Q4 2021 Red Rock Resorts Inc Earnings Call
[music].
Yes.
Good afternoon, and welcome to Red Rock Resorts fourth quarter 2021 conference call.
All participants will be in a listen only mode. Please.
Please note this conference is being recorded.
I'd now like to turn the conference over to Steven.
Decorative vice President Chief Financial Officer, and Treasurer of Red Rock Resorts. Please go ahead.
Thank you operator, and good afternoon, everyone. Thank you for joining us today for Red Rock resorts fourth quarter and full year 2021 earnings conference call.
Joining me on the call today are Frank and Lorenzo Fertitta as well as our executive management team.
I'd like to remind everyone that our call. Today will include forward looking statements under the safe Harbor provisions of the United States Federal Securities laws.
Developments and results may differ from those projected during this call. We will also discuss non-GAAP financial measures for definitions and complete reconciliation of these figures to GAAP. Please refer to the financial tables in our earnings press release.
8-K in Investor deck, which were filed this afternoon prior to the call also please note that this call is being recorded.
Now, let's take a look at our fourth quarter and full year results on a consolidated basis, when excluding great management fees, our fourth quarter net revenue was $422 4 million up 32, 9%.
$317 8 million in the prior year's fourth quarter, our adjusted EBITDA was $189 7 million up 58% from $125 7 million in the prior year's fourth quarter. Our adjusted EBITDA margin was 44, 9% for the quarter, an increase of 535 basis points from the fourth quarter of 2020.
With respect to our Las Vegas operations, excluding the impact from our fourth closed properties. Our fourth quarter net revenue was $416 3 million up 33, 5% from $311 8 million in the prior year's fourth quarter. Our adjusted EBITDA was $206 7 million up 45, 6% from 142.
2 million in the prior year quarter, our adjusted EBITDA margin was 49, 7% an increase of 412 basis points from the fourth quarter of 2020 on.
On a same store sales basis, we achieved the highest fourth quarter net revenue adjusted EBITDA and adjusted EBITDA margin in the history of our company.
Let's now turn to our full year performance. Please note that while we are comparing our 2021 full year performance to our 2020 full year performance.
2020 results were severely impacted by the 79 day shutdown statewide shutdown of all nonessential businesses exclude including casinos in an effort to reduce the spread of COVID-19, and by the restrictions on our business, which followed and continues through today.
On a consolidate basis when excluding great management fees. Our 2021 full year net revenue was $1 six 1 billion up 46, 2% from $1 1 billion in the prior year. Our 2021 full year adjusted EBITDA was $733 2 million up 151, 9% from 290 $291 million.
The prior year, our adjusted EBITDA margin was 45, 6% for the full year 2021, an increase of 1912 basis points from the prior year.
With respect to our Las Vegas operations, excluding the impact of our foreclosed properties are.
Full year 2021, net revenue was $1 five 8 billion up 59% from $995 4 million in the prior year. Our full year 2021, adjusted EBITDA was $797 6 million up 126% from $361 6 million in the prior year.
Our full year 2021, adjusted EBITDA margin was 54% an increase of 1407 basis points from the prior year and.
On a same store sales basis, we achieved the highest full year net revenue adjusted EBITDA and adjusted EBITDA margin in the history of our company during.
During the quarter, we continue to prioritize free cash flow converting 52% of our adjusted EBITDA to operating free cash flow generated $96 8 million.
Or <unk> 90 per share.
This brings our 2021 cumulative free cash flow generally by the company to $472 million or $4 39 per share.
Virtually every dollar being returned to our stakeholders.
Taking a look behind the numbers during the quarter the governance mass mandate across the state of Nevada remained in place and we definitely felt the effects and of that and have increased inflationary pressure on ordinary goods and services. These factors were an offset to customary fourth quarter seasonality and resulted in quarter over quarter visitation reduction of visitation.
Despite these factors we experienced increased time on device as well as strong spend per visit across our entire portfolio.
Consistent with our experience earlier in the pandemic for mass mandate in a recent resurgence of the Omnipod virus, most notably impacted our older guest segment.
Despite these headwinds we remain disciplined and focused on executing on our core strategy, which allowed us to generate record revenue and profitability with our gaming segments in the fourth quarter.
Turning to our non gaming segments, we saw continued growth in food and beverage and hotel as both segments delivered their most profitable fourth quarter results ever with regard to group sales and catering business segments. These business lines continue to be slower to recover and felt the impact of the recent resurgence in the pandemic at this point, while we are seeing our lead pipeline grow business has been pushed back.
Pushed into the back half of 2022 and into 2023.
Finally as mentioned on our prior earnings calls our financials are still carrying approximately $2 $6 million of COVID-19 litigation costs for the quarter and approximately $2 million and carry costs associated with our closed properties per quarter.
On the expense side, we remain operationally disciplined and continue to look for ways to become more efficient, while providing best in class wages and benefits to our team members and delivering best in class customer service to our guests.
The company's actions taken over the past seven quarters to streamline our business optimize marketing initiatives, we get renegotiated a number of vendor and third party agreements have led to a significant transformation of the business.
Which resulted in same store revenue, which exceeds 2029, 2000, 1919 pre pandemic levels higher adjusted EBITDA margin and higher adjusted EBITDA and strong free cash flow conversion.
On the technology front with regard to cashless gaming, we have successfully completed our field trial with IGT at our Red Rock and Green Valley Ranch properties and began rolling out this product to our remaining properties. We expect to have cashless gaming up and running at all of our properties over the next two quarters. While the initial focus is introducing cashless payments on the slot floor.
Eventual goal is to allow customers to play and pay from one mobile digital wallet across all of our amenities at each of our Las Vegas properties there'll be more to come as we roll out this exciting product.
Now, let's cover a few balance sheet and capital items, the company's cash and cash equivalents at the end of the fourth quarter was $275 3 million and took the total principal debt amount outstanding at quarter end was $2 89 billion.
During the quarter, we further bolstered our balance sheet and increased our financial flexibility as we closed on our previously announced sale of the palms casino resort in pumps place for an aggregate purchase price of $650 million in cash coupled with the issuance of a $500 million four and five eight senior note due in 2023.
<unk> 31, we also successfully returned capital to our shareholders through a modified Dutch auction tender offer as well as the payment of a special dividend during the quarter.
We continue to be focused on longer term growth opportunities and on continuing to return capital to our stakeholders.
As noted above the company commenced a modified Dutch auction tender offer in November 2021 through.
Through the tender offer we're able to purchase approximately $6 9 million class a shares representing approximately 10, one of the class a shares issued and outstanding were $6, one or a total number of shares outstanding assuming the exchange of all shares of company's class B shares and limited liability interest in station Holdco LLC at a purchase price of 50.
$1 50 per share at an aggregate cost of approximately 354 6 billion.
Also in November 2021, the company announced that its board of directors has declared a special dividend of $3 per class a share.
Special dividend is payable to shareholders of record on November 23, 2021 and paid on December 22021.
Also during the fourth quarter, we made distributions of approximately $124 3 million to the LLC unitholders of station Holdco, which included a distribution of approximately $74 million to Red rock resorts. The company elected to use its distribution to pay for a portion of the modified Dutch tender as well as purchase an additional 389000 class eight.
Shares at an average price of $49 94 per share under the previously disclosed $300 million share repurchase program.
When coupled with the modified Dutch tender, we purchased approximately $7 3 million class a shares during the quarter at an average price of $51 40 to.
Reducing our share count at quarter end to approximately 107 4 million shares.
When combined with our special dividend, we've returned approximately $703 million to our shareholders in the fourth quarter.
Capital spend in the fourth quarter was $26 4 million and $61 3 million for the full year of 2021.
For the full year 2022, we expect to spend between $75 million and $100 million in maintenance capital and an additional 300 million to $400 million in growth capital inclusive of our Durango project.
Now, let's provide a short update on our development pipeline.
Starting with our Durango development. We are extremely excited about this project, which is situated on 71 acre parcel ideally located up to a 15 expressway in Durango drive in the southwest Las Vegas Valley.
It is located within the fastest growing area in the Las Vegas Valley with very favorable demographic profile.
The project site provides favorable ingress and egress off the $2 15 express rate, which handles over 166000 vehicles per day as within five minute drive to approximately 125000 people.
Further there are no unrestricted gaining competitive in a five mile radius of the project site.
In January we received our permits to begin construction of this project and we have since broken ground anticipated.
Construction will take approximately 18 to 24 months when complete the project will include over 73000 square feet of casino space with over 2000 slot machines and 46 table games over 200 hotel rooms, and suite product for full service food and beverage outlets a state of the art experiential race and sports book in a resort style pool.
As mentioned on our prior earnings call, we expect to spend approximately $750 million, which includes all design cost construction hard soft cost pre open expenses and any financing costs associated with the project we.
We have entered into a guaranteed maximum price contract for the early phases of this project and with the expectation of approximately 70% of the total project costs being under GMP within the next couple of quarters to.
The company expects the return profile of this project to be consistent.
With the past Greenfield projects within our portfolio.
Turning now to North work when we last spoke we noted that the tribe has resolved favorably all its federal Court litigation.
Since then the tribe has settled its California State Court litigation, which stand up for California, which leaves only one pending case in the California courts and that is with the <unk> rancheria.
All of that litigation remains active we do not believe any decision by the California State Court could deprived <unk> of its ability to game on its federal Trust land.
As noted last quarter, we continue to progress with our efforts with respect to this very attractive project, including development and design and initial talks with prospective lending partners. We will continue to provide updates on our quarterly earnings call.
In conclusion for the back half of the fourth quarter, presenting some headwinds our disciplined approach to running our business allowed the company to enjoy record high EBITDA and EBITDA margin and allow the company to return approximately $703 million to our shareholders during the quarter.
With our best in class assets and locations unparalleled distribution scale, our own development pipeline of eight strategically located gaming properties.
We believe that we are uniquely positioned to capitalize on the very favorable long term demographics that demographic trends and high barriers to entry that characterize the Las Vegas locals market.
Lastly, we would like to recognize and extend our thanks again to all of our team members for their hard work in support of us and to our guests for their support throughout this pandemic.
Operator. This concludes our prepared remarks today and we are now ready to take questions from participants on the call.
We will now begin the question and answer session.
Ask a question you May press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
Is it any time your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question today comes from Joe Greff with Jpmorgan. Please go ahead.
Hi, Steve Hi, Frank Dilorenzo.
Quick question for you would be getting this.
Not today.
Last night.
Al talked about seeing.
Weakness in spend from there lower income lower tier consumer and so we've been fielding questions.
About that kind of segment.
And the casino segment, and I know, it's a different business than not.
In gaming, but can you talk about what youre seeing.
Maybe at that lower income that lower price point consumers segment, clearly the fourth quarter results.
Reflect anything there.
And if you can share with any kind of consumer trends change and what you've seen thus far in January and early February .
Hi, Joe.
Brent.
Yes.
When we look at our business pre pandemic.
We were very much in the mass market heavy promo.
Buffet market and all of these kind of things.
And as we came out of the pandemic our focus.
Like all customers, but our focus has been on the higher end customer player development.
That's really where we've seen all of our goodness come from when you look at these numbers to be in.
In the fourth quarter, given the omicron variants that hit us in December .
Practically we still have a mask mandate and were able to grow revenues by 33% over the prior year, we're pretty happy with that.
Yes, and Joe to be honest I think.
To add onto what Frank was saying from a long term perspective, if we look beyond that quarter, just the long term demographic profile of Las Vegas, we have more people moving to Las Vegas.
Between 'twenty, one and 19 household incomes with over $100000 have grown approximately 19% and if we actually for case that out through 'twenty six is expected to grow on average at a 6% CAGR.
So I think the PD development that we're developing here and our focus now is in the right place.
Got it and I thought what was sort of interesting Steve was in the fourth quarter.
<unk>.
Casino revenues flat sequentially, but food and beverage room up sequentially and yet that resulted in higher margins sequentially.
Can you talk about what Youre seeing.
Outside of the casino floor in terms of spend.
And any kind of expense pressure.
We head into the balance of 2000.
'twenty two.
Definitely experienced pressure in the restaurants.
<unk> fruit and beverage side, but along with those increased costs, we've been extremely diligent.
I'm looking for every opportunity that we have through.
Sure.
Keep our food cost online in.
Not.
Not be underwater and.
In the restaurant chain, whereas before we might be looking at.
Price adjustments once or twice a year literally look and what.
What we have to do to manage costs.
Weekly basis.
Yes, I think I think you mentioned the hotel for non gaming segment. The fortunate thing is we price. It every day. So you get to reprice hotel everyday so from an inflation standpoint, you can sort of mitigate that exactly and then we were able to offset we understand that the group business is going to take a little bit longer to recover but the team has been a great done a great job, yielding the hotel to a much more power.
With gaming gaming customer, which has yielded about $28 million of incremental gaming revenue because of that yielding.
Great Thats all for me thanks, guys.
Thank you.
The next question comes from Carlo Santarelli with Deutsche Bank. Please go ahead.
Hey, guys good afternoon.
Steve It seems as though if you just looked at Simplistically Opex second half is fairly stable I think your implied opex in the fourth quarter for the Vegas locals business was up marginally.
Do you feel like this is a level, where it kind of it kind of plateaus and this is this is more or less the go forward base or are there other amenities that perhaps could drive that if it's inflation or just kind of new amenities that have revenue coming along with it from here.
I think from a new ready as perspective, they would go back to the June of last year. We unlike I think most of our competitors. We opened up all of our entities with the exception of the buffet. So a lot of those fixed costs are already been embedded in there. So now we're looking at any incremental volume should be an incremental positive to margin from an inflation perspective I think.
Joe kind of mentioned this we're experienced the same tight labor market that everyone else is experiencing so we're experiencing wage inflation just like everyone else I think the team is doing an exceptional job manage that labor managing the hours. There. So thats why we effectively from a payroll perspective were flat quarter over quarter, and then we talked a little bit.
Joe's question about managing.
Cogs and particularly in the food and beverage and the team has done a great job.
Strategically.
Challenging the menu pricing and raising prices, where we can and if you look at the amenities as Steve mentioned there is no additional amenities that we're going to reopen that arent opened yet.
From a volume standpoint, food and beverage seems very is very healthy bowling is very healthy. The only area that has not returned to pre COVID-19 levels movies and I think traffic is about 50% of what it was in 2019 and hotel well Theres still yes. There is room in hotel, but I think the theater, obviously has driven a lot by just product.
Not having as much.
Please.
Makes sense. Thank you guys and then.
No. This is kind of a tough one to answer in seasonality has been something thats been bleeding during the last two years, but I believe historically, if you're just looking at kind of locals revenue <unk> tends to be.
Maybe 2% to 3% stronger than <unk> over.
Over time, and Steve just given your comment about some of the stuff obviously with the variance in the latter half of December .
Is that is that seasonality is something that you expect to kind of return to more normalized ebbs and flows as we move into 2022.
I mean again, we have no crystal ball right I think you touched on it I mean, there's still the government restrictions still in place we still have the varian is still affecting some visitation.
Yes, as we as that normalizes, we expect the return of seasonality to take hold we expect our older demographic to come back no different than they did in past cycles of the pandemic.
Great. Thank you guys.
The next question comes from Shaun Kelly with Bank of America. Please go ahead.
Hey, good afternoon, everyone. Thanks for taking my question.
Steve you brought up a couple of times.
The <unk> mandate and that are holding you back.
And also the older demographic I'm just wondering if you could could you go a little bit of a layer deeper whether it's visits.
Visitation down from kind of either pre COVID-19 levels or even from what you saw last quarter.
Or just kind of the broader behavior pattern and just give us a sense of how much. This is costing you right now because I mean again the results being stable quarter on quarter is is impressive in its own right.
I think when you look at visitation, if you kind of dig down on visitation seasonality from Q3 to Q4, you actually expect what we've seen and if you look back in our prior 10 15 years when excluding 21 generally visitation is flat and we saw as visitation down almost 6% and again it was a tale.
All APM to December with the <unk>.
Our business really.
Follows what about the new cycle and when people get scared.
This time actually people getting sick.
On top of that we would.
Make out close to visit concentrations that we were missing 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 a dark streaming or whatever and this time.
Basically the response was.
<unk> from <unk>.
I think that really did affect our business absolutely.
Sean to even go to that next level and you kind of look at when we referred to the older demographic arguably almost three quarters of those missing visits were of the older demographic.
And it's why we're very comfortable with that as we saw this a year ago and they returned when the restrictions came off in a new cycle and the virus stated this lorenzo getting getting some more.
More detail on your visitation.
One of the things that we're really happy about is that our younger demographic, 21% to 35%. If you compare Q4 2119, it's up over 60%.
This station standpoint, so we're continuing through the amenities that we have and the properties are locations, where the growth in the valley as we're getting our fair share.
What we think is going forward is going to be.
Very valuable demographics.
Thanks for that and actually it's Lorenzo Thank my follow ups right along that same line. So you mentioned, obviously the favorable.
Housing and broader demographic trend if I think move ins from other places that we know the benefits of flow taxes and all the other advantages of being there.
Could you just give us a sense of maybe when we look back on <unk>.
2021, or whatever the right timeframe is.
How many new customers have you either welcomed in the boarding pass program or broadly do you think youre seeing that or just people you haven't seen before because I think historically this was a bit of a same store model, but that tailwind could be substantial is there a way you could help us think about maybe magnitude for that in your own business.
Boarding pass.
Sign ups are up.
We are in a pretty strong fashion I think.
Up around 50% year over year growth path.
Sign ups so.
Very healthy rate and I think.
A good part of that is because of what we talked about.
And Steve you touched upon this is not just overall growth in Las Vegas Valley, which I'm sure everybody I mean.
It's pretty widely known but when you really dig down to the details what excites US is when you look at the growth in the higher end demographics, whether it's a 100000 of income and higher 150000 income and higher talking about.
20%, 19%, 20% growth and a 6% CAGR going out to 2030 I mean those are some of those are really going to benefit our business. If you are playing the long ball with us because.
Where our locations are out in Summerlin Green Valley, all the growing areas of Las Vegas, and the development pipeline and the development pipeline and we've got eight eight properties eight undeveloped projects that obviously, we broken ground on Durango, and we're working on all the entitlements and actually starting to lay out plans in time.
Lines for the balance of those properties.
Thank you very much.
The next question comes from Stephen Grambling with Goldman Sachs. Please go ahead.
Hey, Thanks for taking the questions as that blip occurred did you see any change in the promotional environment across the peer set or do you think as a whole.
She is just operating with less volatility.
Are you seeing any kind of broader shifted promotions.
No I think I think the blip I think you're referring to the December blip note, we did not see any increase or any irrational behavior of our competitors in fact from our perspective, we're continuing to optimize and refine our marketing because.
Our hope we're pivoting to we have best in class assets best in class locations and the favorable Las Vegas demographic, that's what we're marketing.
Makes sense.
It really would make no sense.
To go and spend promotional dollars into a situation where people are at home because they are sick.
I don't think you'd be able to move the needle, but we really didn't see any increase in commercials.
And then on the properties that are still closed I guess, how are you thinking about the potential to either reopen those and at what point or in what fashion could you ultimately even potentially monetize some of these assets.
Yes, it's one of those.
It's very similar answers, we've given in past quarters, we're continuing to evaluate.
Evaluate the potentially openings on a regular basis and we've I think we've made it clear that we're only going to reopen these properties. We're confident we can deliver incremental value to the overall portfolio.
Fortunately, we've been able to capture about 94% of the CA, we called missing gas from prior to the pandemic and been able to channel them at great operating leverage.
To our existing six open properties.
In terms of your second point of how we can monetize I think we've got across the first rich first before we are evaluating that.
Got it maybe one other one just on Durango, the $750 million looks consistent with what you've discussed before but you've also talked about higher inflation.
Level of inflation are you generally anticipating in that build and are there any mitigating factors of inflation ends up being higher MLR.
We're early in the process, obviously as Lorenzo we just broke ground grading the property right now.
We have locked in steel so it's.
<unk> was bought a while back we've locked and concrete.
For things like the.
Low rise and the parking garage.
In the tower and then you have site workers no margin side work is under GMP, So thats locked down.
<unk> here in the near future, we expect to be up to 70% under GMP.
Already ordering things like kitchen equipment.
Other other things you wouldn't typically.
<unk> and <unk> out this far out from a project, but we are.
Sure.
Anticipating trying to mitigate any issues that there might be relative to supply supply chain or our inflation I'm sure. We will we will experience some things, but as of right. Now today, we're very confident in the number that we laid out in.
And the beautiful thing about GMP contracts Steven.
If this is pushing the risk to the builders the builders smart.
We've got a best in class builder building Durango, he is definitely putting a.
Contingency to to help cope with any potential inflation of unforeseen circumstances.
They're there.
Willing to going to face during the building of the project, but if theres any unforeseen risks that that person doesn't anticipate that risk is on them.
Makes sense. Thanks, so much.
Yes.
The next question comes from Barry Jonas with Chewy Securities. Please go ahead.
Thank you I wanted to start on cashless, what kind of expectations or maybe aspirations do you have with cashless growing your spend per player on the gaming and non gaming side and I guess with that maybe talk about any impact you expect from Nevada proving.
Remote registration thanks.
I think it's early days right. So we havent really even begun our big marketing push as we wanted to wait until there's a seamless experience across our entire portfolio. So that our guests can experience the same cashless transaction and technology at Red rock that they would at Sunset. So we expect to do a larger push.
When we're completed with the rollout in terms of the expectation.
We expect this to be adapted well, particularly with the younger demographic, we expect it to accelerate gig anytime you remove friction from the gaming floor that generally is good for the business and it accelerates gaming spend.
I'll leave it at that.
The remote.
Registration.
Overall, I think that just shows you again, you're removing friction from the business from a cashless perspective, and so you expect that to help our sign ups.
Okay, Great and then just as a follow up.
I wanted to kind of ask you about your excess land bank anything you're actively marketing or I guess could we see any sizable landfills this year.
Okay.
Yes, I mean, we have the eight development sites.
So we're looking at all of them to turn I'm trying to determine which are strategic and which are noncore.
Noncore.
And our phones are always accepting inbound calls, which we get constantly is particularly given the scarcity of land in Las Vegas. So this portfolio is only getting a much more valuable over time.
In Q4, we did close on our micro site. So we did sell a mount roadside for $32 6 million.
And so that was I think a good end of that transaction, we look forward.
More to come.
Thanks, Steve.
Yes, sorry about that.
The next question comes from Dan <unk> with Wells Fargo. Please go ahead.
Hey, good afternoon, everyone and thanks for taking my question I just wanted to follow up on the commentary you gave on the additional development parcels.
Can you kind of outline obviously after Durango, how you look at the relative attractiveness of some of those parcels.
Which ones you would maybe look to develop sooner than later.
Yes, I mean, we're still in the process of trying to figure out.
Kind of what is going to be next on deck, and certainly demographics and growth in the valley.
In traffic studies are going to play a role in that I can tell you that we've started to work on plans and lay out the.
The projects that we have.
And as for auto and Green Valley, and we think Thats, a very very dynamic market.
Ton of population growth.
And the traffic out there is fantastic.
We're also actively working on the Skye Canyon project, which is near the Charles can turn off their Sky Candy is one of the fastest growing master planned development in the states. We've got a great location right off the freeway there.
We're actually working on pre development up on our site up in Reno, which is across the street from the Convention center. So we're tracking kind of what's happening up there in northern Nevada market with the same dynamics with a lot of people moving theyre looking for.
A tax Haven and just overall.
Diversification of the economy and technology and all the good stuff happening up there.
While we haven't we're not going to commit to exactly what's going to be next we spent a lot of time debating.
Whether we.
Which when we pulled the trigger on next but I can tell you that the focus right now is getting direct and open and right our position being in a position that right on the heels of opening that project will be in a position to break ground and announce kind of what the next pipeline of deals are going to be.
Got it and then just for my follow up.
Steve on the corporate expense for the quarter I think it was around $50 million.
Take tire a little bit sequentially was there anything bonus accruals or any kind of onetime items in there or is that a good run rate to use going forward.
Yes, I mean, I still think I think 5 million $5 1 million a month is a decent run rate, but in Q4, you did see.
2021, as a whole was it was a great year for the company and we wanted to reward our team members and so we did in Q4, we did up our bonus accrual for the year in order to pay our team members.
Got it thanks, so much.
As a reminder, if you have a question. Please press star then one to be joining into the queue.
The next question comes from Chad Beynon with Macquarie. Please go ahead.
Hi, good afternoon. Thanks for taking my question and congrats on the result.
First wanted to start with just the margins at these levels, how should we think about flow through going forward whether it's.
The older customer coming back on the gaming side for that non gaming business, starting to turn on a little bit more on the events and convention can you still generate 50% plus flow throughs with revenues coming in.
Given where margins are at this rate.
Yes.
Incremental gaming revenue, obviously is going to flow at a very high margin as the older demographic starts to come back.
Invention and banquet business for us historically has been.
At least at a 50% we underwrite it at least at a 50% margin.
So yes, I mean, we certainly would expect Steve.
Kind of go through the quarters.
<unk>.
Over the last since reopening.
Yeah sure I mean, I think we talked about this last quarter, but we've been over the past seven quarters, we've exceeded 45% and yes. So we as I mentioned it during the remarks.
We spent a lot of time on the operation side.
Just readjusting and readjust both of the operations as well as the marketing programs that we think what we've done is transformational so achieving these margins and flow through we think should be more of the norm than the exception I think the last seven quarters.
Approve that and then to add one of the businesses that <unk> mentioned in the theater business. Once the product gets better will return you saw.
December was a cause of Spider man with a bang and it was a good month for the theaters, we hope to have more of them to come.
Normally we expect about 600000 people per quarter because of theaters, it's 100% margin business for us and then any of the incremental <unk>.
Volume that they generate is also incremental deposits to profit.
Great. Thanks.
And then in 'twenty, two even with the elevated capex for Durango, holding the business flat youll still be able to generate some some excess free cash flow. So from a capital allocation standpoint, how should we think about what the best use of this cash is during the next year.
Well I mean from our perspective, we think the best use of cash is exactly what we're doing with investing in Durango I mean, we don't really look at them.
Traditional like Capex I think there's a lot of companies out there that would love to be investing their money in a location like the wrangler I mean, thats true investment capital I think when you look at our our maintenance number.
It should be kind of a trend line with where we've been for 100 or maybe it just depends how you look at it as free cash flow you've got a lot of free cash flow. We just happened to be investing in a project that we think we're going to get a very high return.
Scott twice the dose per gaming position.
Within a five mile zone is red rock and Green Valley. So we think it's a good use of capital.
Again the Randgold.
Yeah, sorry, I guess my question is during this phase should we think about considerations for dividends or share repurchases. During 2022, when capex is a little elevated.
Should we not assume that thats on the table.
I think you should assume everything's on the table.
I have mentioned in the remarks, we're going to take a balanced approach to longer term growth opportunities as well as returning capital shareholders. You saw what we did in 2021, which we think was extraordinary and probably the only gaming company.
<unk> now raised that to not raise equity and then returned over $700 million.
To our shareholders kind of proves that out.
Balance sheet at three five times net leverage at an average interest rate of three 5% with no long term maturities is positioned well for the board to consider both.
Growth opportunities and in a balanced approach to returning capital if they so chose and we still have room left on our share repurchase repurchase program.
Thank you very much appreciate it.
This concludes our question and answer session I would like to turn the conference back over to Stephen Coody for any closing remarks.
Thank you everyone for joining the call and we look forward to.
<unk> in the next 90 days.
Thank you very much.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.