Red Rock Resorts, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. Red Rock consolidates Station Casinos LLC and Station Holdco. It held 58.4% of Station Holdco’s economic interests at quarter-end. Station LLC operates gaming and entertainment properties primarily in the Las Vegas region.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Net revenue | $401.6 million | $352.6 million |
| Operating income (loss) | $130.8 million | $(71.2) million |
| Net income (loss), consolidated | $92.2 million | $(106.6) million |
| Net income (loss) attributable to Red Rock | $48.3 million | $(64.8) million |
| Basic / diluted Class A EPS | $0.79 / $0.77 | $(0.92) / $(0.92) |
| Adjusted EBITDA | $178.7 million | $156.6 million |
| Cash from operating activities | $157.5 million | $119.8 million |
| Capital expenditures, net | $38.9 million | $8.0 million |
Casino revenue increased 7.6%, with a 75.4% casino margin versus 75.7% a year earlier. Food and beverage revenue rose 40.2%, with margin improving to 19.0% from 12.4%; room revenue rose 67.6%, with margin improving to 66.1% from 49.5%. Hotel occupancy was 77.0% versus 60.1%; ADR was $167.97 versus $117.07.
At March 31, cash and cash equivalents were $336.6 million, plus $32.0 million restricted cash. Total debt carrying value was $2.85 billion, including $25.9 million current; the revolver had $1.0 billion of borrowing availability, net of letters of credit. Management reported compliance with debt covenants. Current and long-term liabilities under the tax receivable agreement totaled $27.2 million.
Changes versus the prior-year quarter
- Revenue increased 13.9%, reflecting stronger Las Vegas customer activity and recovery in food, beverage and hotel demand. Three properties remained closed.
- Operating results moved from a loss to a profit. Q1 2021 included a $169.7 million Palms impairment charge; Palms was sold in December 2021. Q1 2022 included $10.2 million of write-downs and other costs, including $6.7 million in Palms artist-performance agreement termination costs.
- Adjusted EBITDA increased about 14.1%. Operating cash flow rose, while investing cash outflow increased with capital spending, including Durango development.
- Management fee revenue fell substantially following the end of the company’s Graton Resort management role in February 2021.
Outlook, commentary and risks
- Management cited favorable visitation, guest spending and gaming activity trends, alongside business optimization and cost controls, but cautioned that these trends may not continue and that COVID-19 impacts remain uncertain.
- The company expected $335 million–$460 million of capital expenditures for the rest of 2022, including Durango. The new southwest Las Vegas resort was expected to open in 18–24 months. Management said cash, operating cash flow and available revolver borrowings should fund operations and requirements for the next 12 months, subject to risks.
- Texas Station, Fiesta Henderson and Fiesta Rancho had not reopened; management had no current plans to reopen them in 2022. Durango construction faces potential cost, labor, materials, permitting and execution risks.
- Management reported increased inflation in food, supplies, energy and construction, as well as wage pressure from a shortage of qualified workers. It also noted variable borrowing rates began rising in Q1 2022 and could continue to rise.
- The North Fork tribal casino project remained subject to NIGC management-agreement approval, litigation and financing. The company had advanced approximately $50.3 million, with a $35.2 million carrying amount; recovery is not assured. Management estimated a 75%–85% likelihood of successful completion, but gave no assurance of timing or completion.
- A proposed Nevada gaming-tax ballot initiative, if not withdrawn and approved by voters in November 2022, could raise the rate from 6.75% to 9.75%, effective January 1, 2023. The Secretary of State’s appeal concerning withdrawal was pending.
- The regular quarterly dividend was reinstated at $0.25 per Class A share. The company repurchased 184,793 shares for $8.8 million under its program during the quarter; $145.6 million remained authorized through December 31, 2022.
Investor verification priorities
- Track Las Vegas demand, customer spending and profitability while three properties remain closed.
- Monitor Durango construction schedule, total project costs and the company’s $335 million–$460 million remaining-2022 capital-spending estimate.
- Review debt maturities, floating-rate exposure, revolver availability and covenant compliance as interest rates change.
- Follow North Fork regulatory approval, litigation, financing and recoverability of development advances.
- Confirm the outcome and potential effective date of the Nevada gaming-tax initiative.
- Assess whether cash generation supports dividends, noncontrolling-interest distributions, buybacks and planned investment without weakening liquidity.