Red Rock Resorts reported a 6.8 percent increase in EBITDA and a 4.0 percent increase in net revenues for the second quarter of 2016, its first as an official publicly traded company since going private a decade ago, though its shares were down slightly after its earnings per share came in below expectations.
The mixed quarter came after the company, which now controls the Station Casinos brand, successfully raised $541 million in its initial public offering in late April at $19.50 a share – $10 million more than anticipated. Shares closed at $21.91 on Monday, down $0.12 from the opening price.
“The second quarter was a transformational period for Red Rock Resorts as we successfully completed our initial public offering, announced an agreement by Station Casinos to acquire the Palms Casino Resort, and completed a refinancing of Station Casinos’ credit facility,” said Marc J. Falcone, Executive Vice President, Chief Financial Officer and Treasurer.
For the quarter, net revenues jumped to $351.5 million compared to $337.8 million from the prior year period, marking the 13th consecutive quarter of revenue growth. Adjusted EBITDA grew from $109.9 million to $117.4 million, and the company reported a debt to adjusted EBITDA leverage ratio of 4.5 times.
However, earnings per share checked in at just $0.01, well below analyst expectations of as high as $0.37.
Falcone attributed the mixed quarter to lower sports hold at its Las Vegas properties and additional expenses incurred from the 10th anniversary celebration at the Red Rock Casino Resort & Spa.
He expressed confidence that a strong foundation had been laid for the second half of 2016. “We believe these significant accomplishments, combined with the strength of our existing operations, position us well for future growth.”
In a signal of confidence to investors, the company declared its first-ever cash dividend of $.10 a share in July, just three months after its IPO, payable on August 30.
Red Rock is the holding company that at the beginning of 2016 assumed the brand of Station Casinos, which has long been a formidable player in the Las Vegas locals and tribal gaming markets since its founding in 1976. Both of these areas were particularly strong in the second quarter, with net revenues from Las Vegas operations increasing 2.3 percent to $322.9 million and Native American management fees up from $14.4 million to $20.1 million from the prior year quarter.
Also of note, non-gaming revenues at its Vegas properties were up 3.8 percent due to strong hotel and food and beverage sales and other investments in non-gaming amenities, compared to a 1.8 increase in gaming revenues attributable to slot and table play.
Its acquisition of the Palms Casino Resort – just off of the Las Vegas Strip – for $312.5 million and its plan to inject the first substantial capital investment into Palace Station in 25 years are indicators that Red Rock is looking to reinvent itself as more than just a gaming company that caters to Nevadans and Indian tribes.
The company also touted its $2.4 billion restructuring of its debt structure that will provide greater borrowing capacity, reduced cost of capital and more financial flexibility in the future.
Red Rock Resorts is the holding company that manages and owns a significant stake in Station Casinos, which operates casinos in Las Vegas, northern California and Michigan.
