Red Rock Resorts outlines $385M Durango expansion with 400 new slots while extending share repurchase program to 2027

Earnings Call Insights: Red Rock Resorts (RRR) Q3 2025

MANAGEMENT VIEW

* Stephen Cootey, Executive VP, CFO & Treasurer, reported, "Our Las Vegas operations once again set new records, delivering its highest third quarter net revenue and adjusted EBITDA in our history while maintaining a near record adjusted EBITDA margin. This marks the ninth consecutive quarter of record net revenue and the fifth consecutive quarter of record adjusted EBITDA, underscoring the strength, consistency and long-term earnings power of our operating model."
* Management highlighted ongoing success at Durango Casino Resort, with continued expansion in the Las Vegas locals market, increased visitation, and new customer acquisition. The current Durango expansion phase—which includes over 25,000 square feet of casino space, a high limit slot area, and 230 new slot machines—is on track for late December completion at a cost of $120 million. Attention is now turning to the next phase, which will add more than 275,000 square feet to the property and approximately 400 new slot machines, a 36-lane bowling facility, luxury movie theaters, new restaurants, and multiple entertainment venues at a projected cost of $385 million. Construction is expected to begin in January and take about 18 months.
* Cootey announced, "Our Board authorized an extension of our existing share repurchase program to December 31, 2027, as well as authorized an additional $300 million to our existing share repurchase program, giving us $573 million of availability for future share repurchases."
* The Board also approved an increase in the regular quarterly cash dividend to $0.26 per Class A share, payable December 31.

OUTLOOK

* Management expects completion of the current Durango phase in late December and commencement of the next phase in January, with construction spanning approximately 18 months.
* Cootey stated, "For the full year 2025, we now expect to spend between $325 million and $350 million, down $25 million from our previous earnings call, mainly due to the timing of capital expenditures."
* Management anticipates continued disruption at Green Valley Ranch into 2026 and projects $8 million in Q4 disruption from construction at that site.
* The company remains focused on core local guests and expects continued stability in the slot and table games business.

FINANCIAL RESULTS

* Las Vegas operations reported third quarter net revenue of $468.6 million and adjusted EBITDA of $209.4 million. Adjusted EBITDA margin was 44.7%.
* On a consolidated basis, including $3.9 million from North Fork, net revenue was $475.6 million and adjusted EBITDA was $190.9 million with a 40.1% margin.
* Operating free cash flow conversion was 67.3%, generating $128.5 million or $1.21 per share in the quarter.
* Cash and cash equivalents at quarter end were $129.8 million, with total debt at $3.4 billion and net debt at $3.3 billion. Net debt-to-EBITDA ratio was 3.89x.
* Year-to-date capital spend reached $240.1 million, and full-year capital spend forecast was reduced by $25 million from the previous quarter.
* The company returned approximately $221 million to shareholders year-to-date through dividends and share repurchases.

Q&A

* Daniel Politzer, JPMorgan, asked about the rationale and expected returns for Phase 3 Durango expansion. Lorenzo Fertitta replied, "We expect to get similar returns on the expansion that we have gotten so far on the initial build, which is right in line with what we had communicated to everybody when we announced the project."
* Politzer also inquired about sports betting hold and construction disruption. Cootey explained last year's unusual hold and noted current quarter disruption at Green Valley Ranch impacted results by $2.5 million to $3 million, with $8 million expected in Q4.
* Brandt Montour, Barclays, questioned hotel business resilience amid Strip softness. Scott Kreeger, President, stated, "Occupancy was up about 244 basis points. And when you look at RevPAR, we were only off by about 1.3%. And if you added back in the GVR rooms that RevPAR, we probably would have been positive in RevPAR for the quarter."
* Stephen Grambling, Morgan Stanley, sought views on Strip trends and development opportunities. Cootey remarked, "We had 9 record quarters of revenue and 5 record quarters of EBITDA."
* David Katz, Jefferies, asked about leverage. Cootey responded, "This quarter marked the sixth quarter in a row of deleveraging. If it does spike up because of the development of these projects would be temporary in nature."
* Ben Chaiken, Mizuho, requested guidance on free cash flow conversion and seasonality. Cootey highlighted ongoing capital planning and noted Q3 to Q4 seasonality is usually up about 10% to 11%, offset by construction disruption.
* John DeCree, CBRE, explored gaming business database trends. Kreeger confirmed growth across local, regional, and national segments, with particular growth in VIP and stable performance in lower worth segments.
* Chad Beynon, Macquarie, asked about OpEx and cost sustainability. Kreeger said, "Operating expenses were flat to down for the quarter... fundamentally, as long as marketing remains rational, which it has for the last several years, these are completely sustainable efforts."
* Patrick Keough, Truist, requested an update on construction impact and taverns. Cootey said, "We're tracking below that number" for construction disruption, and Kreeger reported positive early performance in the taverns business.

SENTIMENT ANALYSIS

* Analysts focused on the sustainability of margins, construction disruption, hotel performance relative to Strip softness, and the scale of new capital projects. Their tone was generally neutral to slightly positive, probing for risks but acknowledging robust operating trends.
* Management maintained a confident and optimistic tone, repeatedly emphasizing record performance and the resilience of the business. Cootey stated, "We remain confident in the strength and resilience of our business."
* Compared to the previous quarter, both analysts and management maintained a similar tone. Management continues to project confidence, while analysts remain constructively inquisitive.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for 2025 capital spend was reduced by $25 million compared to the prior quarter.
* The company announced a new $385 million Durango expansion phase, a step up from previous updates.
* Operating and financial results set new records for net revenue and adjusted EBITDA, although consolidated revenue and EBITDA were lower than the previous quarter.
* Management’s tone remains confident, with continued emphasis on development and share repurchases. Analyst focus on disruption and sustainability echoed previous calls but with more attention on the scale and timing of new projects.
* The share repurchase program was extended and expanded, and the quarterly dividend was increased.

RISKS AND CONCERNS

* Management acknowledged ongoing and future construction disruption at Green Valley Ranch, Sunset Station, and Durango, expecting continued impact into 2026.
* Cootey estimated $8 million of disruption at Green Valley Ranch for Q4.
* Leverage could temporarily rise with simultaneous project developments, but management plans to fund projects from free cash flow.
* Analysts raised questions about market share shifts, hotel resilience to Strip softness, and cost sustainability amid ongoing expansion.

FINAL TAKEAWAY

Red Rock Resorts management emphasized that the company delivered record third quarter financial results and is accelerating its development pipeline with a $385 million Durango expansion slated to break ground in January. Supported by robust cash flow and an extended share repurchase program, management remains confident in the long-term growth trajectory of its Las Vegas-centric operating model, while acknowledging continued construction-related disruptions and disciplined capital allocation as critical to sustaining shareholder value.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/rrr/earnings/transcripts]

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