Red Rock Resorts bouncing back with strong Q4 results

Red Rock Resorts on Wednesday reported record quarterly and annual cash flow figures, despite state restrictions that may have kept some of its most loyal customers away.

The parent company of Station Casinos Inc. achieved the highest fourth-quarter and full-year net revenue for adjusted cash flow in the company’s history, said Stephen Cootey, Red Rock’s executive vice president and chief financial officer.

“With the back half of the fourth quarter presenting some headwinds, our disciplined approach to running our business allowed the company to enjoy record-high (cash flow) and (cash-flow) margin and allowed the company to return approximately $703 million to our shareholders during the quarter,” he said.

In December, the company paid a $3-per-share special dividend to shareholders and conducted a modified Dutch auction to repurchase around $350 million in shares to return capital.

The company, operator of Red Rock Resort, Green Valley Ranch and several other locals properties, reported net income of $200.1 million — a 303.4 percent increase from the previous year — $1.66 a share, on revenue of $422.4 million for the quarter that ended Dec. 31.

In the same quarter a year earlier, the company reported net income of $49.6 million, 39 cents a share, on revenue of $343.4 million.

For 2021, Red Rock posted net income of $354.8 million, $2.84 a share, on revenue of $1.618 billion. That compared with a net loss of $174.5 million, $2.13 a share, on revenue of $1.182 billion in 2020.

A gaming analyst who follows the company said Red Rock’s results surprised him and that the company is well-positioned in a very healthy Las Vegas locals market.

“We see this attractive same-store growth further complemented by Red Rock’s Durango development, which opens in 2024, one that should achieve a reasonable return on investment capital, given this sub-market’s higher income residential demographic with modest nearby, competitive supply,” said Joe Greff, an analyst with New York-based J.P. Morgan.

During Wednesday’s conference call with investors, company officials said the omicron variant of COVID-19 and mask mandates imposed by the state have had a detrimental impact on visitation to Station properties, particularly in the last couple of weeks of December.

“In the past, it used to be that people were scared to come out or they didn’t want to come out because they didn’t have the vaccine yet,” Chairman Frank Fertitta III said. “This time, basically the response was, ‘I have the omicron variant.’ So I think that really did affect our business.”

On the plus side, said Lorenzo Fertitta, a director with the company, the 21-to-25-year-old demographic has been resilient and sign-ups for the company’s Boarding Pass loyalty card have increased.

Company officials continue to closely monitor and adjust non-gaming asset pricing, particularly in food and beverage and catering which are sometimes adjusted on a daily basis because of supply chain issues.

Cootey said food and beverage and the company’s bowling amenities have remained relatively stable, but revenue from movie theater amenities has been down, which Station attributes mostly to a smaller menu of new movies available.

With Texas Station, Fiesta Rancho and Fiesta Henderson still closed with no opening dates in sight, and the $650 million deal to sell the Palms to the San Manuel Band of Mission Indians only awaiting regulatory approval, the company is able to await the next best development opportunity in its portfolio.

The company already has broken ground on a $750 million locals property in southwest Las Vegas on Durango Drive and will work on that before considering other development options in Southern Nevada or central Reno.

The company also is looking to employ a new cashless gaming system it has field-tested at Red Rock Resort and Green Valley Ranch with Reno-based Automated Cashless Systems. Company officials said they expect to deploy the cashless system to all of its properties within the next two quarters.

Red Rock Resorts shares, traded on the Nasdaq exchange, were down 28 cents, 0.63 percent, in average trading. After hours, shares perked up $3.72, 8.4 percent, to reach $48 a share.

Contact Richard N. Velotta at rvelotta@reviewjournal.com or 702-477-3893. Follow @RickVelotta on Twitter.