An increase in charges and write-downs combined with a drop in the fair value of derivative investments to yield a first-quarter net income decrease from a year earlier for Red Rock Resorts. However, revenue rose and topped Wall Street forecasts.
In a statement issued Tuesday after stock markets closed, Red Rock Resorts, the Las Vegas-based parent of Southern Nevada locals casino giant Station Casinos, said its net income was $20.3 million, or 16 cents per diluted share, for the three months ended March 31, down from net income of $51.2 million, or 65 cents per diluted share, a year earlier.
A prior-year gain linked to the extinguishment of a tax receivable liability distorted the year-to-year comparison, Red Rock Resorts suggested.
Analysts polled by Yahoo Finance had, on average, forecast net income of 35 cents per share.
Adjusted earnings before interest, taxes, depreciation and amortization, a cash flow measure that excludes nonrecurring costs, rose 3.6 percent to $145.1 million from $140.1 million.
Quarterly revenue rose 6.2 percent to $447 million from $421 million, topping the $445.5 million average forecast by analysts polled by Zacks Investment Research. Las Vegas operations revenue was $422.4 million up from $395.2 million a year earlier.
In a conference call with investors, Red Rock Resorts Chief Financial Officer Steven Cootey said despite construction disruption at the Palms, his company achieved its best same-store revenue and EBITDA in more than a decade, helped by growth in both gambling and nongambling business.
As he has in several prior quarterly calls, Cootey touted Las Vegas’ continued population and job market expansion as buttresses for his company’s business prospects. Broad-based employment growth, for example, has grown for 94 straight months, he said, or nearly eight years.
The $191 million renovation at Palace Station finished in December, adding 178,000 square feet of gambling and entertainment space and refreshing the property’s exterior with two new light-emitting-diode marquees, 300 more parking spaces and improved access. Cootey said the property’s revenue growth reached a double-digit-percentage since the makeover.
Work on the $690 million Palms upgrade is nearly done, Cootey said; Red Rock has incurred $587 million in costs on the project as of March 31.
The makeover, much of which was unveiled this month during a grand reopening weekend, attracted attention from major news outlets. Condé Nast Traveler, for example, highlighted Kaos, a dayclub-nightclub with a retractable dome that replaced Ghostbar, and a 9,000-square-foot, two-story villa designed by artist Damien Hirst, in an online feature. The upgrades also included Shark, a new restaurant by celebrity chef Bobby Flay.
The upgrade also impressed Union Gaming, which raised its price target and Las Vegas EBITDA estimates for Red Rock Resorts.
Cootey said the Palms second-phase makeover is finished, except for a new wellness spa and salon expected in the second quarter and the third phase is done, except for a dim sum restaurant by Tim Ho Wan, expected in the third quarter.
Cootey said technological improvements continue to pay off for the company. An International Game Technology slot system, for example, was driving growth, reflected in an increase in time on device and spend per visit. Also, he said, patrons have liked personalized on device marketing and messaging introduced in December and the company plans to roll out other initiatives, including new companywide bonusing programs, as the year progresses.
“We are confident,” he said, “that these additional enhancements, along with the additional branding relationships (such as Wheel of Fortune and Monopoly will provide an even more engaging, rewarding and convenient customer experience that will, in turn, further accelerate gaming revenue growth.”
Red Rock Resorts said it will proceed with an American Indian casino in California near Fresno if its partner, the North Fork Tribe, gains approval from the state’s Supreme Court to build. The court has agreed to review the case, Cootey said.
Nomura Instinet analyst Harry Curtis told Seeking Alpha this month that growth in the Las Vegas locals market (6.6 percent) and downtown Las Vegas market (8.7 percent) bodes well for Red Rock. He expects a meaningful free cash flow inflection in the year’s second half for the casino operator, which Nomura rates “buy.”
Red Rock Resorts shares fell 65 cents, or 2.35 percent, Tuesday to close at $26.98. The shared drifted higher in after-hours trading, rising 2 cents, or 0.07 percent, to reach $27 at 5:30 p.m. PDT.
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