管理層發言
Good afternoon, and welcome to Red Rock Resorts Second Quarter 26 Conference Call. All participants will be in a listen-only mode. Please note this conference is being recorded. I would now like to turn the conference over to Stephen Cootey, Executive Vice President, Chief Financial Officer and Treasurer of Red Rock Resorts. Please go ahead.
Thank you, operator, and good afternoon, everyone. Thank you for joining us today for Red Rock Resorts' second quarter 26 earnings conference call. Joining me on the call today are Frank and Lorenzo Fertitta, Scott Kreeger, and our executive team. I would like to remind everyone that our call today will include forward-looking statements under the safe harbor provisions of the United States Federal Securities Laws. Developments and results may differ from those projected. During the call, we will also discuss non-GAAP financial measures. For definitions and complete reconciliation for these figures to GAAP, please refer to the financial tables in our earnings press release, Form 8-Ks and investor deck, which were filed this afternoon prior to the call. Also, please note that this call is being recorded. Before we begin discussing our second quarter results, I would like to take a moment to recognize an important milestone for our company. On July 1, Station Casinos officially kicked off celebrating our 50th anniversary at Palace Station, the property where our story began. Throughout the summer, we are celebrating the history of our company, our incredible team members, our loyal customers, and the Las Vegas community. As part of this celebration, we will incur approximately $8 million one-time anniversary and brand marketing expense, which will be reflected in our third quarter corporate expense. We view this as an investment in honoring our history, recognizing our team members, our loyal customers, and the local community that have made our success possible. The celebration also marks the launch of our new brand campaign "From Vegas for Vegas, Always Vegas," reflecting our enduring commitment to the city we have proudly called home for the past 50 years and our confidence in the next chapter of our company's growth. Our second quarter results demonstrate the company we have built over the past five decades is as strong as it has ever been. Even against the strongest operating quarter in the company's history a year ago, our Las Vegas operations delivered the second highest second quarter net revenue and adjusted EBITDA in our history, while maintaining near-record adjusted EBITDA margin. These results demonstrate the strength, consistency, and resilience of our operating model and our ability to deliver long-term shareholder value through strong operational performance and disciplined capital allocation. Our Durango property continued to perform exceptionally well despite ongoing construction impacts, and has firmly established itself as a meaningful growth driver within the Las Vegas locals market. The property's continued success reinforces our long-held understanding that investing in best-in-class integrated resorts can expand the market rather than simply redistribute existing demand. Equally important, our core properties continue to generate growth, further demonstrating the strength of our broader portfolio. Building on Durango's continued momentum, construction of the Durango North expansion is progressing well and remains on schedule to open in the second half of 2027. The continued strength of our existing property together with the significant residential growth occurring in Southwest Las Vegas reinforces our confidence in the expansion and its long-term growth prospects. Durango continues to validate our approach to capital allocation, and we believe this expansion will further strengthen the property's competitive position, expand the Las Vegas locals market, gain market share, and generate superior long-term shareholder value. Now let's take a look at our second quarter results. With respect to our Las Vegas operations, our second quarter net revenue was $503.2 million, down 2% from the prior year's second quarter. Our adjusted EBITDA was $227.5 million, down 5% from the prior year second quarter. Our adjusted EBITDA margin was 45.2%, a decrease of 143 basis points from the prior year. On a consolidated basis, our second quarter net revenue, which includes $3.8 million from our North Fork project, was $510.3 million, down 3% from the prior year's second quarter. Our adjusted EBITDA, which includes $2.8 million from our North Fork project, was $208 million, down 9.3% from the prior year second quarter. Adjusted EBITDA margin was 40.8% for the quarter, a decrease of 281 basis points from the prior year. During the quarter, we converted 48% of our adjusted EBITDA to operating free cash flow, generating $100 million, or $0.95 per share. Year to date, we have generated $206.7 million operating free cash flow or $1.97 per share. This strong free cash generation continues to validate our operating model and disciplined approach to capital allocation, enabling us to invest in our properties while continuing to return meaningful capital to our shareholders through dividends and share repurchases. As we begin the third quarter, we remain focused on serving our core local guests. We will continue to grow our regional and national customer segments across the portfolio. Compared to the second quarter of last year, we saw meaningful growth in overall carded spend per visit together with higher net theoretical win across our local, regional, and national customers. These trends drove the second highest second quarter gaming revenue and profitability in our company's history, surpassed only by last year's historic quarter. Turning to our nongaming operations, our hotel and food and beverage divisions delivered a strong revenue quarter, reflecting healthy underlying demand across both businesses and the diversification of our operating model. During the quarter, Green Valley Ranch hotel renovation reduced the available room night inventory by more than 21,000 room nights, impacting both revenue and profitability across both divisions. Even with this temporary disruption, hotel performance remained solid, supported by higher occupancy across the portfolio. Our food and beverage division benefited from higher guest volumes and higher check averages. We look forward to once again offering our guests the full Green Valley Ranch hotel product beginning in late September. As we look ahead to the balance of the year, we are seeing stable trends in our core slot and table business across the Las Vegas locals market and within our carded database. While we expect ongoing disruption from construction activity at our Durango, Sunset Station, and Green Valley Ranch properties, we are actively managing these projects to minimize operational disruption. We believe these temporary disruptions are more than offset by the long-term benefits of these investments, which will enhance the guest experience, strengthen our competitive position, and drive long-term shareholder value. Now let's cover a few balance sheet and capital items. The company's cash and cash equivalents at the end of the second quarter was $136.5 million, and the total principal amount of debt outstanding was $3.6 billion, resulting in net debt of $3.5 billion. As of the end of the quarter, the company's net debt to EBITDA ratio was 4.21 times. During the quarter, we made total distributions of approximately $59 million to the LLC unitholders of Station HoldCo, including a distribution of approximately $34.5 million to Red Rock Resorts. The company used its portion of the distribution to fund its previously declared quarterly dividend of $0.26 per Class A common share. When combining the dividend and share repurchases made during the year, we have returned approximately $198 million to our shareholders. Capital spend in the quarter was $139.8 million, which includes approximately $94.4 million in investment capital, as well as $45.4 million in maintenance capital. This brings our year to date capital spend to $257 million, which includes approximately $181.6 million in investment capital, as well as $75.4 million in maintenance capital. For the full year 2026, we still expect to spend between $375 million and $425 million, which includes $275 to $300 million in investment capital, as well as $100 million to $125 million in maintenance capital. In addition to the continued investment at Durango, we are making significant investments at our Sunset Station and Green Valley Ranch properties. At Sunset Station, we are continuing to make excellent progress on our podium refresh. The recently reopened Gaudi Bar has been met with positive customer feedback, and we are very encouraged by its early financial performance, reinforcing our confidence in both the renovation strategy and the underlying demand at the property. In the coming weeks, we look forward to opening Stoney's Rockin' Country, a new country western bar and nightclub, which will further expand the property's entertainment offerings. The renovation remains on budget with the remaining amenities expected to come online throughout 2026. Building on this momentum, we continue to execute the next phase of the Sunset Station redevelopment. This phase includes enhancements to the movie theaters, relocation of a temporary bingo operation into a permanent location, and the redevelopment of the former buffet space into a premium steak club, a steakhouse, and a high limit slot and table game area. These investments build upon a proven strategy that has consistently generated attractive returns across our portfolio, further strengthening our confidence in the long-term opportunity at Sunset Station. Construction remains on schedule with the balance of the project expected to be completed throughout 2026 and into 2027. The total project cost remains $87 million. At Green Valley Ranch, we continue to make excellent progress on the comprehensive renovation of our hotel product. The West Tower and Convention space have reopened to positive customer feedback and encouraging financial performance, validating our investment in the property. We expect to have the full East Tower hotel product back online in September, completing the renovation of all of our guest rooms and suites. Upon completion, Green Valley Ranch will feature one of the finest hotel products in the Las Vegas Valley, complementing the recently renovated high limit slot and table game areas, and further strengthening its competitive position as one of Southern Nevada's premier integrated resorts. Building on the momentum of these investments, we continue to execute the next phase of Green Valley Ranch's long-term redevelopment strategy. This phase includes a comprehensive casino floor refresh, enhancements to its food and beverage offerings, and upgrading entertainment amenities. Construction is underway and is expected to extend into 2027, with the total project cost estimated at approximately $56 million. Turning to North Fork, construction continues to progress well as we move closer to opening. Last month, we successfully completed the turnover of the first phase of the casino podium, and we have begun installing slot machines and other gaming equipment. We expect turnover of the next phase of the podium later this month, which will keep us on pace for an early fourth quarter 26 opening. The project remains on budget and is fully financed with total all-in costs expected to remain approximately $750 million. As of quarter end, Red Rock's outstanding note receivable from the tribe was approximately $83.4 million. With construction progressing well and the project moving into its operational readiness phase, we remain excited about this best-in-class development and look forward to welcoming our first guests later this year. The company's Board of Directors has also declared its regular cash dividend of $0.26 per Class A common share payable on September 30 to Class A shareholders of record as of September 15. As we look ahead, we remain confident in the strength and resilience of our business model and long-term opportunities across our portfolio. Our recent capital investments continue to perform well, reinforcing our disciplined approach to reinvesting in our existing properties and advancing our development pipeline. Continued success at Durango validates our long-term growth strategy and the embedded value of our more than 450 acres of owned development land located in some of the most attractive submarkets across the Las Vegas Valley. Combined with our portfolio of best-in-class assets, this unmatched development pipeline positions us to capitalize on favorable demographic trends and high barriers to entry that continue to define the Las Vegas locals market. Before we wrap up, we would like to sincerely thank all of our team members for their continued hard work, dedication, and commitment to delivering exceptional guest experiences every day. They are the foundation of our company's success and the driving force behind the results we continue to achieve. Their efforts continue to be recognized both locally and nationally. During the year, Station Casinos was recognized by Forbes and Statista as one of America's best large employers of 2026; by Newsweek as one of America's greatest workplaces by state for the second consecutive year; as a top workplace in Nevada for the sixth consecutive year; and as a USA TODAY top workplace for the fourth consecutive year. Finally, as we celebrate our 50th anniversary, we want to extend our sincere gratitude to our loyal guests and the communities we have proudly served over the past five decades. Your trust and support have made this milestone possible. As we look to the future, we remain committed to investing in our team members, our properties, and our communities as we continue building on the foundation established over the past 50 years. With that, operator, we would be happy to open the line for questions.
分析師問答
We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. At this time, we will pause momentarily to assemble our roster. First question today comes from Benjamin Chaikin with Mizuho. Please go ahead.
Hey, how's it going? Thanks for taking my questions. Maybe if you could just take us through the cadence of the quarter to the extent you can. I think we had heard that maybe June was potentially softer in Las Vegas. Not sure if that is calendar related or maybe anything underlying. Just maybe what you are seeing to the extent you can break it down. Thank you.
Hey, Benjamin. This is Scott. Thanks for the question. Let's start with slot revenue, which for us is our primary source and most important aspect of our business. We were very consistent across all three months of the quarter. April was definitely better than May and June, but only by a small percentage difference in race and sportsbook and table games. Otherwise, pretty consistent across the quarter. We actually got quite a pickup from the World Cup in June. Our properties really leaned into activation and promotion for the event and drove a lot of bodies. Overall, I think it helped June from a traffic standpoint.
So it was positive.
Understood. That is very helpful. And then maybe just from a modeling standpoint question. Love to touch on seasonality. Just as we sit here today, what is your best take on Q3, at least historically? Thanks.
Yeah. Thanks, Benjamin. Historically, moving from Q2 to Q3 is seasonal, with Q3 being one of our softer quarters. Usually you see it down about 10% from Q2 to Q3.
Thanks.
The next question comes from Trey Bowers with Wells Fargo. Please go ahead.
Hey, guys. Thanks for the question. Just wondering if you guys in the past have given some helpful detail around kind of the numeric impact of the disruption. As we think about Q2 and then kind of making our way through the balance of the year as some of these projects kind of finish up and come online? Any sense of just the impact in Q2 relative to Q1 and then what it might look like for the next couple of quarters? Thanks.
Yeah. Sure. The team did a great job managing disruption both on-site at our Green Valley Ranch, Sunset Station, and Durango properties as well as off-site with NDOT engaged in a substantial infrastructure project near several of our properties, including Durango, Green Valley, and Red Rock. While estimating disruption is never an exact science, we did experience temporary disruption at Green Valley of about $7 million, which was slightly lower than the $9 million we had noted in our last earnings call. It was driven primarily by the loss of the 21,000 room nights as well as the associated gaming, food, and beverage revenue of the property. At Durango, the team did a great job managing disruption; we really did not see much disruption in Q2, but we still stick to our guidance as construction both on-site and off-site is progressing. We are guiding about $2.5 million in Q3, and then each quarter subsequent to that until the project completes in the back half of 2027. I did want to remind everyone that these impacts are temporary in nature and are more than offset by the long-term benefits of the investments that we are making.
And then if I could just get a follow-up, appreciate the call out of the $8 million impact from the 50th anniversary this quarter. Just offsetting that, anything that we should expect to see from a top line perspective or any further detail on what that means for the model, that would be super helpful. Thank you.
I think there is a good degree of brand awareness and goodwill that comes from what we are doing here. We are part of the community, and being out in the community with the message is certainly going to have a positive impact going forward. Looking at the quarter thus far, we are happy with the way things are going. If we stay on this track, I would imagine there is a net positive effect on the top line.
Great. Thanks all.
The next question comes from Chad Beynon with Macquarie. Please go ahead.
Hey, good afternoon. This is Aaron on for Chad. Thanks for taking our question. Maybe to start with just a higher-level question. We continue to hear about the C-shaped economy versus the K-shaped economy. Are you seeing any notable differences in visitation or spend between your lower-worth and higher-worth customers?
No. The trends are pretty stable across our entire business, both slots and tables, and across both higher-end and lower-end customers.
Okay. Gotcha. Great to hear you guys did well on the World Cup. Just kind of sticking on the event theme. The third F1 Las Vegas race is coming up, and I know in the past you have said that F1 is not really an event for your company. Just curious if that is still the case or if programming around it, or the understanding of visitation and customer behavior has changed where there could be some opportunities for you guys? Thanks.
The F1 event in Las Vegas is primarily tourist-driven as we see it. We do not get a lot of rallying behind it from a locals perspective. The World Cup worked for us because the local fans were really into it; depending on what game was going on, our sports venues were busy. From a traffic standpoint it was very positive. For us specifically, F1 does not really move the needle at all, and we do not lean into promotions for it. My understanding is it is obviously very good for the higher-end properties on the Las Vegas Strip, though.
So okay. Thank you. Nice quarter.
The next question comes from Joe Stauff with Susquehanna. Please go ahead.
Thanks. I was wondering if you could give maybe an assessment of the level of demand you are seeing or you saw in the second quarter and what you are seeing thus far as far as destination and regional demand, and then maybe an update with respect to the roadwork and all the things that the state is doing in and around the Durango property. Is it worsening? Is it the same as it was a month or two ago? Just trying to assess that level of disruption there.
Joe, I will take the first question and let Stephen talk about the second. If I were to gauge demand, I would look at two areas: inbound gaming and inbound hotel. We like the way the database and customer segments performed in the quarter. We like what we are seeing in July, and into the future relative to the gaming database, specifically our regional (drive market) and out-of-town (fly market) segments. From a hotel perspective, excluding Green Valley Ranch given the impact of the 21,000 rooms out in the quarter, same-store hotel performance was very strong for Q2. We like the trends in occupancy and ADR; we outpaced the Strip from an ADR perspective. Looking into Q3 and forward group sales bookings, we see positive signs. With GVR rooms coming online in mid-September, that will provide a boost from a destination perspective.
Maybe to tackle the second question, Joe. There are three or four infrastructure items around Durango. The Roy Horn connectivity construction we discussed earlier this year has been completed; that was the connection into the multifamily development next to Durango. However, westbound and eastbound on-ramps are kicking off in June 2026 and are expected to last about the next year, as well as the triple left on Durango South. So three major infrastructure projects are just kicking off. Similar projects are occurring at Red Rock and Green Valley.
And the incremental $8 million that you are spending, just a clarification: if you are kicking off a marketing campaign is it fair to say that some level of spending might stick in that corporate line into fourth quarter to maintain that marketing campaign to some degree?
If you are referring to the $8 million, this started as a family business. The company has been around for 50 years and we thought the anniversary was a great opportunity to kick off a branding campaign to reinforce our position in the locals market, which our dad helped create. We have received a lot of good feedback, and there has been significant media coverage and earned media along with the media spend in the marketplace around the brand campaign, which is featuring many long-term team members, some of which have been with us almost 50 years. We think we will benefit from this for many years. We have done brand campaigns in the past, and it made sense to do it around the 50th anniversary. They do cost money, and it will hit the quarter in the third quarter, but overall we think it is the right thing to do for the long-term benefit of the business.
Makes sense. Thank you.
The next question comes from Steven Pizzella with Deutsche Bank. Please go ahead.
Hey, good afternoon, everybody, and thank you for taking our questions. As some of the ROI projects come back online and start contributing, how should we think about how fast the ROI projects ramp as we build a bridge in our models into 2027?
I think we have always been consistent in targeting these projects over a three-year lifespan. The first year generally is around 10%. The first major project coming online will be Green Valley, which should be online as of Q4.
Okay. Thanks. So just as a follow-up, have you seen any impact from the Strip operators becoming more aggressive on value, including all-inclusive offerings and promotional packages? Has demand in the locals market remained largely insulated?
Steven, we like what the Strip did this summer by offering value packages; it helps the city. We provide value every day; it's core to what we do. Our model is a high-frequency model.
Value is relative and not just about price. Based on convenience, value, and friendly service, our employees know our customers and there is a relationship. The locals want convenience and value; we consistently deliver what they want. I do not believe we have seen any negative impact on us as a company from the Strip's value initiatives. It should be good for the Strip long term to offer value, and net it should be positive for the city.
Thank you. Appreciate it.
The next question comes from David Katz with Jefferies. Please go ahead.
You know, first, I wanted to say I am looking ahead, seeing a lot of these projects sort of get to their final stages and in good form. How soon might we be talking about the next casino project and where it would be? We are anxious to start modeling that stuff in.
We are currently working on multiple projects from a design standpoint, both new-build greenfield projects—two that we are actively working on now—and we will determine which one will go first. We also have a master plan expansion to add rooms and a spa facility at Durango after opening the current expansion. We are working with multiple general contractors in the market to determine pricing and have mostly decided on scope. We are actively trying to understand where pricing could land and whether we need to change design. We hope to have more information as we turn the corner into early 2027. We are as anxious as anyone to start another project; we are a development company and have had our best success building projects from the ground up. Off the success we have had with Durango, we are anxious and ready to go, but these projects take time to gestate and we need to slot them at the right time. We are actively working on it and have more news to come shortly.
Appreciate that. And as my follow-up, I wanted to ask about the advent of major sports in the valley, such as the A's and potential NBA activity. What strategy makes sense in leaning into those and do you get any tangible benefit from it?
There are several benefits. Professional teams generate and draw many fans, which helps the overall hotel room base for the city. We have had a lot of success partnering with the Golden Knights; we do promotional activity around them and there is a large fan base with strong affinity. The Raiders have been great as well, and visiting teams stay at our properties. We expect similar benefits with the A's and potentially an NBA franchise coming to Las Vegas. Las Vegas is turning into an events city; big events—major sporting events, fights, entertainment—drive weekends and demand. The critical mass of events is net positive for the city and for our properties. It also helps our high-end play; we see robust growth in high-end table game play. Large boxing or UFC events generate benefits and people fly in and stay with us at properties like Red Rock, Durango, and GVR. From a local guest standpoint, our casino marketing does a good job taking higher-end local guests to games and events to create brand loyalty and excitement.
Appreciate that. Thank you.
The next question comes from Brandt Montour with Barclays.
Hey, guys. It is Christy on for Brandt. Thanks for taking our question. As it relates to the next growth phases at GVR and Sunset that are coming online in 2026 and into 2027, what percent of the enhancements would you say will be coming online by year end 2026?
In terms of Sunset, the majority of the first phase will be coming online. The only remaining items of note are Leticia's and RosaLitas; those are the only two real remaining items. Bingo may be late this year, but the rest of the remaining items will be in 2027. From a Green Valley perspective, we are focused on getting the hotel across the finish line; that asset will be placed in service in 2026 with the remainder of the project coming online in 2027.
Got it. Thank you. And just a clarification on the seasonality comments related to Q3 and specifically Q4: in the past you have said April is up 10% to 11% sequentially from March. Is that a consolidated comment or is that specific to Las Vegas operations? Las Vegas operations will be a more important distinction as we open North Fork in Q4.
Okay.
Great. Thanks, guys, so much.
The next question comes from Barry Jonas with Truist. Please go ahead.
Hi. This is Jeremy on for Barry. Thanks for taking our questions. Can you talk about the promotional environment in the locals market right now and any changes in competitive behavior?
Hey, Jeremy. As we've discussed in previous quarters, the promotional environment is very rational. We do not see any change in the market nor anything that would make us change our strategy.
Got it. And then how has the tavern business trended? Have you seen any notable cross-sell from tavern customers to your casino properties? Thanks.
We have opened six of eight taverns; two more are coming, one in October and one at the end of the year. We entered the tavern business to get into underpenetrated areas around the valley, and we do see incremental pickup in new customers who are new to the brand. We also see crossover play with customers who go to our larger properties. So far, we like the performance of the taverns and we are excited about the two additional taverns coming online by year end.
Thank you.
The next question comes from Dan Politzer with JPMorgan. Please go ahead.
I wanted to touch on OpEx a bit. You talked a little about labor, utilities, insurance. We've heard some of those trends have been getting better. More broadly, as you think about investments ramping and the OpEx environment, how should we think about margin lift into 2027?
From a labor perspective, salary and wages are up around 3% year over year. Utilities continue to be a drag on OpEx and I expect that to remain a drag for the remainder of the year. Our margin was down year over year primarily due to Green Valley Ranch disruption; we will have the full suite of product back at the end of September. There was also the absence of the North Fork catch-up payment we recognized in the prior year, and several one-time repair and maintenance items and contributions during the quarter. I view this as an anomaly from a margin perspective.
Got it. And were there any share repurchases in the quarter? If not, was there any reason for that?
No. We have been consistent with a balanced approach to capital allocation. This quarter we heavily spent on our existing projects, including Durango garage retention payments and spending at Sunset and Green Valley Ranch projects.
Thanks so much. No problem.
This concludes our question and answer session. I would like to turn the conference back over to Stephen Cootey for any closing remarks.
Well, thank you, everyone, for joining the call, and we look forward to talking to you in about 90 days. Take care.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.