Red Rock Resorts Q2 2025 Earnings Call Transcript

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Provided by Quartr
July 29, 2025

Key Takeaways

  • Positive Sentiment: Red Rock’s Las Vegas operations delivered a record second-quarter with net revenue of $513.3 million (+6.2%) and adjusted EBITDA of $239.4 million (+7.3%), driving a 46.7% margin (up 47 bps).
  • Positive Sentiment: The Durango Casino Resort has added 108,000 new customers since its December 2023 opening, showing elevated visitation, spend per visit and on pace to deliver over 50% net return through 2025.
  • Positive Sentiment: Non-gaming divisions—hotel, food & beverage and group sales—achieved near-record revenue and profitability, driven by higher ADR, occupancy and cover counts across the portfolio.
  • Negative Sentiment: Ongoing expansions at Durango ($120 million), Sunset Station ($53 million) and Green Valley Ranch ($200 million) remain on budget but may cause near-term guest disruption ahead of late-2025/early-2026 completions.
  • Positive Sentiment: The company converted 54% of adjusted EBITDA into $124.3 million of operating free cash flow, funding over $200 million in dividends and share repurchases while maintaining net leverage at 3.96x.
AI Generated. May Contain Errors.
Earnings Conference Call
Red Rock Resorts Q2 2025
00:00 / 00:00

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Operator

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

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for Red Rock Resorts' second quarter twenty twenty five earnings conference call. Joining me on the call today are Frank and Lorenzo Fortita, 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
Executive VP, CFO & Treasurer at Red Rock Resorts

During this call, we will also discuss non GAAP financial measures. For definitions and complete reconciliation for these figures to GAAP, please refer to the financial tables in our earnings press release, Form eight ks and our investor deck, which were filed this afternoon prior to the call. Also, please note that this call is being recorded. The second quarter was an exceptional one for the company by every measure. Our Las Vegas operations delivered its highest quarterly net revenue and adjusted EBITDA in our forty nine year history, all while sustaining near record adjusted EBITDA margin. In addition to delivering strong financial results, we remain highly encouraged by the continued performance of our Durango Casino Resort and the revenue backfill at our core properties.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

Durango continues to expand the Las Vegas locals market, drive incremental play from our existing customer base and attract new guests to the Station Casinos brand. The property once again demonstrated strong momentum within the quarter with increased visitation, higher spend per visit and elevated net theoretical win from our carded customers in the surrounding Durango area. And since opening since December 2023, Durango has added over 108,000 new customers to our database. The resort remains on a solid trajectory and is on pace to become one of our highest margin properties, delivering a return net of cannibalization of over 50% through the 2025. Regarding the cannibalization impact, which occurred primarily at our Red Rock property following Durango's opening, we are encouraged by the pace of the revenue backfill, which suggests that the worst of the impact is behind us.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

Consistent with our historical experience, we continue to expect full revenue recovery over the next couple of years, supported by strong long demographic growth across the Las Vegas Valley. This is particularly evident in Summerlin, where the combined build out of the Downtown Summerlin and Summerlin West is projected to add approximately 34,000 new households. Across the rest of our portfolio, we demonstrated our ability to successfully manage costs while driving top line growth, resulting in what was easily the best quarter in our company's history. Strength was evident across all business lines as we executed our core strategy of reinvesting in existing properties to enhance amenities and deliver best in class customer service, while also returning capital to our shareholders. Now let's take a look at our second quarter.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

With respect to our Las Vegas operations, our second quarter net revenue was $513,300,000 up 6.2% from the prior year second quarter. Our adjusted EBITDA was $239,400,000 up 7.3% from the prior year second quarter. Our adjusted EBITDA margin was 46.7%, an increase of 47 basis points from the prior year. On a consolidated basis, our second quarter net revenue, which includes $10,000,000 from our North Fork project, was $526,300,000 up 8.2% from the prior year's second quarter. Our adjusted EBITDA, which also includes $10,000,000 from our North Fork project, was $229,400,000 up 13.7% from the prior year's second quarter.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

Our adjusted EBITDA margin was 43.6% for the quarter, an increase of two twelve basis points from the prior year. In the quarter, we converted 54% of our adjusted EBITDA into operating free cash flow, generating $124,300,000 or $1.18 per share. This brings our year to date cumulative free cash flow to $217,300,000 or $2.06 per share. This strong level of free cash flow was strategically deployed to support our long term growth initiatives, including our most recent project at Durango, Sunset Station and Green Valley Ranch, will return to our stakeholders through debt reduction, dividends and share repurchases. As we begin the third quarter, we remain focused on our core local guests while continuing to drive our regional and national customer segments across the portfolio.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

Compared to the second quarter of last year, we saw continued strength in Cardiff's Law play across our entire database. Robust visitation and strong spend per visit, coupled with a strong table games business, helped drive the highest revenue and profitability in our gaming segment in the company's history. Turning to our non gaming operations, both hotel and food and beverage divisions delivered a strong quarter, achieving near record revenue and profitability in the second quarter. Our hotel division recorded its highest second quarter revenue and profit, driven by our team's success increasing both ADR and occupancy across our portfolio. The Food and Beverage division also achieved near record results for the quarter, supported by higher cover counts across our outlets.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

In Group Sales and Catering, the team delivered a near record second quarter revenue and profit, and we continue to see positive momentum in both business lines through the remainder of 2025 and into 2026. As we look ahead to the third quarter, we are seeing continued stability in our core slot and table games business within the Locals market and across our Carta database. While we do expect a return to more typical seasonal visitation patterns and some near term disruption impact from our ongoing construction projects at Durango, Sunset Station and Green Valley Ranch, we remain as confident as ever in the strength of our business and long term growth prospects. Now let's cover a few balance sheet and capital items. The company's cash and cash equivalents at the end of the second quarter was $145,200,000 and the total principal amount of debt outstanding was $3,400,000,000 resulting in net debt of $3,300,000,000 As of the end of the second quarter, the company's net debt to EBITDA ratio was 3.96x.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

During the second quarter, we made total distributions of approximately $200,300,000 to the LLC unitholders of Station HoldCo, including a distribution of approximately $116,900,000 to Red Rock Resorts. The company utilized this portion of the distribution to fund its first and second quarter estimated tax payments, pay its previously declared quarterly dividend of $0.25 per Class A common share and a special dividend of $1 per Class A common share and to repurchase approximately 672,000 Class A common shares for $31,000,000 at an average price of $45.94 per share under its previously announced $600,000,000 share repurchase program. The second quarter share repurchases bring the total number of Class A common shares repurchased, including the 2021 tender offer in open market repurchases to approximately 15,000,000 shares at an average price of $45.35 per share, reducing the company's share count to approximately 105,400,000.0 shares at the quarter end. Capital spend in the second quarter was $78,200,000 which includes approximately $59,800,000 in investment capital as well as $18,400,000 in maintenance capital. This brings our year to date capital spend to 146,400,000 which includes approximately $92,000,000 in investment capital as well as $54,000,000 in maintenance capital.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

For the full year 2025, we now expect to spend between $325,000,000 and $375,000,000 down $25,000,000 from our previous earnings call, mainly driven by the timing of capital expenditures. Full year capital spend includes $235,000,000 to $275,000,000 in investment capital as well as 90,000,000 to $100,000,000 in maintenance capital. As mentioned on our last earnings call, we are making significant investments in our Durango Casino Resort, Sunset Station and Green Valley Ranch properties. At Durango, construction continues on the next phase of our Durango master plan. This expansion will add over 25,000 square feet of additional casino space, including a new high limit slot area and bar.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

In total, the project will introduce two thirty new slot machines with 120 allocated to the high limit room. As part of this phase, we are also building a new covered parking garage with nearly 2,000 spots, which will enhance customer access and provide infrastructure flexibility to support the future growth of the property. The total project cost is approximately $120,000,000 and is currently operating under a guaranteed maximum price contract. The project remains on budget and is expected to be completed in late December. At Sunset Station, we are advancing our podium refresh to better position the property for continued growth in Henderson, particularly from the master plan communities of Eskaya and Cadence, which are able over 12,500 new households at full build out.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

The 53,000,000 renovation includes an all new country western bar and nightclub, a new Mexican restaurant, a new center bar and a fully renovated casino floor. We are pleased to report that customer feedback on the completed portions of the renovation has been overwhelmingly positive, positive, reinforcing our confidence in the project's direction. The property remains on budget with the new amenities expected to come online throughout the remainder of 2025 and the 2026. At Green Valley Ranch, we have commenced a comprehensive refresh of our guest rooms, suites and convention space, aligning the hotel experience with a recently renovated and well received high limit table of slot rooms at the property. Work on the rooms in the West Tower is currently underway, with the majority of all rooms in both towers expected to return to service by year end.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

The total investment for the room and convention renovation is projected to be approximately $200,000,000 As with our recently introduced amenities, we believe these upgrades will generate strong returns. However, we do anticipate some temporary disruption at the property as we bring these new offerings online for our guests. Turning now to North Fork, construction is progressing well. We've completed the slab on grade and we anticipate closing the facility by October, keeping us on a pace for an early fourth quarter twenty twenty six open. The total all in project cost is expected to be approximately $750,000,000 is fully financed and is currently being executed under a guaranteed maximum price contract.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

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 III games, 44 table games and two food and beverage outlets and a food court with many exciting options. In addition to the work continuing to progress as planned, the project remains on budget. We are also pleased to report that we're now able to begin and have begun recognizing our development fee revenue starting this quarter. This will continue to the project's opening, marketing another meaningful milestone in the advancement of this long project. Also at the end of the quarter, Red Rock's outstanding balance due from the tribe stands at approximately $72,300,000 We're excited about this project, very happy with the progressive construction and look forward to providing further updates on future earnings calls.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

Lastly, the company's Board of Directors has also declared its regular cash dividend of $0.25 per Class A common share payable on September 30 to Class A shareholders of record as of September 15. Following the payment of this dividend and the share repurchases completed during the quarter, we have returned approximately $189,000,000 to our shareholders year to date. With two record quarters under our belt, the year is off to a strong start and we remain confident in the strength and resilience of our business model. The range continues to validate our long term growth strategy and highlight the value of our own development pipeline and real estate bank, which includes more than four fifty acres of developable land positioned in highly desirable locations throughout the Las Vegas Valley. Combined with our existing portfolio of best in class assets in premier locations, this pipeline positions us for significant growth, enable us to fully capitalize on the very favorable long term demographic trends and the high barriers to entry that define the Las Vegas Locust Market.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

We do want to take a moment to sincerely thank all of our team members for their continued hard work and dedication. Our success begins with them. They are the driving force behind the exceptional experiences that keep our guests coming back time and time again. To their efforts, we are proud to have been recognized with multiple accolades, including being voted a top casino employer in the Las Vegas Valley for five years five consecutive years, certified as a great place to work for three years running and named one of America's best in state employers by Forbes. We are also honored as a top place to work by USA TODAY and recently recognized by Newsweek as one of America's greatest workplaces in Nevada.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

Finally, we extend our heartfelt gratitude to our loyal guests for their unwavering support over the past six decades. Operator, this concludes our prepared remarks for today and we are now ready to take questions.

Operator

We will now begin the question and answer session. If at this time a question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. First question today comes from Jordan Bender with Citizens. Please go ahead.

Jordan Bender
Senior Equity Research Analyst at Citizens Capital Markets and Advisory

Hi, everyone. Good afternoon. Backing out the Native American contributions in the quarter, flow through still incredibly strong. Are you maybe able to help us unpack kind of where you're finding that incremental operating leverage? And I guess I'll just put the second part of the question there.

Jordan Bender
Senior Equity Research Analyst at Citizens Capital Markets and Advisory

Any impact from the renovations in the quarter that you can call out for EBITDA?

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

Yes.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

I mean I think the strength, George, is evident across all business lines. From a casino perspective, obviously, we had the best table and slot hold in the history of our company, led by great volume and some favorable hold. We also had our best hotel revenue and record profitability. And then, not to be outdone, food and beverage had its second best revenue quarter only to be outshined by last quarter, which obviously had the trial from Durango. And the big change there, and you saw this in our margin, you had some revenue mix shift from what's called lower margin food and beverage and hotel and higher margin gaming.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

And gaming actually had a flow through north of 70%.

Jordan Bender
Senior Equity Research Analyst at Citizens Capital Markets and Advisory

Great. And then, I guess, the renovation disruption in the quarter?

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

Yes. We haven't seen too much impact from the renovation in this quarter. That said, we're still sticking to our guns on some of the disruption as we're in the thick or the peak construction period now for all three projects, both the Durango, Sunset Station and Green Valley Ranch, with the majority of that disruption, almost $15,000,000 occurring at Green Valley as the West And East towers are going be taken down over the next two quarters.

Jordan Bender
Senior Equity Research Analyst at Citizens Capital Markets and Advisory

Great. Thank you very much.

Operator

The next question comes from Joe Stauff with Susquehanna. Please go ahead.

Joseph Stauff
Senior Equity Research Analyst at Susquehanna International Group

Thank you. Good afternoon. I wanted to ask just to follow-up on the construction disruption. Steve, you said you're sticking to your guns in terms of kind of what you outlined for each property. Is July, August, September, say, the largest concentration of that disruption?

Joseph Stauff
Senior Equity Research Analyst at Susquehanna International Group

Could you just remind us of the timing of that? And then I was wondering if you could share your analysis of how the tip tax relief kind of affects the locals market and your customer in particular?

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

Hey, Joe, it's Scott. I'll take the disruption kind of schedule and timeline. And I think Steve will take the second question. A couple of quarters ago, Steve was pretty descriptive of what we thought disruption was going to be. And he just mentioned that in the Q2 time frame, it was a little lighter than we thought.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

Some of that is due to just the timing of construction. And in some respects, at sunset, we switched around the order of what we were doing. So at sunset, instead of going into our main pit, we went into an area that contained an entertainment lounge. So that switched around the impact a bit. So you'll see Sunset impact to be more like Q3, Q4, and maybe a little bit of a bleed into 2026.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

Durango disruption has been relatively light, which is a good thing, but we are seeing impacts to parking, especially on the weekends. We're getting above 80% parking and what's left over is less convenient parking in our world. That's pretty impactful. And then the second piece of Durango is we're enclosed now. And so the interior fit out is going to start, which tends to have more noise and kind of disruption that's on the adjacent construction wall than you saw in the past.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

But all in all, we still think that the bulk of the disruption you're going to see in Q3 and Q4.

Frank Fertitta
Frank Fertitta
Chairman & CEO at Red Rock Resorts

And Green Valley is just getting started with the room renovation.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

That's right. Yes. So Green Valley schedule is that will be through Tower 1, late September, October, and then we'll be into the Tower 2 in October with the goal for us to be done at the end of the year.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

And then in October, we'll also kick in on the conference center remodel, which will be early January completion. And then suites will be done in March. So that gives you a kind of a time line at Green Valley Ranch.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

Sure. I'll take the second one, Joe. And I'm going to congratulate you because you gave the ultimate back to school question, one question, 27 parts. I don't think you can actually just look at no taxable tips. We think ultimately, the tax legislation can only be viewed as a good one for Las Vegas.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

And just given our position in the locals market, we do expect to benefit from the legislation and increase the discretionary income it's going to bring to our customers. The key measures, as you mentioned, tax on tips, but there's also the elimination of federal tax and overtime pay, the new senior tax credit as well as standard deductions, family tax credit and some reductions in marginal tax credits, all which would significantly enhance the discretionary income. Well, it's tough to say how much of this income is going to flow to Red Rock. We can start framing that. I think you and I have talked through this.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

For example, when we ran our initial analysis on no tax for tips, for example, we estimated approximately $5,000,000 annual would flow into Clark County. And then we can kind of even view overtime, which is a little trickier. There's about 1,200,000 workers in Clark County. And using some national estimates, roughly 4% to 8% of those typical people actually get receive overtime pay. And ultimately, this could benefit each worker up to $300 to $1,800 per worker annually.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

And then not to be outdone, it's just remind everyone that there are about 390,000 seniors 65. And just given the marginal the median household income of that cohort, we would expect a substantial portion of those seniors will qualify for at least part of the new senior deduction. So all of this is fantastically good for our company. And then to get to the next 27 parts of the question, right? I mean, I think with the expansion of you can expense immediately R and D expenses, the acceleration of bonus depreciation and the relief from interest deductibility, that is going to have an immediate impact on our cash flow for the remainder of 2025.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

We do not expect to pay cash taxes for the remainder of 2025. And further, we do not expect to make any tax distributions to station Holdco for the rest of the year, which we estimate will increase our operating free cash flow by $60,000,000 for the rest of the year.

Joseph Stauff
Senior Equity Research Analyst at Susquehanna International Group

Thanks, guys.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

Thank you.

Operator

The next question comes from Steve Wisewitz with Stifel. Please go ahead.

Steven Wieczynski
Steven Wieczynski
Managing Director at Stifel Financial Corp

Hey, guys. Good afternoon. So Steve, wanted to ask about your new database sign ups across your properties in the quarter. And I guess what I'm trying to understand here is if you guys have seen any pickup in new customers given the well, let's call it, the well documented slowdown along the Strip. Basically trying to understand if The Strip has essentially overpriced itself and some customers are now looking for other alternatives. Hopefully, that makes sense.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

Steve, this is Scott. Let me take that one. So from an overall database perspective, we saw strong positive performance across all of the segments. And as it's been trended from past quarters, because of our focus, because of the investments we're making in our properties, we're seeing particularly strong growth in our VIP, our core customer, our regional and national customer. But in this quarter specifically, not to be outdone, we also saw a considerable improvement in what we would call our retail customer, our non rewards customer.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

So across the database, pretty much homogeneously, we've seen positive increases. And you mentioned new member sign ups, particularly, interesting that if you've got to take into account the opening of Durango and the impact it had in the second quarter of last year. Durango has signed up 108,000 new to brand customers as of this quarter or as of the end of Q2. So that's a sizable database increase that comes from Durango. If you take that comparison of Durango out and you just look at the core six, they were up almost 10% in new sign ups, which is really quite sizable effort on the part of the operating teams to grow the database in general.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

The other thing that we look at is when we look at demographics across all the age categories, we saw positive increases, in the quarter and most interesting as an absolute customer count in the database, we saw under 35 grow 15%. I think that's attributable to the relevant amenities that we're putting in our properties, the way that we position our properties and quite honestly, the team, the marketing team and how they resonate with the younger demographic. So we're seeing strong demographic increases. And then not to be outdone when we look at uncarted, second quarter slot coin in was the highest quarter of increase in uncarted play that we've seen in the last two years. So really when you take a broad brush stroke across all of the aspects of demographics and customer database, we're seeing positive growth.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

And then as we look into Q3, we're seeing very similar trends as we go. It's early, but as we look into the future trend into Q3, it's very consistent.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

And Stephen, just to piggyback on what Scott was saying, that really highlights the difference between The Strip and Las Vegas locals, right? While The Strip relies heavily on tourism, conventions, hotel driven revenue, we are anchored by a gaming centric business model, right? We're focused on a deeply loyal customer base. Many of these customers in fact, our customers, 75% for our Car to Play business over four times a month. And so we feel locals offers a stronger value proposition, which is driving more people to our casino, which includes accessible pricing, convenient locations, personalized service.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

And that continues to resonate not only with our locals guests, but it's starting to increasingly resonate with our out of town guests as well.

Steven Wieczynski
Steven Wieczynski
Managing Director at Stifel Financial Corp

Okay. Got you. That's great color, guys. And I assume this is probably going to be for Scott. And I apologize if Steve, had this in your prepared remarks, but wondering if we could get an update, Scott, in terms of what you're seeing from a group perspective, maybe in the fourth quarter of this year and then what you're seeing so far for 2026?

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

Yes. We're seeing really positive forward bookings. So we're talking in the mid-twenty percent increases in group. And then catering kind of rides shotgun with group sales and we're seeing similar increases, not only through the remaining quarters of this year, but into '26 as well.

Steven Wieczynski
Steven Wieczynski
Managing Director at Stifel Financial Corp

Okay, got you. Thanks guys. Appreciate it.

Operator

The next question comes from Shaun Kelley with Bank of America. Please go ahead.

Shaun Kelley
Shaun Kelley
Senior Research Analyst & MD - Gaming, Lodging & Leisure Equities at Bank of America Merrill Lynch

Good afternoon, everyone. Thanks for taking my question. Steve, whoever wants to take it, know it's probably hard to put a finer point on it, but it sounds like there were several upside surprises in the quarter, both the backfill comment you made a number of times in the prepared remarks and then the strength in unrated play, which has been a segment that I think has come back better than expected across the locals. So if you were to kind of divide out by those two, do you could you venture a guess or help us think a little bit about how much either of those two things in particular contributed to the kind of the outsized growth or the reacceleration in growth we saw in the quarter?

Lorenzo Fertitta
Vice Chairman of the Board at Red Rock Resorts

I think if you really look at really what the big contributor was, I think Scott had touched upon this, it's the VIP play in slots and in table games. And as we mentioned, I mean, we've invested quite a bit in high limit areas and amenities over the past, I guess, four years, five years coming out of COVID. And we're really starting to see that pay off now as we feel like that we're getting more than our fair share in those two areas from a gaming revenue standpoint.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

I would add to that, Steve, you can jump in. When you really look at the market in general, Durango was the star of the show a year ago, but as Durango kind of matures into the market, one of the things that we're seeing, we mentioned it last quarter and again in Q2 is the performance of our core six properties in growing market share and growing the market. So we're seeing all of our properties contribute to the revenue increases.

Shaun Kelley
Shaun Kelley
Senior Research Analyst & MD - Gaming, Lodging & Leisure Equities at Bank of America Merrill Lynch

Thanks for that. And then maybe just to kind of dig in on seasonality or however want to think about it, but there've been a lot of call outs and certainly a warning from your peers about concerns on sort of strip rate compression as we move into the summer months here and some pretty serious discounting out there that I think we can all see on social media. Are you seeing that reflected in any of the hotel product or the prevailing rate there? How are you kind of insulated from that and just sort of bank shots around that for the Red Rock portfolio? Thanks.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

Yes, great question. This is Scott. One, let's just go back and say that Q2 was a great quarter for hotel. But as we look into the current trends and short term booking window, yes, across the board, you are seeing kind of an ADR war, if you will, out there. Now how do we play into that?

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

Certainly, we have to be competitive with the market rates, but we're certainly not completely dropping our rates to unreasonable levels. I think it's also important, Frank and Steve had just mentioned this, that we are a different makeup of business than the Strip. So a majority of our revenue comes through casino. While hotel is important to us, it really only represents about 10% of our overall revenue stream. And then when you look at FIT and transient, it's really only about 20% of the overall hotel mix.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

So while it's important to us and we stay competitive, it really doesn't represent the lion's share of the revenue stream of the company.

Shaun Kelley
Shaun Kelley
Senior Research Analyst & MD - Gaming, Lodging & Leisure Equities at Bank of America Merrill Lynch

Thank you.

Operator

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

Chad Beynon
Chad Beynon
Managing Director, Analyst at Macquarie Group

Afternoon. Thanks for taking my question. Nice quarter, guys. Just in terms of the lower leverage at this point and maybe the business humming along slightly better than anyone would have expected. You obviously have a full plate with some of the renovation projects that you outlined and that will hit in the 2025 and 2026.

Chad Beynon
Chad Beynon
Managing Director, Analyst at Macquarie Group

But as we think further down the track, some of the bigger developmental sites, has anything changed just given your cash position with respect to the timing of maybe green lighting one of those next opportunities? Thanks.

Lorenzo Fertitta
Vice Chairman of the Board at Red Rock Resorts

This is Lorenzo, and obviously Frank But chime nothing has changed. I mean, clearly, we are a development company. I mean, that's really what our focus is. We've got all of this real estate in Las Vegas, its strategic locations. And with Durango, we've proven again that we can develop these projects and get attractive returns.

Lorenzo Fertitta
Vice Chairman of the Board at Red Rock Resorts

From a timing standpoint, we're in a position, I think as we said before, we're just continuing to design and go through the process of trying to figure out which project we think we're going to be able to get the best returns at and have the most impact to be able to create equity value for the company. And these projects just take time. We want to make sure that we get good drawings, we go out on the street, we get good pricing so that when we do announce what the next project is and what the pricing is that we're confident and we're delivering for everybody. I think we had said at one point a quarter or two ago that we would probably have an update when we report Q4 of this year. Don't know, Frank, do you have anything No, you want to agree.

Chad Beynon
Chad Beynon
Managing Director, Analyst at Macquarie Group

Great. Thanks, guys. And then in terms of the Red Rock's impact, what inning are we in, in terms of just getting back on the right glide path to return to what some of the prior numbers are? I know you guys are looking at net of cannibalization, but I know that that's kind of a key model driver, just getting some of that backfilling some of that business back into Red Rocks. Thanks.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

Yes. I think, as I mentioned in the prepared remarks, generally, this backfill historically has taken a little bit over three years. And so, we feel very comfortable in the position we are from a backfill perspective. Scott alluded to the market share comment, where you looked at the twelve months, Durango is really driving the ship. When you look at sixteen months, three months, nine months, it is now really the core six kind of driving the ship, which kind of shows you the power platform and our ability to backfill at our existing properties.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

So, we like where we are. We're mid inning, right? We're kind of entering our second year of that backfill.

Chad Beynon
Chad Beynon
Managing Director, Analyst at Macquarie Group

Thanks, Steve. Appreciate it, guys.

Operator

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

Barry Jonas
Barry Jonas
Managing Director at Truist Securities

Hey, guys. Maybe it's for Steve. Any color you can give about thinking about seasonality for Q3 as we refine our models?

Chad Beynon
Chad Beynon
Managing Director, Analyst at Macquarie Group

Yes.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

No problem. And obviously, it's coming off of big quarter. And I think the first thing you have to do is just recognize that North Fork is in there $10,000,000 and so not really part of seasonality. Just to give you some guidance there, we would expect that number to be 3,000,000 a quarter through opening, just to get that out of the way. And then usually Q4 to Q3 or Q3 to Q3 to Q2 is usually down about 10% from an EBITDA perspective.

Barry Jonas
Barry Jonas
Managing Director at Truist Securities

That's helpful. And Okay.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

To mention it.

Barry Jonas
Barry Jonas
Managing Director at Truist Securities

Right. Go ahead, Steve, if you have a follow-up.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

No, I was just gonna reiterate that there's also that disruption that we talked about, but I think you got that.

Barry Jonas
Barry Jonas
Managing Director at Truist Securities

Yeah, understood. And then I know we'll get the big reveal later on, but any early puts and takes you can offer for the finalists for your next big greenfield project? You've sort of identified a few areas that you're thinking about.

Barry Jonas
Barry Jonas
Managing Director at Truist Securities

So just curious if the order has changed or any puts or takes you'd be willing to share now.

Frank Fertitta
Frank Fertitta
Chairman & CEO at Red Rock Resorts

Yes. I mean, I think the one thing that we've shared with you guys is that the precursor to potential expansion of amenities at Torengo is the garage setting us up to be able to have more amenities, accommodate the guests with convenient parking at all. So that is definitely an option. And in terms of the greenfield, I think we'll do that on our year end call.

Barry Jonas
Barry Jonas
Managing Director at Truist Securities

Great. Thanks so much.

Operator

The next question comes from Ben Chaikin with Mizuho. Please go ahead.

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

Hey, good afternoon. Thanks for taking my question. As you get into some of the renovation work, primarily GVR and Sunset, maybe you could just help us flesh out some of the larger opportunities at each project you hope to solve for with the current renovations because these are largely these are more than at least from my perception, they seem larger than just refreshes of the existing product. Thanks.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

Yeah, I can start that. Is Scott. And then Steve, you can kind of jump in. So let's start Sunset. So Sunset is an incredibly vibrant new emerging area of the valley.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

There's a development called Cadence over in that area of the valley that represents about 12,500 new rooftops over the phasing of the project. At one time, Sunset was kind of an anchor property for us. And as the valley fills in on the East Side, sunset is being remodeled and refurbished to represent kind of the Red Rock of the East Side for us. It's an incredibly dynamic property. It's fully integrated property.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

And so we started about a year and a half ago with the racing sports book and a yard house restaurant, which both have been incredibly successful. And then we've gone through, and we're subsequently remodeling the entire casino floor. We're adding country western dance hall. We'll go in and refurbish the lobby, the exterior of the property at a Mexican restaurant, redo the center bar. And so essentially the main center or heart of the overall property, will be refurbished.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

As we've been doing that over the last year and a half, we've been it's been incredibly well received by our customers. Each segment of the property that we renovate and reopen, we're seeing positive return in visitation and in the expansion of the demographic profile that we're able to attract to the property.

Frank Fertitta
Frank Fertitta
Chairman & CEO at Red Rock Resorts

So, I mean, we feel like we have pretty good traction over there and we really believe in the return on investment that we'll get over there at sunset, given the area in the market that it's in, which is growing and the ability for us to attract a younger gaming profile. And I think we've seen since post COVID with all these investments that we've made, we really have been able to lower the age group that we're able to attract to the property, which I think is very important for the long term growth here.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

And then switching to GVR, same story, it's an incredibly vibrant area, one of the higher network areas of the Valley.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

GVR rooms were in need of a refresh. We really started with adding high limit rooms, which we've done on all of our core properties, pretty much all of the core properties, which we've seen incredible return on investment in. And so we did that first at Green Valley, new highland rooms, both slots and tables, new restaurants. So we're bringing the hotel rooms up to a five star level of finish to compliment the high limit rooms and the restaurants. And at the same time, bringing our meeting space and alignment with that level of quality.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

So you're going to have fresh new rooms, fresh new dimension and meeting space, fresh suite product, great high limit rooms, new higher class restaurants.

Frank Fertitta
Frank Fertitta
Chairman & CEO at Red Rock Resorts

So And I think what you'll see when you see the Green Valley Ranch room product, I mean, it is more than just a refresh or a re rag of the room.

Lorenzo Fertitta
Vice Chairman of the Board at Red Rock Resorts

The repositioning.

Frank Fertitta
Frank Fertitta
Chairman & CEO at Red Rock Resorts

It's a complete repositioning of the property into the luxury space where the bathrooms are being completely redone. And, I think we'll have one of the nicest room products in the city. So, we're excited about that.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

And we have some of the renderings for those in the investor deck. Want to take a look?

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

Got it. Helpful. And then just a really quick one. I think you helped us with some of the benefit to free cash flow for the remainder of the year tied to the 100% bonus depreciation. How do we think about that number in '26 even just in broad strokes?

Frank Fertitta
Frank Fertitta
Chairman & CEO at Red Rock Resorts

Yes, a lot of it will depend on what we actually do.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

That's exactly where I was going to go, Frank. So let's assume that the interest limitation is going to be a good guy. The main driver here in 2026 is going be the accelerated depreciation, and we're literally going through our capital planning right now. But I think that puts us in a good step that any investment that Francois want to make, we know we're going to be able to take that tax credit immediately.

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

Thanks.

Operator

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

David Katz
David Katz
Managing Director at Jefferies

Hi. Afternoon. Covered a lot of ground already. Appreciate it. I I just wanted to get a sense for, you know, Steve, how you're sort of thinking about your sort of ideal leverage range, you know, given the spending, which has been super productive, given, you know, the capital return plans, etcetera.

David Katz
David Katz
Managing Director at Jefferies

Where would you like to sort of range that over time?

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

Yes, David. I don't think there's any change right now. As you can we've kind of knocked down leverage over the last several quarters just naturally through generating higher EBITDA. So very comfortable with the balance sheet and the overall leverage position. As I mentioned previously, it's supported by a very flexible credit agreement and no near debt term maturities.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

And that's the financial flexibility that enables Frank and Lorenzo to give kind of operate a balanced and disciplined approach to capital allocation. You did mention that this quarter, we did take an opportunity to return a lot of capital through the $670,000 share repurchase, our quarterly dividend as well as our special dividend. So I think the focus in the back half of the year is primarily going to be focused on getting Green Valley, Sunset and Durango online.

David Katz
David Katz
Managing Director at Jefferies

Got it. Okay. Thanks. Congrats on your quarter.

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

Thanks, David.

Operator

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

John Decree
John Decree
Director - Institutional Research at CBRE Group

Hey, Thanks for taking my question. Maybe just one in regard to the 100,000 plus customers you've acquired since opening Durango. Curious if you could give us any insight into the behavior of that segment of the database relative to previous customers? Do they spend more? Do they visit more frequently?

John Decree
John Decree
Director - Institutional Research at CBRE Group

Do they move about your other properties? Is their behavior any different if they're acquired at Durango versus the rest of the portfolio?

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

John, this is Scott. I think generally, because you're talking about a large sample size of people, they behave very similarly to the rest of our customers. I mean, they are in and among three to five mile radius of other customers. Now, I guess I'll enhance your question by saying, does Durango behave a little differently than some of our other properties? And the answer would be yes.

Scott Kreeger
Scott Kreeger
President at Red Rock Resorts

I think that Durango is catering to a younger demo. We tend to see a lot of industry folks coming off the strip and stopping off at Durango maybe on the way home. So we had a little bit more visitation on the later day parts of Mango. And I think it's a function of the incredible food and beverage programming we have there that it's kind of a lifestyle oriented property and you're seeing a younger And just the location is unbelievable.

Frank Fertitta
Frank Fertitta
Chairman & CEO at Red Rock Resorts

And it's a growing area of the Valley, both residentially, commercially, there's a lot of activity going on around there. And Scott said, it's broadened the demographic profile.

Lorenzo Fertitta
Vice Chairman of the Board at Red Rock Resorts

And definitely a higher spend per person on food and beverage.

John Decree
John Decree
Director - Institutional Research at CBRE Group

That's all helpful. That's it. Thanks, guys.

Operator

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

Stephen Cootey
Executive VP, CFO & Treasurer at Red Rock Resorts

Well, thank you, everyone, for joining the call, and we'll see you talk 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
    • Frank Fertitta
      Frank Fertitta
      Chairman & CEO
Analysts
    • Stephen Cootey
      Executive VP, CFO & Treasurer at Red Rock Resorts
    • Jordan Bender
      Senior Equity Research Analyst at Citizens Capital Markets and Advisory
    • Joseph Stauff
      Senior Equity Research Analyst at Susquehanna International Group
    • Steven Wieczynski
      Managing Director at Stifel Financial Corp
    • Shaun Kelley
      Senior Research Analyst & MD - Gaming, Lodging & Leisure Equities at Bank of America Merrill Lynch
    • Lorenzo Fertitta
      Vice Chairman of the Board at Red Rock Resorts
    • Chad Beynon
      Managing Director, Analyst at Macquarie Group
    • Barry Jonas
      Managing Director at Truist Securities
    • Benjamin Chaiken
      Equity Analyst at Mizuho Financial Group, Inc.
    • David Katz
      Managing Director at Jefferies
    • John Decree
      Director - Institutional Research at CBRE Group
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