Red Rock Resorts, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Las Vegas operations achieved highest first quarter net revenue and adjusted EBITDA in history with near-record adjusted EBITDA margin.
• Durango Casino & Resort continued growth, added over 95,000 new customers, on pace to be high-margin property with ~16% return net of cannibalization through Q1 2025. Cannibalization at Red Rock property is ahead of pace with revenue backfill on track.
• Construction continues on Durango expansion (over 25,000 sq ft additional casino space, new high limit slot area, bar, covered parking garage, ~$120M project, expected completion late Dec 2025).
• North Fork construction progressing well, expected to complete slab in July, close facility in Oct, open mid-2026, ~$750M project.
• Investments in Sunset Station (race/sportsbook, casino remodel, new bar/nightclub, Mexican restaurant, ~$53M cost) and Green Valley Ranch (room/suite and convention space refresh, ~$200M cost, work starts June 2025).
• Free cash flow of $93 million ($0.88 per share) generated in Q1, deployed for growth initiatives and returns to stakeholders via debt reduction and dividends.
• Declared special cash dividend of $1 per Class A common share and regular dividend of $0.25 per Class A common share, returning ~$159M to shareholders in 2025.

Segment Performance

• Las Vegas Operations: First quarter net revenue was $495 million, up 1.9% from prior year's first quarter. Adjusted EBITDA was $235.9 million, up 2.7% from prior year's first quarter. Adjusted EBITDA margin was 47.7%, an increase of 34 basis points from prior year. Consolidated first quarter net revenue was $497.9 million, up 1.8% from prior year's first quarter. Adjusted EBITDA was $215.1 million, up 2.8% from prior year's first quarter. Adjusted EBITDA margin was 43.2% for the quarter, an increase of 42 basis points from prior year.
• Non-Gaming Operations: Both hotel and food and beverage divisions delivered strong quarters with record revenue and profitability. Hotel division had second-highest first quarter revenue and profit driven by increased occupancy. Food and beverage division achieved near-record performance supported by higher cover counts across outlets.

Guidance

• Full year 2025 capital spend between $350 million and $400 million, down $25 million from previous earnings call.
• Durango on pace to become one of the highest-margin properties, generating return net of cannibalization of nearly 16% through Q1 2025.
• North Fork expected to open mid-2026 with ~$750M all-in project.
• Declared special dividend of $1 per Class A common share and regular dividend of $0.25 per Class A common share, returning significant capital to shareholders.

Risks

• Construction disruption at properties during renovations (e.g., Sunset Station, Green Valley Ranch, Durango).
• Potential impact of tariffs on project budgets and operational expenses, though expected to have minimum effect on announced projects.
• Initial cannibalization impact on Red Rock property from Durango's opening, though revenue backfill is ahead of pace.

Question and Answer

Q: Carlo Santarelli asked about sportsbook headwinds in Q1 and backfill at Red Rock property.

A: Scott Kreeger noted better sports win performance, Stephen Cootey said backfill at Red Rock is ahead of schedule, with cannibalization impact expected to be behind us.

Q: John DeCree inquired about special dividend coinciding with North Fork capital return and capital allocation.

A: Stephen Cootey said special dividend reflects balanced growth approach, with $309M left for share repurchases.

Q: Shaun Kelley asked about construction environment and tariffs impact.

A: Lorenzo Fertitta and Stephen Cootey discussed construction progress, tariff impacts on projects, and mitigation via alternative sourcing.

Q: Barry Jonas asked about managing OpEx margins amidst tariffs.

A: Scott Kreeger and Stephen Cootey said they are managing through alternative sourcing and negotiating with vendors, with no major current impacts.

Q: David Katz asked about operating leased properties and database trends.

A: Stephen Cootey said they would consider opportunities, Scott Kreeger noted stable database with upside in VIP, regional, and national segments.

Q: Steve Wieczynski asked about non-gaming spend and disruption.

A: Scott Kreeger and Stephen Cootey discussed non-gaming spend stability, upcoming disruption from Durango, Sunset, and Green Valley Ranch renovations.

Q: Joe Stauff asked about backfill timeline and California customers.

A: Scott Kreeger and Stephen Cootey discussed backfill timeline using historical trends and California customer visitation stability despite gas price changes.

Q: Ben Chaiken asked about ROI of projects.

A: Stephen Cootey and others discussed strong ROI at Sunset Station's race/sportsbook and casino remodel, Durango's high-limit slot room potential, and immediate impact of Green Valley Ranch's room/convention refresh.

Q: Chad Beynon asked about comparing property ROI and management contracts.

A: Lorenzo Fertitta discussed ongoing evaluation of management opportunities in tribal gaming but noted limited current opportunities.