Monarch Casino & Resort, Inc. — Q1 2024 Form 10-Q
Business context and period: Quarter ended March 31, 2024. Monarch operates Atlantis Casino Resort Spa in Reno, Nevada, and Monarch Casino Resort Spa Black Hawk in Colorado. The company reports the properties together as one segment. Amounts below are in millions, except per-share data and where noted.
Financial results
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Net revenue | $121.7 | $116.6 | +4.3% |
| Income from operations | $23.8 | $23.2 | +2.8% |
| Net income | $18.3 | $17.7 | +3.4% |
| Diluted EPS | $0.93 | $0.90 | +3.3% |
| Operating margin | 19.6% | 19.9% | Down 0.3 percentage points |
| Net cash from operating activities | $38.3 | $61.5 | Down $23.2 |
| Capital expenditures | $17.9 | $15.2 | Up $2.7 |
Casino revenue rose 3.8%, food and beverage revenue 2.9%, hotel revenue 8.4%, and other revenue 6.7%. Hotel revenue benefited from a higher average daily rate ($181.49 versus $161.08), although occupancy fell to 78.7% from 82.2%. RevPAR increased to $153.42 from $146.58.
Operating costs increased: SG&A rose to $27.1 million from $25.1 million, and depreciation and amortization to $12.5 million from $11.3 million. Casino expense as a share of casino revenue edged up to 38.0% from 37.7%; food and beverage expense ratio was 74.8% in both periods. Hotel expense ratio improved to 35.6% from 41.3%.
At March 31, 2024, cash and equivalents were $39.5 million, total current assets $66.5 million, and current liabilities $130.2 million. Credit-facility debt was $5.5 million, classified as current; the $100 million facility matures January 1, 2025. The facility rate was 8.5%. The company reported leverage and fixed-charge coverage ratios of 0.04:1 and 55.46:1, respectively, against covenant limits of no more than 2.5:1 and at least 1.1:1.
Material changes and cash deployment
- Operating cash flow declined from $61.5 million to $38.3 million. Management attributed the decrease mainly to the prior-year receipt of an income-tax refund and working-capital movements; higher depreciation and net income partly offset the decline.
- Investing activities used $17.9 million, primarily for Atlantis third-tower hotel-room upgrades and gaming and other equipment at both properties.
- Financing activities used $24.3 million, including $19.6 million for share repurchases and $5.7 million in dividends. The company repurchased 281,708 shares in the quarter for approximately $19.5 million.
- Cash declined to $39.5 million from $43.4 million at year-end 2023. The company’s $0.30-per-share quarterly dividend was paid in March; a further $0.30 dividend, payable June 15, 2024, was announced after quarter-end. Future dividends remain subject to board review and may be suspended.
Outlook, risks and unusual items
Management expects operating cash flows to support operations, planned capital expenditures and authorized dividends for the 12 months following filing, while noting that adverse financial, economic, competitive, regulatory or other factors could affect that outlook. No specific revenue or earnings guidance was provided.
- Management describes Reno as competitive, citing California tribal gaming, aggressive promotions, labor tightness and wage inflation. It sees Black Hawk’s expanded resort, market-share gains and sports-betting opportunities as potential growth supports, while noting staffing challenges.
- Construction litigation with PCL remains unresolved. The court has not issued a decision following the 2023 trial in the first Denver case; a separate company-filed case is set for trial in April 2025, and a related lien action remains stayed. The company says it cannot estimate the probability or amount of any gain or loss. Litigation-related professional fees were $0.5 million in each quarter presented.
- The credit facility is secured by substantially all company assets and bears floating-rate exposure. The company estimates a 1 percentage-point rate increase on the March 31 balance would add about $0.1 million to annual interest cost.
- Management reported effective disclosure controls and no material changes to internal control over financial reporting during the quarter. It reported no material changes to previously disclosed risk factors.
Key facts for investors to verify
- Developments and potential financial impact of the PCL litigation, which the company says cannot currently be reasonably estimated.
- Cash generation and working-capital trends, particularly the year-over-year decline in operating cash flow.
- Credit-facility balance, floating interest rate and January 2025 maturity, as well as the company’s refinancing or repayment plans.
- Whether the quarterly dividend continues, given the board’s discretion and competing capital needs.
- Share-repurchase disclosures: the filing states 281,708 shares were repurchased in Q1, but the monthly table’s “purchased as part of publicly announced plans” figures total 466,211. Clarification of this apparent inconsistency may be warranted.