Release Date: May 01, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Can you discuss the subdued OpEx growth in Las Vegas and the factors contributing to the high flow-through rate? A: Scott Kreeger, President, explained that better sports win performance during events like the Super Bowl and March Madness contributed to the upside. Payroll costs leveled off, rising about 2% due to a minimum wage increase. IT costs shifted from CapEx to OpEx, but COGS remained flat, and utility costs decreased by over 35%, aiding margin improvement. Stephen Cootey, CFO, added that insurance costs are rising, posing a potential headwind.
Q: How is the backfill effort at Red Rock progressing, and can you quantify the impact of Durango's opening? A: Stephen Cootey stated that the backfill is running about six months ahead of schedule, with cannibalization at Red Rock estimated at 10%. The company modeled the impact using historical data from Sunset and Green Valley, expecting full recovery over three years.
Q: What prompted the decision to pay a special dividend, and how does it relate to capital allocation strategies? A: Stephen Cootey explained that the special dividend reflects a balanced approach to investing in growth and returning capital to shareholders. The successful closing of North Fork financing and the return of $110 million in capital contributed to this decision. The company continues to evaluate share repurchases, with $309 million left in the buyback program.
Q: How is Red Rock Resorts positioned to manage a potential recession compared to past economic downturns? A: Stephen Cootey highlighted the resilience of the Las Vegas local's market, noting that Red Rock grew during past recessions due to customer preferences for convenience and affordability. The company is well-positioned with an efficient business model and strong balance sheet to manage through any recession.
Q: What is the current state of the construction environment, and how does it affect your development pipeline? A: Lorenzo Fertitta, Vice Chairman, acknowledged challenges due to tariffs but emphasized successful procurement of materials like steel and concrete domestically. The impact on project costs is expected to be minimal, around 4% to 6%, with no material impact on announced projects.
Q: How are you managing potential tariff impacts on OpEx margins? A: Scott Kreeger stated that operational procurement costs have not been significantly impacted yet. The company aims to manage costs through alternative sourcing and vendor negotiations, with passing costs to customers as a last resort.
Q: What is the strategy behind expanding the sports betting product beyond the local market? A: Scott Kreeger explained that expanding locations outside the brand, like Treasure Island, enhances market penetration where in-person registration is required. This strategy aims to increase revenue by providing convenient sign-up locations.
Q: How do you view the potential for future management contracts in tribal areas? A: Lorenzo Fertitta expressed interest in exploring opportunities in tribal gaming, citing a strong track record with past projects. While opportunities are limited, the company remains open to potential developments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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