Monarch Resort and Casino’s streak of nine consecutive quarters of double digit income growth and four quarters of double digit EBITDA growth snapped Tuesday afternoon when the company reported earnings for the first quarter of 2017.
The Reno-based casino operator posted a 7.4 percent year-over-year jump in revenues to $53.4 million, a 9.7 percent boost in adjusted EBITDA of $12.1 million and a 6.5 percent increase in net income for the first quarter of 2017, a 7.4 and 9.7 percent respective increase over the prior year period.
But the end of the double digit streaks was primarily attributable to inclement weather in the Lake Tahoe region and construction disruption at Monarch’s property in Black Hawk, Colorado.
The Reno-based operator also posted net income of $4.9 million – up 7 percent – and diluted earnings per share slightly below Wall Street expectations at $0.27.
“Monarch continued to deliver positive operating performance in the first quarter, marked by net revenue and adjusted EBITDA growth of 7% and 10%, respectively, despite disruptive weather in Reno and Black Hawk and an unfavorable calendar,” said John Farahi, co-chairman and Chief Executive Officer.
Farahi touted strong economic growth in both Reno, home of the Atlantis Casino Resort Spa, and Colorado – where Monarch Casino Black Hawk is located roughly 40 miles west of Denver – and was bullish on that trajectory continuing.
“By offering premium gaming and entertainment experience to our guests at both Atlantis and Monarch Casino Black Hawk, we continue to grow market share and improve our operating results. We remain confident in the potential for further growth at Atlantis as we benefit from the expanding local economy,” Farahi said.
“Our focus on continuous improvement at Atlantis elevates the guest experience and positions Monarch to benefit from Reno’s ongoing renaissance and economic expansion,” he continued.
The strong string of quarters has afforded the company flexibility in pursuing a hotel tower and parking lot expansion project at its Colorado property, which will in turn contribute to Monarch’s organic growth story moving ahead.
“Monarch Casino Black Hawk’s transformation into a world-class resort is in full swing. Our solid financial performance has enabled us to fund more of the development costs from operating cash flow, thereby reducing our reliance on our credit facility,” Farahi noted.
Monarch’s revenue and EBITDA growth figures make it an outlier in a regional gaming segment where growth is becoming harder to come by.
“While other Regional operators are growing inorganically, alongside low single digit organic growth, Monarch Casino and Resort continues to demonstrate strong organic growth trends with potential upside from its Black Hawk expansion project,” said Chad Beynon, an analyst with Macquarie, in a note.
Across the enterprise, casino revenues rose 4 percent for the quarter while food and beverage revenues and hotel revenues increased 15.5 percent and 10.5 percent, respectively. Promotional allowances as a portion of total revenue decreased from 18.3 percent to 18.1 percent.
The boost in F&B revenues, along with a concurrent drop in operating expenses from 43.1 percent of revenue to 40.4 percent, were driven largely by the completion of a restaurant renovation at the Atlantis property.
“The redesign and upgrade of Toucan Charlie’s buffet, which was closed during most of last year’s first quarter, drove a double-digit improvement year over year in food and beverage revenue in the first quarter of 2017. Effective management of our hotel room inventory led to a double-digit increase in hotel revenue,” said Farahi.
