Red Rock Resorts Q3 Earnings Call Highlights

Key Points

• Record Las Vegas revenue rose 2.3% year over year to $479.1 million, but segment adjusted EBITDA fell 2.3% to $204.6 million and margins narrowed amid higher utility costs, tougher comparisons and construction disruption.
• Red Rock raised its Durango North expansion budget to about $430 million, with an opening expected in the third quarter of 2027. It also increased its 2026 capital-spending outlook to $550 million–$570 million, reflecting the expanded project scope and Green Valley Ranch renovation overruns.
• North Fork opened Oct. 27, on budget at approximately $700 million, adding management fees and other expected cash flows. Red Rock repurchased about 470,000 shares and paid a $0.26 quarterly dividend during the quarter.

Red Rock Resorts NASDAQ: RRR reported record third-quarter net revenue for its Las Vegas operations, while adjusted EBITDA declined from a year earlier amid higher utility costs, anniversary-related spending and construction disruption.

Las Vegas operations generated net revenue of $479.1 million in the third quarter, up 2.3% year over year. Adjusted EBITDA for the segment was $204.6 million, down 2.3%, while adjusted EBITDA margin declined 199 basis points to 42.7%.

On a consolidated basis, revenue rose 2.8% to $488.7 million, including $6.2 million from North Fork. Consolidated adjusted EBITDA fell 4.3% to $182.6 million, including $5.1 million from North Fork and a one-time $5.8 million expense associated with the company’s 50th anniversary. Consolidated adjusted EBITDA margin was 37.4%, down 277 basis points year over year.

Margins affected by utility costs and comparisons

Chief Financial Officer Stephen Cootey said the Las Vegas margin decline reflected, in part, a prior-year bad-debt receivable recovery that made comparisons more difficult. He said that item accounted for roughly 102 basis points of the year-over-year change in casino margins.

Higher electricity expenses also weighed on results. Cootey said a $1.2 million increase in utilities expense affected SG&A during the quarter after NV Energy increased seasonal peak-demand rates. He characterized the impact as seasonal, applying from approximately June through September.

Management said underlying customer trends remained stable. Scott Kreeger, the company’s president, said carded customers produced year-over-year increases in win, spend per visit and net theoretical win. The company also reported one of its strongest recent year-over-year increases in uncarded play, which Kreeger attributed to newly opened amenities, restaurants and summer entertainment programming.

Hotel and food-and-beverage operations also posted revenue growth. Hotel revenue increased despite more than 4,500 fewer available room nights at Green Valley Ranch during its renovation, supported by higher portfolio-wide average daily rates and demand for renovated rooms. Food and beverage revenue reached a third-quarter record, helped by higher guest volumes and average check sizes.

Durango expansion budget rises to $430 million

Red Rock said construction is progressing on the Durango North expansion, which is expected to open in the third quarter of 2027. The project will add more than 275,000 square feet, nearly 400 slot machines, a bingo room, keno lounge, dining venues, a country-western bar and live-music concept operated with Moonshine Flats, bowling, movie theaters, miniature golf, golf simulators, karaoke and arcade offerings.

The company increased its estimated investment in the project to approximately $430 million, citing additions to its scope. Cootey said management remained confident it could achieve a targeted 20% return on investment over time.

Durango has added more than 168,000 new customers to the company’s database to date, according to Cootey. Management said the property continues to attract incremental play and new customers despite construction activity around the resort.

Chairman and CEO Frank Fertitta said the company expects short-term disruption from construction on the 215 Beltway near Red Rock, Green Valley Ranch and Durango, but views the work as a long-term positive because it is occurring in areas experiencing Las Vegas Valley growth. Construction activity at Durango and two large apartment developments behind the property have also created disruption, executives said.

The company is evaluating a potential subsequent Durango phase that could add about 400 hotel rooms, meeting space and a spa, though management said no commitment or announcement has been made.

Green Valley, Sunset projects and higher capital spending

Red Rock completed renovations of hotel rooms, suites and convention spaces at Green Valley Ranch. The company said the project ultimately cost close to $250 million, compared with an initial $200 million budget, which Cootey described as a one-time cost overrun. The renovated rooms came online later than expected, with the company expecting the benefits to become more visible in October, November and fourth-quarter bookings.

At Sunset Station, the company has opened the renovated Gaudi Bar and Stoney Country. It expects to open Leticia’s Cocina and Cantina, Sunset Bar and a new bingo room later in the fourth quarter. The final phase, including a premium steakhouse and high-limit slot and table-game areas, is expected to be completed by mid-2027. The Sunset redevelopment remains on budget at approximately $87 million.

Third-quarter capital expenditures totaled $199.1 million, including $164.5 million of investment capital and $34 million of maintenance capital. For 2026, Red Rock raised its capital-expenditure outlook to $550 million to $570 million, including $425 million to $435 million of investment capital. The increase reflected the Green Valley Ranch cost overruns, expanded Durango North scope and accelerated construction payments, management said.

Cootey said the company anticipates another heavier capital-spending year in 2027 as Durango North and Sunset Station work is completed. He added that the company generally expects roughly 10% returns in the first full year after completed projects are implemented.

North Fork opens and capital returns continue

North Fork officially opened Oct. 27. The approximately $700 million California Central Valley development was completed on budget and includes more than 2,400 slot machines, 40 table games and food-and-beverage offerings. Executives said initial demand and customer feedback were strong, comparing the opening pattern to prior California developments that initially operated near capacity.

Under a seven-year management agreement, Red Rock expects to receive its first management fee later in November. The company also received a $26 million first installment of a development fee. Its approximately $86 million development note transitioned to cash-pay principal and interest, creating another recurring cash-flow source.

Red Rock generated $81.7 million of operating free cash flow in the quarter, representing 45% of adjusted EBITDA. Cash and equivalents totaled $128.3 million at quarter-end, while total debt principal was $3.7 billion and net debt to EBITDA was 4.4 times.

During the quarter, the company repurchased about 470,000 Class A shares at an average price of $56.94 under its $900 million authorization and paid its quarterly dividend of $0.26 per share. Including dividends and repurchases, Red Rock said it has returned approximately $252.5 million to shareholders so far in 2026.

The company also awarded more than $72 million in Class A common stock to full-time and part-time employees as part of its 50th anniversary. The grants will result in about $79 million of one-time GAAP compensation expense, including payroll taxes, but will be excluded from adjusted EBITDA.

About Red Rock Resorts (NASDAQ:RRR)

Red Rock Resorts, Inc is a gaming, entertainment and hospitality company based in Las Vegas, Nevada. Through its principal operating subsidiary, Station Casinos, the company develops, owns and operates casino resorts and other gaming properties, primarily serving the Las Vegas locals market.

Its portfolio includes destination-style properties such as Red Rock Casino Resort & Spa, Green Valley Ranch Resort Spa and Casino, and Durango Casino & Resort, along with neighborhood casinos including Palace Station, Boulder Station, Santa Fe Station and several Wildfire locations.

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