Red Rock Resorts, the parent company of Station Casinos, recorded its highest third quarter EBITDA since 2008 and its highest year-over-year growth for its Las Vegas business in 16 quarters, the company announced Monday afternoon.
Adjusted EBITDA for the landmark quarter checked in at $109 million, a 13.7 percent jump from the prior year quarter, and adjusted EBITDA margin grew 180 basis points to 31.4 percent.
Net revenues for the quarter increased 7.3 percent to $347.1 million – the fourteenth consecutive quarter of year-over-year growth and surpassing the Wall Street estimate by $11.7 million. Earnings per share, however, checked in at $0.20 – down slightly from the prior year quarter and missing the consensus estimate by $0.06.
“Red Rock Resorts delivered an excellent quarter, as strong trends in both our casino and non-casino segments helped produce our highest year-over-year revenue growth in Las Vegas in over four years,” said Marc J. Falcone, Executive Vice President, Chief Financial Officer and Treasurer. “We believe this recent growth demonstrates the strong underlying fundamentals of the Las Vegas market, which continues to experience broad-based growth.”
Revenue for the Las Vegas locals segment grew 6.2 percent to $318.3 million from the prior year quarter, while EBITDA and EBITDA margin improved by 8.2 percent and 50 basis points, respectively. On a call with investors, the company touted improving economic indicators in the Las Vegas economy as a key driver of current and future business.
“With a record employment base, a healthy construction pipeline and strong visitation growth, the overall Las Vegas economy lined up well for our ability to capture strong top-line and bottom-line growth this quarter,” Falcone said on a call with investors.
Red Rock’s Native American business also grew – posting a $5 million jump in adjusted EBITDA to $21.6 million, and its Graton Resort & Casino and Gun Lake Casino properties in California and Michigan, respectively, are undergoing major expansions.
The company noted that the North Fork Rancheria project, located north of Fresno, took a major step forward in the third quarter after winning a series of rulings from the Department of the Interior to allow for Class 3 gaming and for the land to be taken into trust by the Mono Indians. Upon being given the green light, Red Rock anticipates the total cost of the project to be in the $250-300 million range and will include roughly 2,000 slot machines, 40 table games, several restaurants and other amenities.
At the close of the third quarter, Red Rock had $96.3 million in cash on hand, $2.4 billion in outstanding debt and a debt to adjusted EBITDA ration of 4.6 times.
Other highlights for the quarter include the commencement of a $115 million expansion and upgrade at Palace Station, one of the company’s signature properties. The expansion will involve substantial remodeling the property entrance and exterior, the addition of a bingo room, a new buffet, additional gaming space and better parking.
“We continue to believe that Palace has substantial upside given its market positioning,” said Falcone, with the caveat that this expansion is likely to negatively impact earnings over the next year.
“We anticipate probably 12 months of revenue and EBITDA disruption,” he said, noting that the main entrance and buffet area would be heavily affected. “I don’t think we have completed the total overall impact of what we think disruption will be, but we do think it could be significant over the next 12 months.”
On October 1, following the close of the third quarter, Red Rock closed on the acquisition of the Palms, its newest property in the Las Vegas market, and is now undertaking a round of property enhancements including a renovation of the café and buffet and an upgrade to the gaming area.
Also, looking ahead to the fourth quarter, Red Rock announced in early November that it was enhancing its Boarding Pass loyalty program. While the program renowned as one of the best in the country for more than a decade, it is being re-jigged to allow guests to earn more rewards points for spending on non-gaming items.
“We believe we are first company in the Las Vegas locals market to rollout such a comprehensive loyalty program,” said Falcone. “Overall we expect this program to drive incremental spend at our properties and investors should continue to expect Red Rock Resorts to be an industry leader in these types of important innovations in our business.”
