Red Rock Resorts, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Red Rock consolidates Station Casinos LLC and its subsidiaries, operating seven major and ten smaller casino properties in the Las Vegas region. Red Rock held approximately 58% of Station Holdco’s economic interests at quarter-end; Durango Casino & Resort, opened in December 2023, contributed to year-over-year growth. Unless otherwise noted, amounts below are in millions.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Net revenue | $488.9 | $433.6 | +12.7% |
| Operating income | $155.5 | $137.3 | +13.3% |
| Net income | $78.4 | $85.5 | −8.4% |
| Net income attributable to Red Rock | $42.8 | $44.7 | −4.1% |
| EPS, basic / diluted | $0.73 / $0.68 | $0.77 / $0.75 | Lower |
| Adjusted EBITDA | $209.1 | $194.2 | +7.7% |
| Operating cash flow | $126.5 | $140.5 | −10.0% |
| Capital expenditures, cash paid | $98.1 | $175.5 | Lower |
Operating margin was approximately 31.8%, versus 31.7%; Adjusted EBITDA margin was approximately 42.8%, versus 44.8%. Casino revenue rose 9.9%, food and beverage 19.4%, room 20.4%, and other revenue 11.0%. Casino margin declined to 73.2% from 75.1%, and food and beverage margin to 21.3% from 23.1%; room margin improved to 70.0% from 69.0%. Hotel occupancy was 88% versus 87%, while ADR increased 9.2% to $216.69.
Balance sheet, debt and liquidity
- Cash and cash equivalents were $129.7 at March 31, down from $137.6 at year-end. Current assets were $275.3 and current liabilities $306.9.
- Debt carrying value was $3,446.6, up from $3,327.8 at December 31; total liabilities were $3,795.0. Cash less debt was approximately negative $3.32 billion.
- Available borrowing capacity under the new $1.1 billion revolving facility was $871.1, net of $185.0 drawn and $43.9 in letters of credit and similar obligations. Management said cash, operating cash generation and available revolver capacity should fund operations, capital needs and debt service for the next 12 months.
- On March 14, Station LLC refinanced its credit agreement, including a $1.57 billion Term B loan due 2031 and a $1.1 billion revolver due 2029, and issued $500 million of 6.625% senior notes due 2032. The new Term B loan bore 7.58% at quarter-end. Debt refinancing contributed a $14.4 million income-statement loss; cash flow disclosures include $10.0 million of related fees and costs paid in the quarter.
- Interest expense rose 34.7% to $57.2 million, primarily due to higher variable rates. The credit facilities include a maximum secured net leverage covenant of 5.00-to-1.00; management reported covenant compliance at quarter-end. Two interest-rate collars with $750 million total notional were entered into in April 2024.
Material changes, outlook and risks
- Durango supported revenue and operating-income growth, while its operating costs, higher depreciation and ongoing close-out investment also increased expenses. Q1 capital expenditures were below the prior-year period, when spending was primarily related to Durango.
- Q1 financing cash outflow included $74.1 million of dividends and $57.5 million of distributions to noncontrolling holders. The company paid a $1.00-per-share special dividend in March in addition to its $0.25 quarterly dividend. A further $0.25-per-share dividend was announced for payment in June. The board extended the $600 million repurchase authorization through December 31, 2025; $312.9 million remained authorized at quarter-end, with no program repurchases in Q1.
- Management estimated $75–$135 million of capital expenditures for the remainder of 2024, including Durango close-out, and $12.8 million of required principal payments and $168.9 million of interest payments. These are estimates, not earnings guidance. The filing provides no formal revenue or earnings forecast.
- For the North Fork tribal development in California, the NIGC approved the management agreement in January 2024. The company estimated construction could begin within six months and the project could open 15–18 months after construction starts; estimated future development costs are $375–$425 million. Red Rock had advanced approximately $62.5 million, with a $47.4 million carrying amount. A legal challenge remains unresolved, financing is not yet assured, and management estimated a 75%–85% likelihood of successful completion and opening. Recovery of the advances is not assured.
- Management cited inflation, higher interest and energy costs, construction and labor cost pressures, competition, local economic conditions, regulation and litigation as risks. It said favorable visitation and spending trends continued, but could not predict whether they would persist. The filing reported no material change in previously disclosed risk factors; routine litigation was not believed likely to materially affect results.
Important facts for investors to verify
- Whether Durango’s incremental revenue and operating contribution sustain margins as its opening-related costs and capital spending normalize.
- Future variable-rate debt costs, refinancing effects, leverage and continued covenant compliance; the filing does not state the quarter-end secured net leverage ratio.
- North Fork litigation developments, project financing, construction timing and the recoverability and timing of repayment of advances.
- Actual 2024 capital expenditures, cash generation and debt service relative to management’s estimates, alongside continued dividends and distributions.
- Terms and effectiveness of the April 2024 interest-rate collars and the resulting protection against rate increases.