Red Rock Resorts blamed a tough April year-over-year comparison for a decline in second-quarter revenues and adjusted earnings and continued to see strong signs for the rest of the calendar year.
The company reported revenues of $416.1 million, a decrease of 1.5%, or $6.1 million, from $422.2 million in the same period of 2022.
Net income was $74.9 million for the second quarter, an increase of 130.9%, or $42.5 million, from $32.4 million in the same period of 2022.
Adjusted EBITDA was $175.3 million for the second quarter, a decrease of 7.2%, or $13.6 million, from $188.9 million. This is the 12th consecutive quarter with adjusted EBITDA margins in excess of 45%.
Net revenue from Las Vegas operations was $412.6 million for the second quarter, a decrease of 1.8%, or $7.5 million, from last year’s $420.1 million.
Adjusted EBITDA from Las Vegas operations was $193.1 million for the second quarter, a decrease of 7.1%, or $14.8 million, from $207.8 million. The adjusted EBITDA margin was 46.8%.
Stephen Cootey, executive vice president and chief financial official, said the second quarter was another strong one, the third best second quarter in the history of the company in terms of same-store net revenue, adjusted EBITDA, and adjusted EBITDA margin. It was only surpassed by the second quarters of 2021 and 2022.
President Scott Kreeger said they like where the company is headed for the second half of 2023, but comparisons to 2022 continue to be tough.
“We continue to see upside with strong visitation in our regional and national segments,” Cootey said. “This strength, along with strong spend per visit across our entire portfolio, allowed us to enjoy near-record second-quarter revenue and adjusted EBITDA across our gaming segment.”
Cootey cited April as a difficult year-over-year comparison, accounting for the majority of the decline in the three-month period. May and June were more in line with last year, he said. Boyd Gaming reported similar difficult comparisons to April in its earnings call.
“If you look back at April 2021 and 2022 on an EBITDA per day basis, April 2022 represents the best month in the history of our company,” Cootey said. “April 2021 represents the second best. It has less to do with the consumer and more to do with a huge uphill climb we’re making. As we begin the third quarter, our business among the gaming and non-gaming segments remains stable, but we will continue to face challenging year-over-year comparisons for the remainder of the year.”
Kreeger said 85% of the decline in gaming during the second quarter occurred in April. In addition, many local residents bet on the Golden Knights to win, which didn’t help the sportsbook hold.
“If you parse out April and look into May, June, and even July, you see that gaming revenues are in line with what we’ve been experiencing for the rest of the year,” Kreeger said.
As for non-gaming, Cootey said both hotel and food and beverage continued to grow year over year and delivered record profitability in the second quarter. The hotel division experienced its highest quarterly revenue and profit in the company’s history, driven by higher occupancy and average daily rates up 5.2% to $194. Occupancy is up to 88% occupancy, which leaves room to grow. Revenue per room was up 9% during the quarter.
“Food and beverage experienced near second-quarter record revenues and profitability driven by higher check average across our food and beverage outlets and strength in our catering business,” Cootey said. “Catering continues to surpass 2019 levels, as this quarter represented the eighth consecutive quarter of double-digit year-over-year growth in the business (up 40% year over year and 78% higher than 2019).”
As for group business, Cootey said they continue to see positive momentum driven by the growth in room nights and average daily rates and that pipeline continues to grow into the back half of 2023. Compared to a year ago at this time looking forward, Kreeger added sales revenue is up 43%, catering revenue 56%.
Board member Lorenzo Fertitta said there’s been a lot of talk about Formula One in November and the Super Bowl in February, but for Red Rock, “it’s two weekends out of a lot of great weekends that are coming up for us. That’s why our forward look looks as it does.”
Cootey said they continue to look at expanding their core footprint in Las Vegas and investing in new amenities at existing locations. They’re building on a successful opening of their high-limit slot and table room and a new casino bar at Red Rock Resort and opened a high-end casino bar at Green Valley Ranch Resort in Henderson.
“The early results from these new amenities have been very promising and we look forward to bringing additional complimentary amenities to our Green Valley property later this year,” Cootey said. That includes high-limits slots and table games; a new high-limit room is coming to Santa Fe Station as part of the investment in high-net-worth customers.
Red Rock’s cash and cash equivalents on June 30 were $100.9 million and total principal amount of debt outstanding at the end of the second quarter was $3.2 billion. The company’s board of directors has declared a cash dividend of $0.25 per Class A common share for the third quarter that will be payable on September 29 to all stockholders of record at the close of business on September 15.
Capital expenditures during the second quarter were $201.6 million, which included $172.7 million in investment capital inclusive of their opening of the $780 million Durango Station in southwest Las Vegas in November. They will spend between $600 million to $650 million in growth capital in 2023, including on Durango Station.
