Q1 2021 Red Rock Resorts Inc Earnings Call
Good afternoon, welcome to Red Rock resorts first chord of 2021 conference call all participants will be on listen only milk.
Please note. This the conference is being recorded I would now like to turn the conference over to Stephen who T Executive Vice President and Chief Financial Officer, and Treasurer of Red Rock. The resorts. Please go ahead.
Thank you operator, and good afternoon, everyone.
Thank you for joining us today, the Red rock resorts first quarter of 2021 earnings conference call joining.
Turning on the call today are Frank and the runs on for Cheetah as well as our executive management team.
I'd like to remind everyone that our call. Today will include forward looking statements for the the safe Harbor provisions of the United States Federal Securities laws.
Developments and results may differ from those projected.
During this call we meet wall for discuss non-GAAP financial measures.
The definitions and complete reconciliation of these figures the gap please refer to the financial tables in our earnings press release it for him a K, which were filed this afternoon prior to the call.
Also please note of this call is being recorded.
Before we get started I would like to note that we are comparing our 20 2021 first quarter results against our 2019 first quarter results.
Given that of properties, we're closed for a portion of the prior year's first quarter to the COVID-19 pandemic. We believe this one angel comparison as of better reflection of of our performance this past quarter.
Now, let's take a look at our first quarter results.
On the consolidated basis, our first quarter net revenue was 352.6 million down 21 for like 1% from.
$447 million in the first quarter of 2019.
Are adjusted EBITDA with $156 6 million up eight per cent from 145.1 million in the first quarter of 2019.
Are adjusted EBITDA margin was $44 for percent for the quarter, an increase of 1197 basis points from the first quarter of 2019 and up 59 basis points from the fourth quarter of 2020.
With respect to of Las Vegas operations, excluding the impact from our foreclosed properties. Our first quarter net revenues was $338 for million up 5.4% from 321 million in the first quarter of 2019.
Adjusted EBITDA was 165.6 million up 38% from 120 million in the first quarter of 2019.
Are adjusted EBITDA margin was 48.9% of the increase of 1155 basis points from the first quarter of 2019 and up 339 basis points from the fourth quarter of 2020.
On the same store basis, we achieved the second highest net revenue and the highest adjusted EBITDA and adjusted EBITDA margin in the history of our operations.
During the quarter. We also we continue to privatize free cash flow converting 57% of adjusted EBITDA, the free cash flow generating $88 $8 million or 76 cents per share.
The Springs are total free cut the free casual generated by the company from our June 2020, reopening true the end of the first quarter to almost 350 million for $2.97 per share virtually every dollar going to pay down debt and forty-five our balance sheet.
Taking a look behind the numbers of the overall customer trends, we saw on the first quarter of consistent with the trends we've seen since I reopening last few we continue to see strong visitation from of younger demographic increased spend per visit more time spent on device plus the glowing return of our core customer the.
These transwell of positively impacted by the continued rollout of the COVID-19 vaccination program.
Using of capacity restrictions from 25 to 50 per cent of on March 15th and federal stimulus funny the.
These positive trends were offset by approximately for 8 million of COVID-19 billion of mitigation costs for the quarter approximately 4.9 million of can carry costs associated with our clothes properties for the quarter and the continued negative impact of government mandated occupancy restrictions on several of our core business lines, including hotel food and beverage in sales in cash.
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As of May 1st occupancy restrictions for further east for men, 80% occupancy and if at least 60 per cent of car County residents are vaccinated by June 1st we expect occupancy to increase of 100 per cent.
Well at least development should improve the business segments of most impacted by these restrictions we still expect to carry the continue to carry of COVID-19 mitigation costs as well as our carry costs associated with our clothes properties at least over the short term.
On the expense side as we're getting the anniversary of the government mandated closures of March of 2020, we now expect to achieve over $200 million per annum in cost savings is the.
Target is 50 million above the $150 million per annum cost savings we referenced on prior earnings calls as the company continues the benefit from the actions we took the streamlined our business optimize our marketing initiatives and renegotiate of number of of vendor in third party agreements.
These initiatives along with maintaining of discipline the operational focus.
Have been able the company to achieve and sustained higher profitability and drive more free cash flow.
Now, let's cover a few balance sheet and capital items.
The company's cash and cash equivalents at the end of the first quarter for $117 9 million in total principal amount of debt outstanding at quarter and was 2.87 billion in the first quarter, we pay down $78 million on that and since our reopening in June we've reduced our net debt levels by approximately 330 for.
From a peak level of 3.1 billion.
Capital spend on the first question was 5.1 million and as mentioned that our previous earnings call, the anticipate or 2021 maintenance capital spend to be between 65 and 75 million.
Also during the first quarter, who made of tax distribution of approximately $31.5 million to the LLC unitholders of station Holdco, which included the distribution of approximately $18 1 million true Red rock resorts because.
'cause Red rock resorts does not expect to pay cash income taxes of 2021. The company elected to use 14.1 million of its distribution to purchase slightly over 382000.
Class a shares can redeem of 100000 class b shares and and the average price of $29.16 per share under his previously disclosed of 150 million share repurchase program.
When combined with our debt repayment, we returned $92 for a million dollars to our stakeholders on the first quarter.
Now as for about a short update on our Norfork project and continue to move forward on this project of the near completion of our design efforts.
Over the next couple of weeks it will be having discussions for a lending partners as to how we can most efficiently finances project.
We continue to expect to have a shovel in the ground in the second quarter of 2021 with the construction expected to take 15 to 18 months.
As of now the budget for the for completion of this project excluding any financing cost is expected to be between 350 and $400 million. Upon completion. We expect this project to improve over 213000 square feet, including almost 100000 square feet of casino space 2000 class three slots and.
40 table games, and two standalone restaurants, as well as the phone call concept.
We are excited to begin the development of this very attractive project on behalf of the North Fork drive and will provided the the group be providing more details in the coming quarters.
Lastly on May 3rd we entered into a definitive agreement to sell the palms casino resort the palms place for an accurate purchase price of $650 million in cash tune of Philly of the sand and well band admission India's the closing of the transaction of subject. The customary can closing conditions, including regulatory approvals is expected to be completed before the end of the year.
While we are incredibly proud of how we transform the psychotic property, we determined that the sale of of the property of the best way to create shareholder value and enables us to emerge from the pandemic on a more accelerated timeline.
Going forward, we will continue to focus on and improve operations of our existing portfolio of leading gaming assets in the Las Vegas locals market.
With this transaction, we can accelerate the development of our Durango project located in the fast growing in underserved southwest Las Vegas market, while maintaining of fortress balance sheet.
Finally, this transaction will further reduce our interest expense costs and eliminate approximately nine $5 million of our current annual closed property carry costs of which two 7 million was incurred in the first quarter.
In conclusion that the government mandated restrictions waning with widespread vaccinations.
It can't pent up leisure demand, we believe the worst is finally behind us and we look forward to a brighter future.
We are proud of our team members and how we manage the weather the storm and such a positive manner for Ya.
One of the only gaming Cup of United States would not raise additional debt of equity during this crisis. Instead, we paid our team members during the crisis increased team member benefits, while simultaneously, reducing its costs of our team members.
Kept our focus on being destinations of choice within the Las Vegas locals market by increasing our service levels of the quality of our amount of these generated hi, strictly high EBITDA, an EBITDA margins will converting 68% of that EBITDA cash and saw reopening in June of 2020 pay.
Pay down 334 million and that two of now sitting at levels well below pre COVID-19 level.
Reduced our share counter the series of accretive transactions, all well contained to be one of the few gaming companies is still owns all of this real estate in the operating assets.
When these highlights of coupled with very favorable supply demand demand pandemic. The positive long term trends in population growth and the stable regulatory environment of characterize the Las Vegas locals market and the best in class irreplaceable assets and locations unparalleled distribution and scale and are deep organic development pipeline, we believe that.
We are uniquely positioned to thrive on this highly attractive market.
Lastly, we'd like to recognize and extend our thanks again to all of our team members for their hard work and for our guests for their support to this pandemic of.
<unk> of this concludes our prepared remarks for today and we are now ready to take questions from participants on the call.
We will now begin the question and answer session to ask a question Press Star then run on you touched on song.
You're using the speaker phone please make up your handset before pressing the keys to withdraw your question. Please press Star then too.
At this time of of pause momentarily to assemble a roster.
The first question is from Joe grass from J P. Morgan go ahead.
Good afternoon, guys. Thank you for taking my questions Uhm.
On my question isn't really on the sustainability of margin maybe directly.
On answerable Uhm, but really my <unk>. My question is focusing on how are you thinking about adding back existing capacity closed capacity to the three properties that are still close.
Vs. The relaxation benefits.
From having more hotel rooms, and F&B space that your existing properties and then you mentioned that the C. C. There at the end of you mentioned about the you know where the balance sheets going and that allows you to take on Durango development, maybe Frank you can update us on your current thoughts on the timing and scope of developing on the.
[noise] Durango site.
Of course.
Actually yeah, there was a few questions on there so in terms of.
We'll talk about the clothes properties, where casino reevaluate these clothes properties.
They were to take it very disciplined approach any potential property reopening in any case I think what we're looking for is if we decide to open the project.
It needs to generate incremental free cash to the entity.
In terms of bringing on more staff I think we expect as volumes to increase staffing in certain areas to also rise up but when you look at where where volumes are increasing the majority of that as of non gaming entities such as hotels sales of catering theaters for that example, all of which is very high margin businesses. So we expect to get a return the employee is red.
Kind of load up on new the new hires.
Alright, you have to look at our business model, we're we're primarily of gaming company.
Per cent of our revenues and cash flow primarily come from sludge Cablegram sports and we're very levered cause that's part of the business and while we still haven't gotten back to normal on the hotel.
Catering food and beverage, which for expect when the large her very true those those we do not bring should really take away from.
On the margins that we've been able to achieve given her you know of better cost structure that we've gotten true undercover remains of the theaters for.
<unk> basically Lucia income based on revenue, which flows through the 100 for for the dollar her total on catering or took the free return 40 50 per cent.
We were one of the few companies that opened up a nursery with primarily for all of our food outlets other than the buffers and those for bank of <unk> restrained Gmail between 25 for free.
Maybe for sure depending on where we've been on this COVID-19 cycle and so we would expect those margins true if everything just better than the <unk>.
Historically.
So we're feeling pretty good about what we're saying overall here on the local economy.
Right now on on overload go for you or anything, but you'd like to add to the no I think that covers on I mean like you said, we open with the essentially all of our amenities on June the for if we wanted it to see them as normal as possible to our guests in the things that haven't been open a really theaters and then whatever we're getting incrementally through the hotel and food and beverage, but that should come in.
A fairly nice margin so it shouldn't.
As far as bringing on additional many of these nothing should really drag on margins from there.
Then he had asked about Durango.
At the end of the day.
The company has the.
Great devote of our pipeline here in Las Vegas, primarily with gaming entitled a folks location of the surrounding of Las Vegas for hours and the fastest growing areas of the city.
We pay Durango is the loss of prime of of all of those development of sites.
It's the early non-restricted gaming location on the part of the Beltway were from a farmer Arabia. So it's one of the fastest growing areas of the city, we like everything for saying, we think it's very very underserved.
And we are currently very focused on the the scope of the project and defining the basically working to make our project. Most proficient project that we have ever built as the company trying to take everything that we've learned along the way and so we hope to be sharing those details with you guys.
Within the next.
Hopefully the the next call, we'll be able to share with you guys for the timing of the scope of the project, but we would like to <unk>.
In the position to be on the ground in the early 20 true.
Thank you very much for that.
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Our next question is from cars on <unk>.
Lily from about your bank go ahead.
Hey, guys. Thank you for both of my questions to the extent of you guys could comment on it.
Called on obviously, the not only the clothes property costs, but also some of the the health safety costs of measures and whatnot for about.
Mistaken those are kind of knocking your margin is somewhere in the ballpark of 250 to 300 basis points of quarter.
Clearly I would imagine some of those things day as we move forward here, but when you think about the other pushes in pools and this is kind of getting it to chose questions uhm relative to the portfolio of that you have open right. Now you guys of it pretty comfortably on this 700, you of thousand basis points of margin of treatment on this kind of.
The same storage spaces as.
As those Costco away is it possible that that perhaps we even see a little bit more expansion from here.
Okay.
I think having carla that as a possibility of mean to say that any of these are historically high margins and like to think that we can for one of these levels.
What I can comfortably say is I think we'll be historically above what we've been on for a long time I think this has a lot to do with any Frank touched on the best that but you know the business model is a recurring revenue revenue stream. That's based on really senator on the high market slot business and we've been maintaining our operational discipline of our labor and around marketing enter.
Your point, we do see some of the the until the mitigation costs leaning away. We also see some of the closing.
Closed property costs of leaning away in fact, the nine $5 million has pointed out earlier in the call and that's going to wean away as well plus the.
The businesses that were bringing along when the EBIT occupants.
Occupancy restrictions of listed.
Theaters, which opened up in early May your hotel, which is C traction of the through the end of the the first quarter and that's contained in this quarter. The same with sales in catering you're starting to see green shoots through the end of the 21 in a group business really returning in 2022, but because of his Frank mentioned, we've opened up all of the amenities, even your F&B the incremental margin is going on.
There's going to be it's going to be somewhat high because we're already covering our fixed costs of our existing operations.
Right well. Thank you Steven that if I could just one follow up on and Frank acknowledged.
You're obviously very clearly say ya.
Or color on it perhaps next time was spoke but just in terms of magnitude clearly construction costs.
Things like that have the have gone up.
How do we think about the the scope of the Durango project and and is that kind of construction impact on material impart something that that influences the timing on the on going forward with the project.
He could like the <unk>.
I have to give us a a range of instead of 350 of 500 million dollar project, maybe a little bit more than that you know how we could book about what what was the holidays.
Well, we don't want to get ahead of ourselves. We're we're going through the process I can tell you. The project is significantly tighter than any payment we've done on the past. We're gonna reported the you know the dollars and the place where we make money it's gonna be of focus on the slot machines.
And the table games are primary business you know, we'll have several restaurant of options for we will not have a buffet and I don't want to get ahead of ourselves on it. We're gonna go through on just the real cost on the project. We're <unk>, we're gonna know exactly where we are and who we wanted to give you guys.
Good solid information, but I cancel your credit, but everybody go go to the demographics around every vocal confirm I'm sorry, the Las Vegas, and you'll see the Durango is an absolute no brainer.
It like I said as most of Underserve of.
<unk> population relative to the number of dreaming physicians within the three of them a five mile radius and so we feel really good about it knowing what we're able to produce out of our other protected micro markets that were on and I can tell you we've seen of real inflection.
And I'm, telling you, it's real and the type of person moving the Las Vegas, but where we have these locations you know like Red rock in Green Valley of of it around you know the the suburbs, where the everybody wants to live in.
And the quality of the customer of this moving the Las Vegas and the high end.
Part of our business is is stronger than the suburb of the end.
This is Lorenzo if you look historically.
We've been able to generate outsized returns on the projects that we.
Find the location on the freeway on great traffic Greg demographics.
We've been able to generate the outsize returns and that's why we're so excited about the Durango project.
And without committing to an actual size or certainly we don't have a budget yet, but we do feel comfortable that given the amount of free cash flow as of the companies generating that we can build that project without affecting our den levels and affecting our balance sheet. So you have that kind of powerful effect of being able to continue.
To have the.
Strong growing existing operations and then.
Growth of beyond that with all of our development opportunities coupled with the ability that essentially execute that.
With the free cash flow that we're generating of not having the level of the company of to do it.
Thank you guys.
And the next question is from Steve <unk> from <unk> go ahead.
Hey, good afternoon, guys. So so what to ask a question about the the palm sales and I guess the question actually this is probably give me of the two part question, but the first part you know would be do you guys think you would actually of soldiers asset if if and this is somewhat hypothetical but if it's COVID-19.
Never happened and then the second part of that question would be I mean looking back when you made the original palms acquisition, what what were some of the bigger challenges that maybe you didn't foresee when you originally made that deal.
So on the first I guess the first question.
That's like trying to grab the tail of an aardvark Frank.
Sounds easy for difficult to.
Who knows I don't know I mean, I think the job of our job is to create shareholder of maximize shareholder value.
There wasn't something we were contemplating of the free COVID-19, we weren't talking about really selling the palms or go on through a process of at the time of course, when COVID-19 hit we of reassessed our entire visit every day eight of you adopt.
At the bottom.
And.
The the sand Manwell drive.
For it and presented what we thought was a great opportunity for our company too.
Refocused our strategy, which is on our current operations here and accelerating the development of all of these piece.
Pieces of land that we have throughout the valley the focus on the growing areas of the Las Vegas, local market, which which we love.
The second part of the some of the challenges challenges of the pumps.
Look I mean, we were starting to actually gives the tractor of the poems I think if you go back in.
Kind of if we look at.
We are so critical about maybe.
Maybe didn't go exactly planned of the poems I think that we invested too much and too much focus on the nightlife and day life part of of the business and I think we entered the market at a time on was hyper competitive probably too many players in the market at the time.
Given the landscape of the competitive of <unk>.
Reset as well the.
The the cost of entertainment just the amount of players in the market and the market didn't necessarily seem to grow and I think that we missed that and we made a decision seven months later later to to.
To shut that part of the operation down and we kind.
Kind of one of those things, where we've decided we're going to fail. We're gonna sales asked the move on and from that time on when it really started to focus on the core parts of the business, we're actually starting to get some traction.
On the casino side of the overall operations side of the business and then call the hit.
And like I said, it kind of of allowed us to to reassess everything and look we just we really like the idea of we have this very clean simple story, where we have a very simple balance sheet very shrimp for we are on all of the railroad. We've got on all of the real as we are on all of the development of of presented a simple business.
This is there is no flea-flicker this is literally like.
Student body left student body, right, just marched down the field and get a touchdown and that's what we're focused on.
Okay Gotcha. Thanks for that that's that's great color and then the second question.
Can you give us a little bit of color in terms of what you've seen over the past couple of months in terms of your your loyalty program in the you know my rewards boarding pass on you know in terms of of of new sign ups and then maybe what kind of movement you've seen inside of the.
The loyalty club or of a program as well, meaning you know have you seen a lot of movement from.
Guys going from platinum, the chairman or kind of movement up inside of the your loyalty program.
Yeah, well, we're going to stay away from a bunch of that but what I can tell you that we are we are actively trying to grab new sign ups.
And we're getting a lot of traction and what we can see is the sign ups that we're getting a far more active in terms of there'll be a day of transition from just signing up to actually playing and then when they play they're much more valuable than science pre at the pre pre COVID-19 level of almost to the almost two X types of the items.
Okay, great. Thanks for I appreciate it.
Yeah.
The next question is from Stephen Grambling from Goldman Sachs Go ahead.
Hey, good afternoon. Thanks day of the questions, there's a bit of of follow up the steep for a question on the palms, but what's your latest thinking I guess on the strip recovery.
Giving you spell the palms and it seems like working on from some of your <unk>. Some of the appears on the strength of a little bit of an inflection and how much the some form of of us how to think through a recovery eventually at Palo station.
Okay call station as well recovery, Yeah, we're the policies of doing very well the.
The local business there is really really driven that business and of course, you know as as the Las Vegas shrimp for covers in the room market recovers of you start to get the ability to start to push right not just on the weekends, but we get some a little bit more from rates of midnight mid week, and it's only gonna crude of the better to palace instead of re.
Really nice sweet spot there given the overall location in the dollars we invested in the property over the last.
Two years, I mean, the whole places completely redone and the customers really taken to it very well.
That's that's helpful. I finally got of property specific response, there as we think about free cash flow going forward you gave the maintenance capex assumptions, but are there other factors that can influence free cash flow of conversion either on the working capital or as we think about tax credits from the the palm sell the <unk>.
Yeah, I think I think just the if you want to get.
The little framework around free free cash will just take care of EBITDA estimate from of cash tax of standpoint, 2021 of the de Minimis cash taxes on the palms will be able to shield any of its tech for the Red Rob me of the shield any any taxes paid on the palm sale of into.
Interest cash interest will fluctuate anything in a positive way a lot of it because of the the the inflow of the $650 million into our balance sheet. So you could talk about interest between 105, and the maybe $115 million probably more of a more likely on the lower side.
And in terms of working capital no real change of working capital work right now somewhat of the steady state in terms of working capital. So I wouldn't put too much credence in working capital fluctuation.
That's helpful. Thanks, so much.
Our next question is from Sean Kelly from the Bank of America go ahead.
Hi, Good afternoon, everyone. I was just wondering if we could get a little color on some of the customer behavior as it played out maybe across the quarter I think what we saw out there was obviously in many markets and hospitality January and February were a little slow of of March was kind of off the charts. Good probably helped a little bit by stimulus. So what are you do for.
Comment there and also just need the any thoughts on just how the older demographic is coming back at the stage in in the local market.
Yeah, I think for the transfer you kind of nailed the chance of you answered you're on question I mean, you did see it starts.
The notion yes give me all of this is.
A multitude of of things are coming together.
Giving me election behind us.
That was funny, but as well as the vaccination people being more comfortable going on that's right. So you're seeing you are seeing an uptick when hours per visit visitation is is up.
And from an older demographic of your see neck yoshinori poor customer return.
And maybe just given that you're already up on if I, if I caught it correctly I think Bruce on casino revenues your ear. It looks like you're already up vs. 2019, I think Same-store revenues same show like is there anything you hear the that you look at it and say you think it's on sustainable at least on on the gaming operations side on the on the pure revenue.
Or do you think look this is here to stay and like you said you got other drivers midweek rooms things like that they can actually pushing of even eat maybe even higher from here.
No I mean, we are definitely midweek rooms, we can do a lot better.
I think the catering we can definitely do a lot better actually that probably more of a slow recovery on the fourth quarter and probably do a much better on 22 both of.
Those are definitely the areas that we have of sorry.
No Steve.
We feel pretty good about what we're seeing right now yeah, I would I would I would say, Sean I thought what from a ton of business I think I think we feel really good about where we are particularly again on the non gaming side I mean, Frank touched on it just from.
But hotel is coming back and then.
It's all up from an occupancy sampling of end of ADR standpoint of restarting being able to whole right and.
And food food and beverage, particularly with the the restriction is kind of easing you're definitely seeing uhm.
And increasing covers and I'm Gonna say X buffet, because obviously can be doubt year over year because of the buffet, which I haven't you know I I think we can fairly say will never return.
And we're also up in terms of.
Price of the price point, so we're getting more from the cost per per cover which is more than making up for the revenue loss of of the buffet.
Thank you very much.
Our next question is from Barry <unk> Jonah from two of security go ahead.
Alright. Thank you for taking my question for starters, Eddie updated thoughts on selling any excess land is there less urgency now.
No I mean like our goal is always true maximize shareholder value.
And we always book to <unk> on a card any excess land that we may have alright. Thank you know when you look at it we think we have sixth grade core development of opportunities here of Las Vegas is you know the you know we have had to have some traction on real estate COVID-19.
Kind of set the back a little bit, but we continue to work towards.
Monetizing anything that we don't see being part of our development pipeline over the next I would say five years or so.
Yeah, just the AD would Frank said I mean, the demographic trends in Las Vegas Ah could team to go stronger by at the bottom of the week in that same goes for the housing market in the same goes for the rock the real real estate market. So.
Of two things working on our village the <unk> the the geographic location of the development of stripes, we have.
Or a for screaming entitled in the areas of Las Vegas sort of glory and the demographics for working through our advantage given the migration that we're seeing from other space, where people want to avoid regulation taxation.
And look to move to a great state like Nevada Weathers are for Turner.
Great and then as of follow up question, what we're hearing a lot about late.
Labour hiring issues across the country I'm wondering if you are seeing an impact or expect to see an impact of the staff up.
<unk> on Saturday.
Yeah, I mean, right now we feel really good about our labor situation I mean, there's there's some open positions, but not too what <unk>, what we're hearing across the valley.
The remember we did keep our team members on drink COVID-19, we were on a few comprehensive the the I think as a result of it's made of of easier on us true basically be properly strapped zero as the.
Business returns for the normal.
Yeah, and I think the focus on family initiatives that we announced really last call increasing wages, increasing training increasing benefits of makes it made us an employer of choice in the valley.
That's great. Thank you so much guys.
My next question is from chat Beynon from May come eat go ahead I.
Good afternoon, and thank you for taking my question.
First I wanted to ask about cashless gaming adoption at your property is how are you thinking about rolling this out and how you think your customers will embrace this new technology.
Wait a second.
Go ahead of I was going to say it is cleared of momentum in the industry to move it move forward in this technology.
Currently in the process of the developing an app and of one wall of solution, which we think will increase customer convenience reduce friction I think ultimately.
Lead to of positive customer experience as well as increased profits on our side and we plan to have more information on that in the next couple of quarters.
Okay, Great and then just had a follow up on the 50 million of annual cost saved that you announced the 150 going up to 200 is that completely separate from I guess, bringing back the non gaming amenities at a higher margin or should we think about some of that 50 million is basically.
Just the operating some of those non giving you my name's that'll come back on more efficiently.
The ladder I mean, when we first started this.
This program back when it back in June on the reopened it's a combination of the of managing the neighbor efficiently optimizing marketing programs and well as well as managing after the party vendor and consulting of management contracts.
Thanks I appreciate it.
Our next question is from <unk> from Union Gaming go ahead.
Hi, everyone. Thanks for taking my question just the follow up on on Chad's question regarding the cost savings Steve just for clarify already I think you've been you mentioned this earlier the COVID-19 mitigation costs fading as well as some of the clothes property carrying costs is that in addition to or would that be in addition to the total of 200 million of.
Of operational cost savings that you've talked about.
Yes.
Got it and.
Second question on some of the share repurchase activity you have a program or an amount of outstanding.
Talked about Durango being on the horizon and deleveraging. So when we think about the share repo activity or returns to shareholders. What's your thought process going forward is it opportunistic programmatic and it bigger picture of kind of thinking of all all of those buckets as uses of free cash flow.
Going forward.
I think it's the I think it's the latter you guys, making easy because you answered your own questions. So I think it's actually the ladder and I think one of the reasons why we look to.
The close the sale of the palms is having that $650 million, just really increases our financial flexibility of it allows us to look at all options and all the way ways to increase of maximize shareholder value.
Got it. Thank you. Thank you for guys made the story quite simple so making it easy for us to congratulations on the quarter guys and thanks for taking the questions on.
Standard on.
This concludes the question and answer session I would like to turn the cancel on spec over to Steve from Coney for.
Closing remarks go ahead.
Well. Thank you everyone for joining the call and we look forward to hearing would look forward to talking to get about 90 days I take care of.
The come from the concept of is now concluded. Thank you for attending today's presentation. You may now disconnect.