RRR - Earnings call transcript Q1 2019

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Operator

Good afternoon, and welcome to Red Rock Resorts First Quarter 2019 Conference Call. [Operator Instructions]. 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.

Stephen Cootey

Operator. you, Thank and XXXX everyone, Red Resorts Rock Good Call. welcome Quarter Earnings First afternoon, to

Joining call Officer; on and Fertitta, and me the Finch, Chief Chairman are Rock Bob and Frank Operating Resorts Officer. Chief Vice Executive Executive Richard President; today Haskins, President from Red

are Our will The to may results differ statements those projected. include in under provisions related safe harbor detailed and call the laws. United with statements Developments and filings today risks these uncertainties of States forward-looking the the federal our securities from SEC.

also During we non-GAAP call, this will discuss financial measurements.

and of X-K, Also, recorded. this call earnings complete press For prior were to definitions our the please note Form and afternoon reconciliation call. which GAAP, to please the being refer release in is filed figures tables financial this these to

impacted discuss performance versus a will ex completion, a operations Vegas our to a redevelopment Notably, revenue now EBITDA of at is within Palace points performance the results. in adjusted of million to turn our the net decade. revenues XX% XX.X%. and $XXX.X X.X% disrupted increased X to substantial on X.X% now nearing financial flow-through achieved net Let's basis the EBITDA Vegas we margins $XXX million. $XXX.X solid EBITDA Adjusted decreased and XX%. and to net to decreased X.X% quarter quarter, Las XX.X%. being same-store revenues to our to disruption throughout increased quarter in be a X.X% operations, basis, first and longer Adjusted is basis range With million. the respect Palms to to our basis. $XXX.X Las consolidated over Station highest redevelopment our position On redevelopment financial results no negatively targeted nondisrupted we these fully basis construction points increased margins a complete Despite the XXX to Palms on million Because rapidly increased by for was our properties' XX

both those however, numbers We will, both provide call. the in were additional solid our gaming quarter growth and of later The properties by across driven respect to with nongaming segments business. color first

the for same-store of XX-month now period. the gaming market, rate our at sales this at its with market the seen a in revenues of Vegas growing Las on than we've strength locals market grow twice basis, As States basis same in United market more at the any of a on overall that trailing remainder gaming revenues fastest the rate during regional

key high MSA fastest-growing Las is growth. a take at Las remains metrics some in the is an now nation. supportive the which related and Vegas and look to at the now Vegas future Let's economy, robust all-time very Population of second

Las in XX the Vegas was XXXX, new by increase up an have growth, March. seen X.X% Las nearly forecasted a Wage X.X%, with of Vegas also is impressive by today. add construction record XX% XX to months currently XXX,XXX of residents as from months weekly increase job Additionally, increase employment, is employment and growth. reporting Employment we now led for XX.X% broad-based March which an consecutive at by measured ended almost also trailing is robust earnings, levels growth. an of

remains as prices up XX months accelerated, In addition, in in home in were median solid trailing discretionary taxable ended increase the above average. spending a very sales the March, has X.X% well Housing for evidenced by as national X% January.

in low has compared market. More been billion during to downturn. XX% positive Las Since of a time, of a home Vegas value home over equity of the have that homeowners $XX importantly, more created XX% the now than equity

center new Raiders nation locals expansion now planned gaming supply/demand rate and the underway market led economy. the and convention view market this we vibrant best-in-class lowest scale a or positioned investments billion in developments, the the why impressive in most extremely explain expand market. which development of very with United by organic capital in Project attractive ongoing the Vegas dynamics, environment take over combined local economic assets Las locations, the Las In Vegas, unparalleled the backdrop is we Strip in $XX growth And uniquely regulatory This will addition, deep with States. multiple new favorable all the of there to NEON, and are further and in stadium, remain distribution gaming advantage and tax our the pipeline, stable

quarter, to we initiatives. continue the our bonusing we time-based developed been play latest has allow we are well continued new us and newly a as guests. device which meaningful carded system slot our visit. time form on to such to introduced metrics programs personalized personalize The slot marketing per of December, second gaming in now revenue extremely the introducing individual enhancement company-wide engine, At for system spend of more key by role in on-device the slot messaging, Back and increases see Turning the in beginning pivotal technology the guests. effectively accelerating which IGT win, to and growth received our in bonusing

programs will the the year. addition, we number In enhancements system of including a remainder introducing new bonusing other throughout be company-wide of

engaging, Monopoly, system relationships revenue gaming even Fortune will that and enhancements, growth. that such will We further an convenient and the along branding these with as accelerate Wheel customer additional more rewarding in provide of experience turn are confident

and as enhancements respect dim we including budget to the luxury bullish to experiencing property-wide only has going to tourists tourists Station Las this Empathy expanded seamlessly for these at state-of-the-art to Tim appealing status self-park customer Station X,XXX been upon awareness completion. the nongaming very returns property. noted project a also on expect and quo completed as the the has revenue Las the in casino enthusiastic residents the already components With million add differentiating venue's opening a the further And Palace the our on next exciting Wan, appeal the redevelopment Vegas. critically expansion unique hybrid restaurant, Palace it was XXX-foot $XXX improvements. one time newly significant call, completely Michelin-starred connection based of with property both feedback Tower in the Hirst-inspired up final of into connector XXX on remain Palms last our accommodate property's ultra to square new entire a making respect seafood suites gaming largest tall and company property opportunities positive of rebranding be same high-energy property's budget. time, we we city. With the our these the dayclub adjacent and Palms and very including Turning the dome double-digit basis. in directly XX key casino restaurant Notably, grand a projects. Kong April, will XX,XXX-square-foot on We clearly several to from is side of growth redevelopment Palms a Damien plan Vegas our million with $XXX been both and exterior XXX,XXX eatery the dayclub Street offers Strip. with Completion guests, nightclub, daylife both of Suite; and Palace in Vegas reviews with floor and redefining Shark, element locals response XXX-room the casino feet and added to That reimage on entertainment approximately is and their and At partnership generate table on Beard across amenities Hospitality, of the Tower as in Las campaign Station casino redevelopment, of guest and fully a visible that to drive and Tower experience the ingress along number projects redevelopment, December. In Initial to sum The to nearly our alike designed to new nationwide Hong plan them be both with floor; remains ability late on are a alike segments. of that transformed to award-winning New machines early leader key into connector exterior, reposition experience hospitality these LED changes. garage games X and on adds York-inspired the sign year-round QX; consisting Ho with marketing will as on open already chef directly X the club debuted of to the KAOS, result to a to newly XX,XXX-square-foot the time acclaimed east of reopening Green weekend these floor; cover, seasonal extremely of completely integrated Fantasy combined, trial part in the and the an a Phases in a developed Bobby which unveiled of which its and James spectacular rave are Place indoor Flay; a Coast nightlife on a Kitchen, in nightlife; of West the from in slot Ivory Clique completed and the the celebrity expanded preexisting spanning and the to integrating

we touch QX. once-at-a-time of X, with noted of components X, Once Wan, late As nearly a of Ho QX will complete this iconic the completed to it Vegas. expected component rapidly and wellness the gaming late spa in are nearing Las project confident expected and final a Phase in destination that to entertainment be completion be fully is salon, the Phase become will and must-see Tim complete, property, final the earlier, in aspect world-class reinvestment

we the year. Lake Turning by progress impact a year, of the to the the related last management With the for million, exploration our agreement offset North That February the to in agreement project. pieces management remaining quarter of to primarily down the Native management litigation XX.X% remains $XX.X as few the from American performance partially from by Fork in Gun reported Graton continue negative fees of the was of property's We respect segment. project, robust. X.X% fees to increase driven prior with

key Court petition involving Enterprise taking court As the but until before that which is to the the granted received matter favorable has ruled deferred, California involving court review project, at we've court level. the Tribe, tribe's - action similar decision case noted, on for respect into further with appellate a previously ruling Supreme that very a the in a lower it's

schedule end capital company's in cover hearing The case million will at and principal now court quarter was billion. balance cash sheet the near million. spend a Cap respectively. debt coverage in at At the quarter, first $X the ratios was $XXX end and the EBITDA first and net debt the of outstanding end that anticipate X.Xx, first on a interest to equivalents and the of to will of X.Xx quarter few $XXX.X Enterprise cash the the future. were continue amount I were items. We and total quarter

For and the year we expenditures the be capital XXXX, $XXX between will Palms inclusive redevelopment anticipate of full million million $XXX project.

to completion year. redevelopment amount the cash in significant project, - Following QX Palms the a expect be generate significant flow a we this beginning of of free

As our we forward performance sheet financial target exit this the less. maximizing a on a the and company development properties as Xx with deleveraging will balance our moving or leverage focus cycle, be ratio of existing

Directors call. XXXX. Lastly, of declared share The for to concludes be to remarks Board will the April second and Operator, the of XXXX. this quarter XXXX, $X.XX take on today, payable shareholders June record payable per questions on XXXX, ready of participants cash June XX, for XX, on of the a company dividend that from its announced now prepared had on the dividend we're our XX,

Operator

Instructions]. [Operator

from first will question Greff Joe of come JPMorgan. Our

Joseph Greff

your locals notably early little it's And maybe opening phase again, you nonlocals. talk latest at here, about what, maybe realizing and bit super about But Palms. impact just here a properties, the know you GVR? some experienced early Red of and at the I you if can Rock any, between mix with have can talk days its the other

Stephen Cootey

cannibalization to Yes, perspective, We're less Joe, seen right. project. first. property. From sure. cannibalization the the we've I'll no any on Well, XX you're into actually a days address than try last question

promising. very In an I'm the fact, is ignoring Not forgot that quarter, in seen I crossover play Joe. the was? last the - And question first we've increasing which you,

Joseph Greff

in weeks, the Just guess, last tourists of, mix and, terms say, between I locals? the four

Stephen Cootey

tell. to I mean, early and too this one, it's completely

So months... X give me X another to

Unidentified Company Representative

Both up considerably. segments are

Stephen Cootey

Yes.

Joseph Greff

retrenching I that costs the And knowing the been with in of included just some XQ that totally get maybe both versus do have in Palms given, I there - XQ, we was relative respect it. CapEx, then the just are may profitability hitting see Palms small? contributions to guess, XQ,

Stephen Cootey

I mean, I'm sorry.

a up broke Joe. you little So there, bit

So if repeat you question. could maybe the

Joseph Greff

it whatever a EBITDA versus the Did the little in XQ? Palms bit XQ contributed on in retrench

Stephen Cootey

you mean, projects very both on stages. I these it's projects long-term beginning and mean, at much understand and very - we take I are again, the very, Actually Joe, ramping view up. a

Palms little from margin. The any standpoint, bit the Palace don't were all. margins actually on was are drag up, but there both core and of So a a think retrenching profitability at business I a

Operator

The comes from Santarelli next question Deutsche Bank. Carlo of

Carlo Santarelli

of And of wherever more have to acknowledging thinking that run kind the revenue maybe well question do along doing both to and - lines about to when think that get how margin in think margins easier the we little a about for to bit kind about guess it's Joe's, rate time of of from same how level a sense of unique both aspects, expect will is the I the with But completion? of kind my you So development stabilize Palms, but greenfield guys ramps. the better from margins as and Palms achieve to the of rate a kind revenue and should it's it your terms kind as property? run as ability the when you believe line you're

Stephen Cootey

Yes.

Carlo, mean, new completely every completely not. whether a aspect project, question. or this that's we've I treated project. a touched of think, We've I this as actually good greenfield

different is take this than months. XX same So project, no going about as ramp a new to the

Carlo Santarelli

seeing Have of Okay. seems more higher-end obviously, Great. like there's seen trends granted which I one any - in in if locals Strip and all your evidence pressure - on but just been so you into could, impactful, over we're business, And some follow-up. the the segments then different the some it guys some maybe some locals have at seen spend customers' less of portfolio that of you Strip guys your on be of spilling softness will habits?

Stephen Cootey

positive No, the every seen - one, our to pretty at property growth; and two, actually. X of, closest actually with Strip, No, we it the haven't exception much extraordinary we've growth. properties seen we've revenue

customer we've behavior. So seen no in change our

Operator

Bank comes of Shaun from of Kelley question next The America.

Shaun Kelley

or sense sounds Steve, want can said move from metric that you the give on Palace full the you you we it - of Palace, the you remarks, Did on from the you just characterized here. almost guys trailing see portfolio to was overall of down a out start think, us as pretty the But the for the same-store XQ, Steve, Or you a give Xx you this market excluding versus to high you just sort level, kind think, like prepared a quarter what no the kind I Palace some want cannibalization away include, to identifiable. to for characterize basis, I if much But or are the [indiscernible] that market. you numbers? ex market, continue revenues? at outperform in of would how broader don't directionally

Stephen Cootey

bit mean, I core exceptional the That's growth a after moderated I right. QX. all think, in little business the

improvement as perform That and trends be seen sequentially continue we and - to But meaningful March, we with - the I both in and expect January. in all operators weaker growth same saw the a we the and had never here. we linear to and line then going said, market. we is think we've other February

Some exceptional. quarters going are to be

is to view kind You're as exceptional in at which our more we the the normalize, to like QX. months, be going as XX the of remarks, growth going we past bit have the continue and the over growth outperformed as in saw to mentioned is a Others, expect things market forward. prepared that I little look going modest. we growth But to business do to tends core way significantly we we've

Shaun Kelley

you've Or on Palms - little is on a more to of second the Great. to take little move little cadence is you like a to aren't cadence anything detail of the start of here turn to talk do be kind of on outside move work sort here. think, little ramp-up which that through longer expect that And the what's just left we any And marketing quarters bit the I you're to here? amenities progression? Can bit market? a baccarat bit - the area in some the bit of, and primarily - as you marketing a or just one then about forward for specifically there third areas Asian highlighted how we from online, market, going as sort of or the just of the terms

Stephen Cootey

think, that as correctly. sure significant you'll so the some mean, that yes, the occur on any cadence additional we I Tim marketing see see to forward, rebranded $XXX of - you're weekend as We've it's as because million to this year. I project. status a see to And going of expect go QX marketing into But there. steady in we to and Ho the with would expenses, throughout once launching have project, you'd more start make want theme launch some we Asian-centric happen I quo into we go put Wan, with kind of we our then, spend - opening

Shaun Kelley

Did at any we in of that of throughout the sort sort get modest of year? as of be of? quarter-to-quarter improvement aware move sequential some way the we Anything least should

Stephen Cootey

to this long XX-month answered this of view think what Again, we're back this So take to going go Carlo's, to view, I'd getting long-term is stabilization. an I a right? I with -

bumps we So of are way do in if programs there's doubt point out. in I going don't the I'll them the no there's well, road, improvement. a get some to to going sequential be think marketing but And

Operator

of question comes next from Curtis Nomura Harry The Instinet.

Harry Curtis

If the we could to gears Palms. shift

single a it distribution what sort your star on pretty you new this, do but you others introduced way? you to that ROI or address incremental the the it? broader advantages doing by property, your how get of approaching entertainment focus? the than what's on differently you're have expensive, - And can the tend As Strip It's

Stephen Cootey

profile tough is there. and sure unparalleled mean, in kind as appeal - don't I of But idea a in pretty it's that but to terms all in of in. we to really We up that's audience. with why not it every to ROI crowd, the we that into of level to built performer. talent I'm appeal I'm one individual of the going a question come that's actually venue helped the on appeal detail so in answer went had out deals. on go to we idea a a single music The We was actually of with broad comment market. we want there, terms wider or of perform just kind EDM Harry, markets, across to group a brought people who to to not to to

Harry Curtis

is the that ramp to the time? you this for part And initial employ strategy a is Okay. reintroduction marketing Or some of this of and Palms? intend

Stephen Cootey

This strategy. a continued is

Unidentified Company Representative

I and Harry. early property the mean, reintroduce in to facility. I trial mean, locals we're get for tourists both trying just days, the and the we're to

So that giving [indiscernible] of do same start step launch, and And reintroduction, trial every we'll then property. new initial focusing on we property, a as through expenses the one as It's time thing the is rebranding we can. once the get everything. much we open we

Harry Curtis

gears. Shifting

population in frequent kind you lift similar seeing of are your lift the player sign-ups? Given locals Las enjoying, that is Vegas a

Stephen Cootey

you're all within win, I uncarded, increases per slot. mean, of with getting metrics, I new player that out. We played, hours carded what visit, are slot slot any spend seeing - sign-ups, our all look at? of along at metrics Harry, mean, you Is listen, sign-ups, across

Harry Curtis

I'm trying versus get your to at is ones are What customers that sense more. of Yes. playing new just older

Stephen Cootey

seeing Yes. are both. No, we

Operator

of will Stephen come The next Grambling question Goldman Sachs. from

Stephen Grambling

locals locals couple have but What a and the been even RevPAR question, outperform can broader a the become biggest facing challenge you numbers Strip and overall the GGR to And years at Strip? maybe correlated? is time been two has been choppy has do point of now, solid. a of the for as clearly for market think continue sluggish or prolonged period the This some

Stephen Cootey

But - they're So I from indirectly think hotel-centric business customers a Strip most I our as beyond right? is mean, we're correlated, as employees. particular are their we perspective, listen, economic not that, And why think gaming-centric. growth. about we continue more of We're kind I've Strip. right indicators to and to mentioned in dozen business different the local the going we're of our see a

Unidentified Company Representative

how the locals wage be the they're think totally markets market the on at is two The doing, different growth, of is focused growth, population end day. going economy retirees to I here indicators where coming market. business that's comes the we're are very from, Las for Vegas into primarily the Las market. bullish Vegas positive, in locals and economy And all our and the the

Stephen Grambling

the how as a hold either we also, we the a as disruption And in on kind went you additional any Last follow-up. magnitude a of of basis should should any on progresses. color calendar bit can one, be little thinking maybe think that and shift but you the year dollar and more about this, give if of there's And both and about? micro quarter or that through

Stephen Cootey

I - Palms? You're the talking mean... the I mean, there I mean, - was

Stephen Grambling

the just portfolio. No, across

Stephen Cootey

mean, I continued we're kind think, at see now opening we beyond through I be we're to as still perspective, a any from the No. holds at there. I But Palms, disruption. expenses April, as Palace, disruption, process. the Starting I though. work calendar of Palms again, going beyond There's we're the don't the elevated pretty mentioned, the much

Operator

SunTrust. next, Barry of have from question a And we Jonas

Barry Jonas

the around market. about at mean, of any resort - promotion I offered I locals any the on how You've upside? Strip just Has see potential the some great fee you how curious I'm backlash that properties. parking some you no-resort your - versus you driven fees, given recently think rising some fees? color do believe

Stephen Cootey

to think opportunity, for I mean guests particularly to for don't the fees our and I manageable, resort our Strip. parking are we the that's think near pay very particularly Strip. there's I - resorts an relative enforce our

Barry Jonas

the authorized February, in share believe, a $XXX authorization. I Board million then, And Great.

Have in capital terms Just repurchases allocation? And prioritize bought what color? anything? any given you you curious, of do you have share

Stephen Cootey

possibly We pay to built just that, So This goes focus, really [indiscernible] an yet. deleveraging. could did one, at been is as - and in debt no, point. We have that down of paying the our call, two, anything realized properties; on buy December - bought now, right that suspenders. to XX. back mentioned on focus stock This up place. would I But not ramping is we haven't on kind to the meltdown have our opportunity and

Barry Jonas

acres, in And June? last Wild for Wild, Sure. West me, target is purchase still the that then land on close for to XX

Stephen Cootey

Yes, it is.

Operator

a Beynon have of from we question Chad next, Macquarie. And

Chad Beynon

Graton Regarding fee you now, I year-over-year up you up going and your the growth, we think came perspective? management assume from that in what's based well. in at think that that was XX% significantly that see pretty property that improvement above that a sequentially, as one on I on Should remarks, said prepared could continue was area to most from surprisingly expectations.

Stephen Cootey

- to keep Yes. is the think your explanation short, I I fair. assumption that's mean just

Chad Beynon

special distributed nothing There's and improvement that they're seasonality That's in fees. quarter Great. the way? of kind just of those Okay. the about

Stephen Cootey

Correct.

Chad Beynon

Okay. you The that could $XX attributable as what to? write-down, million to was elaborate

Stephen Cootey

Well, the you're pretty in put $XX open. yes, my - I'm That's sequentially talking million P&L. sorry, it's write-down, actually weirdly yes,

Palms. the to related all that's So

Operator

Instructions]. [Operator

Union from next will of come DeCree Our John question Gaming.

John DeCree

hit high it on for on your I one sheet. deleveraging about balance prepared Just level in you've the me. directly focusing Steve, think remarks

I of Xx. leverage think mentioned ratio the you about target

cash and these long you'll Looking ramp that might how properties get at there. not that to generate take amount could the all of flow

that quick then, capital was target. EBITDA if comment you wondering target. achieve how you And you just once to question, think about on about in principal actual relative growth allocation I leverage obtaining So just a paydown you think how your could

Stephen Cootey

is because of bit to little one easier you're get both. a Well, question the going last an

are rightfully expected to ramp. properties think said, you the I As

mentioned not to, once we're any to your alluded get core and So a you - and amortization you'll but got significant head going natural generator. expect debt XXXX, ramp-up I've through we'll the that and - to property just through from Palms, cash you growth, Palace some normal you've then of to and free the deleveraging as and complement be

so have options shares, developments/M&A. new great dividends could include at which the available to value looking and maximize back buying to is lot thing a returning to our shareholders, we're going potentially And of

Operator

would back Cootey closing the session. our conference any concludes like question-and-answer over turn I Stephen to to this And remarks. for

Stephen Cootey

thank XX for joining, days. to bye. in look forward Well, talking you and to everyone Bye, I you

Operator

for The conference now today's Thank presentation. has you concluded. attending

may disconnect. now You

Red Rock Resorts (RRR) 1 May 192019 Q1 Earnings call transcript