resorts

I'm sorry, you have to repeat. The note.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

The note. The note is about $156,000,000 as of December 31. As I mentioned in the remarks, we're looking to complete our financing for the project later this quarter. So pending the result out, we may be able to get some of that note back earlier than 2028 and potentially this year.

Operator

And the final question comes from David Katz with Jefferies. Please go ahead.

David Katz
David Katz
Managing Director at Jefferies

I

David Katz
David Katz
Managing Director at Jefferies

I wanted to go back to one a bit earlier regarding what happens beyond the current projects that you have on the board. And it's not about asking what the project would be in 2026 or any details about them, but really more how you're thinking about leverage and harvest mode versus investment mode and balancing those in 2026. More of a general strategic question, what should we expect in that out year beyond this year? Thank you.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

No problem. As I mentioned, some of the CapEx in 2025 would continue to bleed into 2026. And Frank mentioned that we could possibly be in a position to announce our next project next year, this time next year. Right now, leverage is continuing to go down as we ramp up Durango in the backfill of Red Rock. It comes to fruition, so we're sitting at 4.1 times, very comfortable at 4.1 times interest expense is coming down, one, due to interest rates coming down, but also due to the refinancing.

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

We'd like to see leverage consistent at this point. But if there's an opportunity that came up, we feel okay floating leverage a little bit higher.

Operator

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

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

Thank you, everyone, for joining

Stephen Cootey
EVP, CFO & Treasurer at Red Rock Resorts

the call and look forward to talking again in ninety days. Take care.

Operator

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

Executives
    • Scott Kreeger
      Scott Kreeger
      President
Analysts
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Key Takeaways

  • Red Rock’s Las Vegas operations delivered record Q4 net revenue of $492.6 million (+7.2% YoY) and adjusted EBITDA of $223.9 million (+1.6% YoY), with full-year net revenue of $1.9 billion (+12.6%) and adjusted EBITDA of $879.4 million (+7.4%), while maintaining near-record margins.
  • Durango Casino Resort achieved a 16% cash-on-cash return in 2024 net of cannibalization, signed up over 85,000 new loyalty members, and is expanding with a 25,000 sq ft casino phase (230 slots, 120 high-limit) and a 2,000-space garage by January 2026 at a $120 million budget.
  • The company converted 78% of Q4 adjusted EBITDA into $158.6 million of operating free cash flow ($1.50/share) and 57% of full-year EBITDA into $451 million ($4.27/share), using the proceeds for reinvestment, debt paydown, share repurchases, and dividends.
  • 2025 capital expenditures are forecast at $375–$425 million (including $285–$325 million growth capex), funding amenity investments such as a $53 million refresh at Sunset Station and a $180 million room and convention rehab at Green Valley Ranch to drive incremental visitation and spend.
  • The North Fork Resort in central California, a best-in-class $750 million project with ~100,000 sq ft of casino space (2,400 slots, 42 tables), is on schedule for a mid-2026 opening and expects to close project financing this quarter with no compact limits on Class III gaming.
AI Generated. May Contain Errors.
Earnings Conference Call
Red Rock Resorts Q4 2024
00:00 / 00:00

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