Red Rock Resorts Q2
The top line
Revenues up 295% to $482.2m YoY but down 11% on Q219. Adjusted EBITDA rose to $227.4m from a negative $17.3m in Q220 and up 82% on Q219. Property level margins were at 52.2%, 450bps above Q219.
Las Vegas operations up 322% to $426.4m but down 7% on Q219; adjusted EBITDA for Las Vegas operations of $234.7m from negative $12.1m in Q220 and up 110% on Q219.
Debt at quarter end stood at $2.7bn. Red Rock is yet to reopen four properties including the Palms which was sold at Q1 end to the San Manuel tribe for $650m.
Mr Brightside: Management were extremely bullish on the long-term prospects for the company after record same-store revenues and EBITDA and forecast-beating margins. As with Boyd Gaming on Monday, the company believes the margin improvement is a long-term shift.
“We believe the margins can be sustained within the zip code we are in,” said CEO Frank Fertitta. “We think the costs coming out of the business have been a permanent shift. And every incremental dollar we get through pretty much; the flow through is incredibly high.”
Fertitta went on to say the free cashflow would go towards reducing debt as well as paying for new developments (see below on the Durango plans). Deutsche Bank noted the “meaningfully above consensus” figures and the management comments on the strong visitation trends from younger demographics.
Digging in: There was also the promise of more to come. Although there was no news on the three closed properties where Red Rock remains the owner, management was keen to stress the potential in the Durango development, which Fertitta said was the company’s “primary focus.” CFO Stephen Cootey noted the new property – which will take between 18-24 months to complete once the first spade goes in the ground – was in the “fastest growing part of the Las Vegas valley” without a competitor within five miles. The property will feature up to 2,000 machines, 40 table games and 200+ hotel rooms.
Not REIT now thank you: One trend that Red Rock looks likely to cold shoulder is to go down the road of completing a sale and leaseback of properties to a REIT. Executive chairman Lorenzo Fertitta said that though the company liked what it saw in terms of valuations being achieved, “nothing has changed” with regard to Red Rock’s desire to own its own properties. “We kind of like owning the real estate; that is where the value is.”
Additional articles available on Earnings + More:
- Q2 Results: Churchill Downs, VICI Properties, Monarch Casino & Resort, PointsBet
- Analyst earnings Q2 preview
- GGR Results: Colorado, Tennessee
