Red Rock Resorts(RRR) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2024, the company's net revenue was $468 million, up 13.7% from the prior year's third quarter, while adjusted EBITDA was $182.7 million, up 4.3% from the prior year [15][14] - The adjusted EBITDA margin was 39%, a decrease of 353 basis points from the prior year's third quarter [15] - Operating free cash flow for the quarter was $46.4 million, bringing year-to-date cumulative free cash flow to $292.6 million [16] Business Line Data and Key Metrics Changes - Las Vegas operations achieved net revenues of $464.7 million, up 13.9% year-over-year, with adjusted EBITDA of $202.6 million, up 5.8% [14] - The hotel division experienced its highest third quarter revenue and profit in history, driven by higher average daily rates (ADR) and maintained occupancy [18] - The food and beverage division also saw record revenue and near-record profit, attributed to higher average checks and cover counts [19] Market Data and Key Metrics Changes - The Durango Casino Resort increased visitation and net theoretical win in the surrounding area by approximately 91% and 92%, respectively, while signing up over 70,000 new customers [7][8] - The company expects to backfill revenue lost due to cannibalization over the next couple of years, supported by strong demographic growth in the Las Vegas Valley [9] Company Strategy and Development Direction - The company plans to expand the Durango property, adding over 25,000 square feet of casino space and 230 slot machines, with a budget of approximately $116 million [10][11] - Investments will continue in existing properties, including a new Yard House restaurant at Sunset Station and further renovations at Sunset Station and Green Valley Ranch [24][26] - The company is excited about the North Fork project, which is expected to be a significant development in central California, with a total cost of approximately $785 million [28][29] Management's Comments on Operating Environment and Future Outlook - Management noted a return to traditional seasonal patterns and expressed confidence in the core slot and table business despite some softness in group sales and catering [20][54] - The company anticipates challenges in Q4 due to the Super Bowl and ongoing renovations but remains optimistic about long-term growth prospects [20][56] Other Important Information - The company declared a cash dividend of $0.25 per Class A common share, payable on December 31 [30] - The total principal amount of outstanding debt was $3.48 billion, with a net debt to EBITDA ratio of 4.2 times [21] Q&A Session Summary Question: Any unique trends in Q3 performance? - Management indicated no unusual items outside typical seasonality, with core portfolio revenue down low single digits due to cannibalization from Durango [34][36] Question: What drove margin changes? - Approximately 150 basis points of margin decrease was attributed to cannibalization, along with lower revenues from seasonality and increased minimum wage costs [37] Question: How does Q4 seasonality compare to Q3? - Historically, EBITDA in Q4 is usually up around 12%, but recent sports performance may impact this [41][42] Question: What are the anticipated renovation impacts for 2025? - Estimated EBITDA impacts from renovations are approximately $11.5 million for GDR, $5.4 million for Sunset Station, and $5.9 million for Durango [38] Question: How is group sales performance? - Group sales faced tough year-over-year comparisons due to COVID rebookings, but future years look promising [48][50] Question: What are the potential impacts of the recent election? - Management noted that eliminating the tax on tips could positively impact the local economy and the company's payroll tax expenses [62][63] Question: Update on the Cactus project? - Cactus is a hybrid location with unique development opportunities, and the company is weighing its potential against other projects [68][69] Question: Any updates on tavern openings? - The first tavern opened recently, with two more planned for early 2025, and the company sees strong early performance [88]