Red Rock Resorts Results

Red Rock Resorts First Quarter Net Revenues Increased 4.8%

Consolidated Adjusted EBITDA margin improved approximately 210 basis points to 37.1% for the quarter. Twelfth consecutive quarter of year-over-year consolidated net revenue growth and twentieth consecutive quarter of year-over-year consolidated Adjusted EBITDA growth.

Red Rock Resorts

Red Rock Resorts, Inc. (NASDAQ: RRR) last week announced the results of its operations for the first quarter ended March 31, 2016.

First Quarter Financial Highlights

  • First quarter consolidated net revenues increased 4.8% and consolidated Adjusted EBITDA increased 11.2% compared to the prior year period.
  • Consolidated Adjusted EBITDA margin improved approximately 210 basis points to 37.1% for the quarter.
  • Twelfth consecutive quarter of year-over-year consolidated net revenue growth and twentieth consecutive quarter of year-over-year consolidated Adjusted EBITDA growth.
  • First quarter Las Vegas net revenues increased 3.1% and Las Vegas Adjusted EBITDA increased 7.0% compared to the prior year period.
  • First quarter Native American management fees increased 41.9% compared to the prior year period.

“Red Rock Resorts’ financial results for the first quarter of 2016 demonstrate the continued growth of the Las Vegas market, as well as a strong increase in management fees generated from our managed properties,” said Marc Falcone, Executive Vice President, Chief Financial Officer and Treasurer. “We remain very focused on driving same-store revenue growth, improving our margins and examining high-return uses of available free cash-flow.”

Consolidated Results of Operations

The Company's consolidated net revenues for the first quarter ended March 31, 2016 were $359.2 million, an increase of $16.5 million, or 4.8%, compared to the prior year period. Consolidated Adjusted EBITDA for the quarter was $133.2 million, an increase of $13.4 million, or 11.2%, and our Adjusted EBITDA margin increased approximately 210 basis points to 37.1%. First quarter consolidated income from continuing operations increased 30.2% to $59.5 million, compared to the prior year period. In Las Vegas, net revenues increased 3.1%, while Adjusted EBITDA increased 7.0% and Adjusted EBITDA margin improved 130 basis points to 35.9%. The Company continues to experience strong operating results from its two Native American properties, which drove a 41.9% increase in management fees to $20.4 million for the quarter.

“The key Las Vegas metrics that drive our business – job creation, wage growth and increased discretionary spend – were all strong in the first quarter,” said Mr. Falcone. “And our high-quality assets, market-wide distribution, ongoing investment in our properties and award-winning Boarding Pass loyalty program will allow us to continue to benefit from these improving economic trends as we go forward.”

Adjusted EBITDA is not a generally accepted accounting principle (“GAAP”) measurement and is presented solely as a supplemental disclosure because the Company believes that it is a widely used measure of operating performance in the gaming industry and is a principal basis for valuation of gaming companies. Adjusted EBITDA is further defined under the heading “Presentation of Financial Information” and a reconciliation of Adjusted EBITDA to income from continuing operations, the most comparable GAAP measure, is included in the financial information attached hereto.

Balance Sheet Highlights

As of March 31, 2016, the outstanding principal balance of the Company’s long-term debt was $2.0 billion (excluding a non-recourse land loan of $115.7 million and debt associated with Fertitta Entertainment) and cash and cash equivalents were $122.6 million. As of March 31, 2016, debt (net of excess cash) to Adjusted EBITDA ratio was 4.3 times, excluding the non-recourse land loan and debt associated with Fertitta Entertainment.

Subsequent Events

On May 2, 2016, the Company successfully completed its initial public offering (“IPO”) of approximately 27,250,000 shares at $19.50 per share raising gross proceeds of approximately $531.4 million.

On May 10, 2016, the Company announced that Station Casinos LLC has entered into a definitive agreement to acquire the Palms Casino Resort in Las Vegas, Nevada for total cash consideration of $312.5 million.

“The successful completion of our initial public offering enhances the growth opportunities of Red Rock Resorts,” said Mr. Falcone. “In addition, our core business remains strong and is generating significant free cash flow. As such, we are well positioned to be a continued leader in the gaming space and to drive positive shareholder returns.”

                     
Station Holdco LLC
Condensed Combined Statements of Income
(amounts in thousands)
(unaudited)
   
Three Months Ended
March 31,
2016 2015
Operating revenues:
Casino $ 239,771 $ 234,065
Food and beverage 66,620 65,226
Room 34,384 31,391
Other 17,182 17,180
Management fees   26,649     19,950  
Gross revenues 384,606 367,812
Promotional allowances   (25,359 )   (25,043 )
Net revenues   359,247     342,769  
 
Operating costs and expenses:
Casino 87,421 85,031
Food and beverage 42,524 41,380
Room 12,385 11,788
Other 5,722 6,132
Selling, general and administrative 75,090 78,349
Preopening 348 128
Depreciation and amortization 39,427 35,193
Write-downs and other charges, net   2,368     3,015  
  265,285     261,016  
 
Operating income 93,962 81,753
Earnings from joint ventures   612     410  
Operating income and earnings from joint ventures   94,574     82,163  
 
Other expense:
Interest expense, net (35,068 ) (36,462 )
Change in fair value of derivative instruments   (3 )   (3 )
  (35,071 )   (36,465 )
Income from continuing operations 59,503 45,698
Discontinued operations   -     (132 )
Net income 59,503 45,566
Less: Net income attributable to noncontrolling interest   1,864     1,459  
Net income attributable to Station Holdco LLC $ 57,639   $ 44,107  
 
 

 

                     
Station Holdco LLC
Segment Information and
Reconciliation of Adjusted EBITDA to Income from Continuing Operations
(amounts in thousands)
(unaudited)
 
Three Months Ended
March 31,
2016 2015
Net revenues
Las Vegas operations $ 331,458 $ 321,499
Native American management   26,487     19,786  
Reportable segment net revenues 357,945 341,285
Corporate and other   1,302     1,484  
Net revenues $ 359,247   $ 342,769  
 
Adjusted EBITDA
Las Vegas operations $ 119,010 $ 111,249
Native American management   20,432     14,403  
Reportable segment Adjusted EBITDA 139,442 125,652
Corporate and other   (6,226 )   (5,810 )
Adjusted EBITDA 133,216 119,842
 
Other operating (expense) income
Preopening (348 ) (128 )
Depreciation and amortization (39,427 ) (35,193 )
Share-based compensation (620 ) (3,007 )
Write-downs and other charges, net (2,368 ) (3,015 )
Adjusted EBITDA attributable to MPM noncontrolling interest   4,121     3,664  
Operating income and earnings from joint ventures 94,574 82,163
Other expense
Interest expense, net (35,068 ) (36,462 )
Change in fair value of derivative instruments   (3 )   (3 )
Income from continuing operations $ 59,503   $ 45,698  
 



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