Red Rock Resorts(US:RRR)2021-05-05 02:44Financial Data and Key Metrics Changes - For Q1 2021, the company's consolidated net revenue was $352.6 million, down 21.1% from $447 million in Q1 2019. Adjusted EBITDA was $156.6 million, up 8% from $145.1 million in Q1 2019, with an adjusted EBITDA margin of 44.4%, an increase of 1,197 basis points from Q1 2019 and up 59 basis points from Q4 2020 [6][5][6]. - Las Vegas operations net revenues were $338.4 million, up 5.4% from $321 million in Q1 2019, with adjusted EBITDA of $165.6 million, up 38% from $120 million in Q1 2019, and an adjusted EBITDA margin of 48.9%, an increase of 1,155 basis points from Q1 2019 [7][6]. Business Line Data and Key Metrics Changes - The company achieved the second highest net revenue and the highest adjusted EBITDA and adjusted EBITDA margin in its history on a same-store basis [8]. - The company converted 57% of adjusted EBITDA to free cash flow, generating $88.8 million or $0.76 per share, totaling almost $350 million or $2.97 per share since reopening in June 2020 [8]. Market Data and Key Metrics Changes - Customer trends showed strong visitation from a younger demographic, increased spending per visit, and more time spent on devices, positively impacted by the COVID-19 vaccination rollout and federal stimulus money [9]. - As of May 1, occupancy restrictions were eased to 80%, with expectations to reach 100% occupancy as vaccination rates increase [10]. Company Strategy and Development Direction - The company plans to accelerate the development of the Durango project in Southwest Las Vegas while maintaining a strong balance sheet [15][16]. - The sale of the Palms Casino Resort is seen as a way to create shareholder value and focus on improving operations of existing assets in the Las Vegas locals market [15][16]. Management's Comments on Operating Environment and Future Outlook - Management believes the worst is behind them, with government restrictions easing and pent-up leisure demand expected to drive recovery [19]. - The company has achieved over $200 million in annual cost savings, exceeding previous targets, and expects to maintain higher profitability and free cash flow [11][19]. Other Important Information - The company’s cash and cash equivalents at the end of Q1 were $117.9 million, with total debt outstanding at $2.87 billion. The company paid down $78 million in debt during the quarter [12]. - A tax distribution of approximately $31.5 million was made to LLC Unit holders, with part of it used for share repurchase under a previously disclosed program [13]. Q&A Session Summary Question: Thoughts on adding back existing capacity and Durango development - Management is evaluating closed properties and will only reopen if they generate incremental free cash flow. Staffing will increase as volumes rise, particularly in high-margin non-gaming areas [25][26]. Question: Impact of COVID costs on margins - COVID mitigation costs are expected to fade, potentially allowing for further margin expansion beyond current levels [34][35]. Question: Insights on loyalty program and customer behavior - New sign-ups in the loyalty program are more active and valuable than pre-COVID levels, indicating strong customer engagement [52]. Question: Thoughts on the Strip recovery and Palace Station - Palace Station is performing well, benefiting from local business and expected recovery in the Strip market [56][57]. Question: Free cash flow considerations post-Palms sale - The sale will shield taxes and improve cash interest, with no significant changes expected in working capital [58]. Question: Labor hiring issues - The company feels confident about its labor situation, having retained staff during COVID, which has eased the staffing process as business returns [70][71]. Question: Cashless gaming adoption - The company is developing a cashless gaming app to enhance customer convenience and experience [75][77].