Red Rock Resorts Announces Fourth Quarter and Year End 2018 Results

Red Rock Resorts, Inc. (NASDAQ: RRR) today reported financial results for the fourth quarter and year ended December 31, 2018.  The Company adopted FASB’s new revenue recognition standard (“ASC 606”), effective January 1, 2018.  Certain prior period amounts have been adjusted to reflect the full retrospective adoption of ASC 606, with no material impact on operating income, net income or Adjusted EBITDA(1).

Net revenues were $431.5 million for the fourth quarter of 2018, an increase of 7.8%, or $31.2 million, from $400.3 million for the same period of 2017. The increase in net revenues was  primarily due to an increase in Las Vegas operations, partially offset by a decrease in Native American management fees due to the expiration of the Gun Lake management agreement in February of 2018.

Net income was $13.2 million for the fourth quarter of 2018, a decrease of 71.3%, or $32.8 million, from $46.0 million for the same period of 2017. The decrease in net income was primarily due to an after-tax decrease in the fair value of derivative instruments of $23.9 million.  These results also reflect an out-of-period, one-time, non-cash adjustment related to a lease obligation regarding our corporate office building that increased interest expense by $9.3 million and decreased net income by $8.6 million.

Adjusted EBITDA was $135.1 million for the fourth quarter of 2018, an increase of 10.1%, or $12.4 million, from $122.7 million in the same period of 2017. The increase in Adjusted EBITDA was primarily due to an increase in Las Vegas operations, partially offset by a decrease in Native American management fees due to the Gun Lake expiration.

For the full year, net revenues were $1.68 billion in 2018, an increase of 2.4%, or $38.9 million, from $1.64 billion for the same period of 2017.  The increase in net revenues was primarily due to a $69.6 million increase in Las Vegas operations, partially offset by a $31.0 million decrease in Native American operations due to the Gun Lake expiration.

For the full year, net income was $219.5 million in 2018, compared to $63.5 million for the same period of 2017. The increase in net income was primarily due to a gain associated with the extinguishment of tax receivable liabilities, as well as a prior year loss associated with the acquisition of the leases at Boulder Station and Texas Station.

For the full year, Adjusted EBITDA was $509.0 million in 2018, an increase of 2.4%, or $11.7 million, from $497.2 million in 2017, primarily due to a $23.7 million increase in Las Vegas operations, partially offset by a $15.1 million decrease in Native American operations due to the Gun Lake expiration.

Las Vegas Operations

Net revenues from Las Vegas operations were $409.5 million for the fourth quarter of 2018, an increase of 10.4%, or $38.5 million, from $371.0 million in the same period of 2017.  Adjusted EBITDA from Las Vegas operations was $121.0 million for the fourth quarter of 2018, an increase of 14.4%, or $15.2 million, from $105.8 million in the same period of 2017.

Native American Management

Adjusted EBITDA from Native American operations was $19.1 million for the fourth quarter of 2018, a 22.1% decrease from $24.5 million in the same period of 2017.  The decrease was primarily due to the Gun Lake expiration, partially offset by increased management fees generated under the Graton Resort management agreement. 

Palace Station and Palms Redevelopment Update

The Palace Station redevelopment project was completed on schedule and on budget with all aspects of the project open as of the end of 2018.  As of December 31, 2018, the Company has incurred $188 million in costs against the budget of $191 million.

The Palms redevelopment project remains on schedule and the budget remains unchanged with the remaining components of phase two expected to be complete in the second quarter of 2019 and phase three expected to be complete in the third quarter of 2019.  As of December 31, 2018, the Company has incurred approximately $430 million in costs against the $690 million project.

Balance Sheet Highlights

The Company’s cash and cash equivalents at December 31, 2018 were $114.6 million and total principal amount of debt outstanding at the end of the fourth quarter was $2.91 billion. The Company’s debt to Adjusted EBITDA and interest coverage ratios were 5.0x and 4.4x, respectively.

Quarterly Dividend

The Company’s Board of Directors has declared a cash dividend of $0.10 per Class A common share for the first quarter of 2019. The dividend will be payable on March 29, 2019 to all stockholders of record as of the close of business on March 14, 2019. 

Prior to the payment of such dividend, Station Holdco LLC (“Station Holdco”) will make a cash distribution to all unit holders of record, including the Company, of $0.10 per unit for a total distribution of approximately $11.7 million, approximately $7.0 million of which is expected to be distributed to the Company and approximately $4.7 million of which is expected to be distributed to the other unit holders of record of Station Holdco.

Red Rock Resorts, Inc.

Consolidated Statements of Income

(amounts in thousands, except per share data)

(unaudited)

Three Months Ended
December 31,

Year Ended
December 31,

2018

2017

2018

2017

Operating revenues:

Casino

$ 240,757

$ 221,763

$  940,483

$  886,206

Food and beverage

100,971

87,995

381,197

365,448

Room

42,169

39,640

170,824

179,041

Other

27,054

22,940

100,912

92,967

Management fees

20,520

27,972

87,614

118,477

Net revenues

431,471

400,310

1,681,030

1,642,139

Operating costs and expenses:

Casino

84,854

79,388

326,980

311,086

Food and beverage

87,892

78,406

340,212

326,069

Room

19,314

19,297

78,440

81,768

Other

14,320

10,074

48,431

40,332

Selling, general and administrative

92,952

92,215

390,492

380,930

Depreciation and amortization

46,864

43,496

180,255

178,217

Write-downs and other charges, net

13,580

3,653

34,650

29,584

Tax receivable agreement liability adjustment

(263)

(139,070)

(90,638)

(139,300)

Related party lease termination

100,343

Asset impairment

1,829

359,513

187,459

1,308,822

1,310,858

Operating income

71,958

212,851

372,208

331,281

Earnings from joint ventures

579

390

2,185

1,632

Operating income and earnings from joint ventures

72,537

213,241

374,393

332,913

Other (expense) income:

Interest expense, net

(46,800)

(31,315)

(143,099)

(131,442)

Loss on extinguishment/modification of debt, net

(13,355)

(16,907)

Change in fair value of derivative instruments

(14,938)

11,053

12,415

14,112

Other

(67)

(99)

(354)

(357)

(61,805)

(33,716)

(131,038)

(134,594)

Income before income tax

10,732

179,525

243,355

198,319

Benefit (provision) for income tax

2,449

(133,556)

(23,875)

(134,786)

Net income

13,181

45,969

219,480

63,533

Less: net income attributable to noncontrolling interests

4,235

16,497

61,939

28,110

Net income attributable to Red Rock Resorts, Inc.

$     8,946

$   29,472

$  157,541

$    35,423

Earnings per common share:

Earnings per share of Class A common stock, basic

$       0.13

$       0.43

$        2.28

$        0.53

Earnings per share of Class A common stock, diluted

$       0.11

$       0.35

$        1.77

$        0.42

Weighted-average common shares outstanding:

Basic

69,283

68,486

69,115

67,397

Diluted

116,414

116,274

116,859

115,930

Dividends declared per common share

$       0.10

$       0.10

$        0.40

$        0.40

Red Rock Resorts, Inc.

Segment Information and Reconciliation of Net Income to Adjusted EBITDA

(amounts in thousands)

(unaudited)

Three Months Ended
December 31,

Year Ended
December 31,

2018

2017

2018

2017

Net revenues

Las Vegas operations

$ 409,483

$ 370,985

$ 1,588,003

$ 1,518,442

Native American management

20,365

27,842

87,009

117,968

Reportable segment net revenues

429,848

398,827

1,675,012

1,636,410

Corporate and other

1,623

1,483

6,018

5,729

Net revenues

$ 431,471

$ 400,310

$ 1,681,030

$ 1,642,139

Net income

$   13,181

$   45,969

$    219,480

$      63,533

Adjustments

Depreciation and amortization

46,864

43,496

180,255

178,217

Share-based compensation

2,417

2,195

11,289

7,922

Write-downs and other charges, net

13,580

3,653

34,650

29,584

Tax receivable agreement liability adjustment

(263)

(139,070)

(90,638)

(139,300)

Related party lease termination

100,343

Asset impairment

1,829

Interest expense, net

46,800

31,315

143,099

131,442

Loss on extinguishment/modification of debt, net

13,355

16,907

Change in fair value of derivative instruments

14,938

(11,053)

(12,415)

(14,112)

Adjusted EBITDA attributable to MPM noncontrolling interest

(1,780)

(962)

(15,262)

(Benefit) provision for income tax

(2,449)

133,556

23,875

134,786

Other

67

1,099

329

1,357

Adjusted EBITDA

$ 135,135

$ 122,735

$    508,962

$    497,246

Adjusted EBITDA

Las Vegas operations

$ 120,971

$ 105,790

$    457,379

$    433,640

Native American management

19,124

24,548

80,795

95,897

Reportable segment Adjusted EBITDA

140,095

130,338

538,174

529,537

Corporate and other

(4,960)

(7,603)

(29,212)

(32,291)

Adjusted EBITDA

$ 135,135

$ 122,735

$    508,962

$    497,246

SOURCE Red Rock Resorts, Inc.