Red Rock Resorts announces Q3 2018 results

Red Rock Resorts reported financial results for the third quarter ended September 30, 2018. The Company has adopted FASB's new revenue recognition standard ("ASC 606"), effective January 1, 2018. Certain prior period amounts have been adjusted to reflect the full retrospective adoption of ASC 606, with no material impact on operating income, net income or Adjusted EBITDA.

Net revenues were $412.3 million for the third quarter of 2018, an increase of 1.6%, or $6.4 million, from $405.9 million for the same period of 2017. The increase in net revenues was primarily due to an increase in Las Vegas operations, partially offset by a decrease in Native American management fees.

Net income was $25.1 million for the third quarter of 2018, an increase of 12.3%, or $2.8 million, from $22.3 million for the same period of 2017. The increase in net income was primarily due to an increase in non-disrupted Las Vegas operations and an increase in the fair value of derivative instruments, partially offset by lower operating income and higher interest expense.

Adjusted EBITDA was $109.1 million for the third quarter of 2018, a decrease of 7.9%, or $9.3 million, from $118.4 million in the same period of 2017. The decrease in Adjusted EBITDA was primarily due to a decrease in Native American management fees and ongoing construction disruption at Palace Station Hotel & Casino ("Palace Station") and the Palms Casino Resort (the "Palms"), partially offset by an increase in non-disrupted Las Vegas operations.

Las Vegas Operations

Net revenues from Las Vegas operations were $389.7 million for the third quarter of 2018, an increase of 3.9%, or $14.6 million, from $375.1 million in the same period of 2017. Adjusted EBITDA from Las Vegas operations was $97.9 million for the third quarter of 2018, a decrease of 3.9%, or $3.9 million, from $101.9 million in the same period of 2017. The decrease in Adjusted EBITDA was primarily due to ongoing construction disruption at Palace Station and the Palms, partially offset by an increase in non-disrupted Las Vegas operations.

Native American Management

Adjusted EBITDA from Native American operations was $19.8 million for the third quarter of 2018, a 21.9% decrease from $25.3 million in the same period of 2017. The decrease was primarily due to the expiration of the Gun Lake Casino management agreement in February of 2018, partially offset by continued strong performance at Graton Resort & Casino.

Palace Station and Palms Redevelopment Update

The Palace Station redevelopment project remains on schedule and on budget with all aspects of the project expected to be complete by the end of 2018. As of September 30, 2018, the Company has incurred $179 million in costs against the $191 million project.

The Palms redevelopment project remains on schedule with the remaining components of phase two expected to be complete in the second quarter of 2019 and phase three expected to be complete by the third quarter of 2019. The overall budget for the redevelopment project has been increased to approximately $690 million primarily due to increased construction costs driven by high demand in the Las Vegas market, as well as higher material costs. As of September 30, 2018, the Company has incurred $318 million in costs against the $690 million project.

Balance Sheet Highlights

The Company's cash and cash equivalents at September 30, 2018 were $110.6 million and total principal amount of debt outstanding at the end of the third quarter was $2.77 billion. The Company's debt to Adjusted EBITDA and interest coverage ratios were 5.1x and 4.4x, respectively.

Quarterly Dividend

The Company's Board of Directors has declared a cash dividend of $0.10 per Class A common share for the fourth quarter of 2018. The dividend will be payable on December 31, 2018 to all stockholders of record as of the close of business on December 14, 2018.

Prior to the payment of such dividend, Station Holdco LLC ("Station Holdco") will make a cash distribution to all unit holders of record, including the Company, of $0.10 per unit for a total distribution of approximately $11.7 million, approximately $7.0 million of which is expected to be distributed to the Company and approximately $4.7 million of which is expected to be distributed to the other unit holders of record of Station Holdco.