- Las Vegas Operations Net Revenue: $483.2 million, up 17.1% from the prior year second quarter.
- Las Vegas Operations Adjusted EBITDA: $223.1 million, up 15.6% from the prior year second quarter.
- Las Vegas Operations Adjusted EBITDA Margin: 46.2%, a decrease of 61 basis points from the prior year second quarter.
- Consolidated Net Revenue: $486.4 million, up 16.9% from the prior year's second quarter.
- Consolidated Adjusted EBITDA: $201.7 million, up 15% from the prior year second quarter.
- Consolidated Adjusted EBITDA Margin: 41.5%, a decrease of 67 basis points from the prior year second quarter.
- Operating Free Cash Flow: $117.6 million or $1.11 per share, converting 58% of adjusted EBITDA.
- Year-to-Date Cumulative Free Cash Flow: $246.2 million or $2.33 per share.
- Cash and Cash Equivalents: $136.4 million at the end of the second quarter.
- Total Principal Amount of Debt Outstanding: $3.47 billion, resulting in net debt of $3.34 billion.
- Net Debt to EBITDA Ratio: 4.2 times.
- Distribution to LLC Unit Holders: Approximately $53.5 million, including $31.1 million to Red Rock Resorts.
- Share Repurchases: 75,000 Class A common shares at an average price of $52.29 per share.
- Capital Spend in Q2: $78.6 million, including $35.9 million in investment capital and $42.7 million in maintenance capital.
- Full Year 2024 Capital Spend Expectation: Between $140 million and $180 million.
- Cash Dividend: $0.25 per Class A common share payable on September 30.
- Return to Shareholders in 2024: Approximately $168.5 million through share repurchases and dividends.
Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Red Rock Resorts Inc (RRR, Financial) reported its best second quarter in history for Las Vegas operations in terms of net revenue and adjusted EBITDA.
- The Durango casino resort showed strong financial performance, with increased visitation and net theoretical win by approximately 90% and 88% respectively.
- The company announced an expansion of the Durango property, adding over 25,000 square feet of additional casino space and a new high-limit slot and bar area.
- RRR's Las Vegas operations delivered adjusted EBITDA margins in excess of 45% for the 16th consecutive quarter.
- The company generated significant free cash flow, converting 58% of adjusted EBITDA to operating free cash flow, amounting to $117.6 million or $1.11 per share.
Negative Points
- RRR continues to experience cannibalization at its Red Rock property due to the opening of the Durango casino.
- Adjusted EBITDA margin for Las Vegas operations decreased by 61 basis points from the prior year second quarter.
- On a consolidated basis, adjusted EBITDA margin decreased by 67 basis points from the prior year second quarter.
- The company faces tough comparables for group sales and catering businesses for the remainder of the year due to COVID sales rebooked into 2023.
- The total principal amount of debt outstanding was $3.47 billion, resulting in a net debt to EBITDA ratio of 4.2 times.
Q & A Highlights
Q: Can you give us some sense of a range of CapEx associated with the Durango expansion and particularly with respect to the expansion of the casino floor and adding some slot areas in the bar? Do you anticipate any of this construction to result in disruption at all?
A: Right now, we're still going through the design and planning process. So we expect to have a budget the next month or so. And we'll be announcing that on our next earnings call. In terms of disruption, we expect it to be minimal disruption to the property. (Stephen Cootey, CFO)
Q: If we look at your performance in the 2Q year over year, and we exclude whatever the contribution is from the incremental EBITDA generated from Durango and the cannibalization impact at Red Rock property, does that imply that the rest of the portfolio was up year over year on an EBITDA basis?
A: Yes. Effectively, if you strip away exactly what you talked about, the core portfolio is probably flat. But it should be noted that with Durango, we've grown operating EBITDA of $30 million, which is pretty much the majority of the Las Vegas growth story over the last quarter. (Stephen Cootey, CFO)
Q: Is there a scenario where you could basically get started with a next project while Phase 2 at Durango is ongoing?
A: We like the optionality of our development portfolio. We have several options that we can entertain, and we're driving all of those projects through their entitlement process. We've mentioned Insperada as a potential project that's on the forefront. There is the possibility of doing joint development as we go forward. (Scott Kreeger, President)
Q: Can you comment on the relative health of the local's market spend levels, as well as the promotional environment?
A: We see stability and consistency in Q2 performance. All of our segments had positive growth year on year, specifically high performance in our VIP section. We saw strong growth in our new member sign-ups, up about 23%. The promotional environment is rational and consistent with no systematic changes. (Scott Kreeger, President)
Q: Where are we at in terms of margin and cost stabilization at Durango?
A: It's only the second full quarter we've had this property opened. It takes at least three or four quarters to get everything fine-tuned. We are super pleased with the results so far. (Frank Fertitta, CEO)
Q: Would you expect to get back to that 50% plus flow through, which I believe you've targeted historically?
A: Right now, we're up roughly about 37.5%. We will eventually be able to get there. It usually takes about two to three years for the backfill of Red Rock to fill in, and that's when you really start getting the benefit of that leverage and flow through. (Stephen Cootey, CFO)
Q: Would you look at an asset or assets coming up for sale in the Las Vegas local's market?
A: We will look at everything. But we have a great owned pipeline of growth that we're currently working on. Our development opportunities are where all the growth is taking place in the suburbs, which we think are far better than looking at older assets. (Frank Fertitta, CEO)
Q: Can you talk about the implications of Durango on margins?
A: We did a proactive labor increase across the market-to-market labor. We've been able to absorb that labor increase. Our labor increases are really at market right now when you look at the rest of the valley's increases. (Frank Fertitta, CEO)
Q: How do you typically think about the returns and spend on expansion projects like Durango versus a typical greenfield build?
A: We expect a 20% ROI net of cannibalization. The risk with Durango is much lower because we know the demographic profile and the needs of the resort. (Stephen Cootey, CFO)
Q: How do you view the new customer sign-ups at Durango and what it tells us about some of the uncapped markets where you have development sites?
A: The growth of our existing known customers in that zone is in the high 70 percentile, and new to brand growth in the area is nearly 90%. This supports our strategy that when we come into an area, we grow the market. (Scott Kreeger, President)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
