Q4 2023 Red Rock Resorts Inc Earnings Call
Good afternoon, and welcome to Red Rock resorts fourth quarter, and full year 2023 conference call.
Operator: Good afternoon, and welcome to Red Rock Resorts' fourth quarter and full year 2023 conference call. All participants will be in a listen-only mode.
All participants will be in a listen only mode.
Operator: Please note, this conference is being recorded. I would now like to turn the conference over to Stephen Cootey, Executive Vice President, Chief Financial Officer, and Treasurer of Red Rock Resorts. Please go ahead.
Please note this conference is being recorded.
I would now like to turn the conference over to Steven <unk> Executive Vice President Chief Financial Officer, and Treasurer of Red Rock Resorts. Please go ahead.
Stephen Lawrence Cootey: Thank you, operator, and good afternoon, everyone. Thank you for joining us today for Red Rock Resorts' fourth quarter and full year 2023 earnings conference call. Joining me on the call today are Frank and Lorenzo Fertitta, Scott Krieger, and our executive management. 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.
Steven: Thank you operator, and good afternoon, everyone. Thank you for joining us today for Red Rock resorts fourth quarter and full year 2023 earnings conference call.
Steven: Joining me on the call today are Frank and Lorenzo Fertitta, Scott Kreger, and our executive management team.
Speaker Change: I'd like to remind everyone that our call today will include forward looking statements under the Safe Harbor provisions.
Speaker Change: I would say its federal securities laws developments and results may differ from those projected during this call. We will also discuss non-GAAP financial measures.
Stephen Lawrence Cootey: 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 Orange Press release, Form 8K, and Investor Deck, which were filed this afternoon prior to the call. Also, please note that this call is being recorded.
Speaker Change: For definitions and complete reconciliation for these figures to GAAP. Please refer to the financial tables in our earnings press release form 8-K, and Investor deck, which were filed this afternoon prior to the call.
Speaker Change: Also please note that this call is being recorded.
Speaker Change: Before we get into any of the details we are proud to say that the fourth quarter represented another strong quarter for the company by any measure.
Stephen Lawrence Cootey: Before we get into any of the details, we are proud to say that the fourth quarter represented another strong quarter for the company by any measure. In terms of adjusted EBITDA, our Las Vegas operations had the best fourth quarter in the history of our company, and in terms of net revenue and adjusted EBITDA margin, our Las Vegas operations experienced their second best fourth quarter ever. As we look at our results for the full year, our Las Vegas operations experienced near-record net revenue and adjusted EBITDA margin while achieving our best adjusted EBITDA in the history of our company. In addition to showing strong financial results, 2023 was a year in which we continued to validate our long-term growth strategy across the Las Vegas Valley by welcoming our Durango and Wildfire Fremont properties to the Red Rock family. The successful opening of these properties not only validates our long-term growth strategy within the Las Vegas Valley, but it also demonstrates the power of our own development pipeline and real estate bank, which now consists of over 441 acres of developable land positioned in highly favorable areas across the Las Vegas Valley.
Speaker Change: In terms of adjusted EBITDA, Our Las Vegas operations had the best fourth quarter in the history of our company and in terms of net revenue and adjusted EBITDA margin, our Las Vegas operations experienced second best fourth quarter ever.
Speaker Change: As we look at our results for the full year Las Vegas operations experienced near record net revenue and adjusted EBITDA margin, while achieving our best adjusted EBITDA in the history of our company.
Speaker Change: In addition to showing strong financial results 2023 was a year in which we continued to validate our long term growth strategy across the Las Vegas Valley by welcoming our Durango and wildfire Fremont properties to the Red rock families. The successful openings of these properties not only validates our long term growth strategy within the Las Vegas Valley. It also demonstrates the power of our.
Speaker Change: Owned development pipeline and real estate Bank, which now consists of over 441 acres of developable land positions in highly favorable areas across the Las Vegas Valley.
Speaker Change: Not only do we expand our physical footprint across the valley in 2023, we continue to execute on our core strategy of reinvesting in our existing properties to do a fresh and relevant amenities to our guests all while remaining focused on best in class customer service.
Stephen Lawrence Cootey: Not only will we expand our physical footprint across the valley in 2023, but we will continue to execute on our core strategy of reinvesting in our existing properties to deliver fresh and relevant amenities to our guests, all while remaining focused on best-in-class customer service. In executing this strategy, the team delivered another strong quarter across all business lines, with this quarter marking the 14th consecutive quarter that the Las Vegas operations delivered adjusted EBITDA margins in excess of 45%. Now, let's take a look at our fourth quarter and full year results. With respect to our Las Vegas operations, and with our Durango resort only open 27 days in the quarter, our fourth quarter net revenue was $459.4 million, up 9.5% from the prior year's fourth quarter. Our adjusted EBITDA was 220.3 million, up 6.5% from the prior year's fourth quarter. Our adjusted EBITDA margin was 48%, a decrease of 134 basis points from the prior year's fourth quarter.
Speaker Change: In executing this strategy the team delivered another strong quarter across all business lines with this quarter, marking the 14th consecutive quarter that the Las Vegas operations delivered adjusted EBITDA margins in excess of 45%.
Okay.
Speaker Change: Now, let's take a look at our fourth quarter and full year results.
Speaker Change: With respect to our Las Vegas operations, and with our Durango resort only opened 27 days in the quarter, our fourth quarter net revenue was $459 4 million up nine 5% from the prior year's fourth quarter or.
Speaker Change: Our adjusted EBITDA was $220 3 million up six 5% from the prior year's fourth quarter. Our adjusted EBITDA margin was 48% a decrease of 134 basis points from the prior year's fourth quarter.
Speaker Change: On a consolidated basis, excluding a one time benefit received in the fourth quarter last year from great in our fourth quarter net revenue was $462 7 million up nine 3% from the prior year's fourth quarter.
Stephen Lawrence Cootey: On a consolidated basis, excluding a one-time benefit received in the fourth quarter last year from Grayton, our fourth quarter net revenue was $462.7 million, up 9.3% from the prior year's fourth quarter. Our adjusted EBITDA was $201.3 million, up 6.1% from the prior year's fourth quarter. Our adjusted EBITDA margin was 43.5% for the quarter, a decrease of 133 basis points from the prior year's fourth quarter.
Speaker Change: Our adjusted EBITDA was $201 3 million up six 1% from the prior year's fourth quarter.
Speaker Change: Adjusted EBITDA margin was 43, 5% for the quarter, a decrease of 133 basis points from the prior year's fourth quarter.
Speaker Change: Let's turn to our full year performance.
Stephen Lawrence Cootey: Let's turn to our full year performance. With respect to our Las Vegas operations, our full year net revenue was $1.7 billion, up 3.6% from the prior year. Our full year adjusted EBITDA was $818.8 million, up 1% from the prior year. Our full year adjusted EBITDA margin was 47.9%, a decrease of 134 basis points from the prior year, on a consolidated basis.
Speaker Change: With respect to our Las Vegas operations, our full year net revenue was $1 7 billion up three 6% from the prior year.
Speaker Change: Full year, adjusted EBITDA was $818 8 million up 1% from the prior year.
Speaker Change: Full year adjusted EBITDA margin was 47, 9% a decrease of 134 basis points from the prior year.
Speaker Change: On a consultative basis, excluding the onetime benefit we received last year from great in our full year net revenue was $1 7 billion up three 8% from the prior year, our full year adjusted EBITDA was 746 million up 4% from the prior year, our full year adjusted EBITDA margin was 43, 3% a decrease of 100.
Stephen Lawrence Cootey: Excluding the one-time benefit we received last year from Grayton, our full-year net revenue was $1.7 billion, up 3.8 percent from the prior year. Our full-year adjusted EBITDA was $746 million, up 0.4 percent from the prior year. Our full-year adjusted EBITDA margin was 43.3 percent, a decrease of 143 basis points from the prior year.
Speaker Change: 43 basis points from the prior year.
Stephen Lawrence Cootey: In the quarter, we converted 73% of our adjusted EBITDA to operating free cash flow, generating $147.1 million, or $1.41 per share. When looking at our 2023 cumulative free cash flow, we converted 59% of our adjusted EBITDA to operating cash flow, generating $437.6 million, or $4.18 per share. This significant level of free cash flow was reinvested in our long-term growth strategy, including our Durango and Wildfire Fremont projects. Additionally, existing property investments will return to our stakeholders via debt paydowns and dividends. As in past quarters, we continue to remain operationally disciplined and focused on our core local guests, as well as continue to grow our regional and national sector. When comparing our results to last year's fourth quarter, we continue to see upside from strong visitation and play in our local, regional, and national segments. This strength, coupled with strong spend per visit across the majority of our carded play, allowed us to enjoy record fourth quarter revenue and profitability across our gaming. Turning to the non-gaming segments, both hotel and food and beverage continue to grow year over year and deliver record revenue and profitability in the fourth quarter.
Speaker Change: In the quarter, we converted 73% of our adjusted EBITDA to operating free cash flow generating $147 1 million or $1 41 per share.
Speaker Change: When looking at our 2023 cumulative free cash flow, we converted 59% of our adjusted EBITDA to operating cash flow generating $437 6 million or $4 18 per share.
Speaker Change: This significant level of free cash flow was either reinvest in our long term growth strategy, including our Durango and wildfire Fremont projects existing property investments will return to our stakeholders via debt Paydown and dividends.
Speaker Change: As in past quarters, we continue to remain operationally disciplined and focused on our core local gas as well as continue to grow our regional and national segments when.
Speaker Change: When comparing our results to last year's fourth quarter, we continued to see upside from strong visitation and play and our local regional and national segments.
Speaker Change: The strength, coupled with strong spend per visit across the majority of our Carter play allowed us to enjoy record fourth quarter revenue and profitability across our gaming segments.
Speaker Change: Turning to the non gaming segments, both hotel and food and beverage continued to grow year over year and deliver record revenue and profitability in the fourth quarter.
Stephen Lawrence Cootey: Our hotel division experiences the highest quarterly revenue and profit in our company's history, driven by our team's success of continuing to drive higher occupancy and ADR across our hotel portfolio. Food and beverage revenue and profit are the highest quarterly revenue and profit in our company's history, driven by higher average check and cover counts across our food and beverage outlets and the contained strength of our catering. Our catering revenue continues to remain strong as this quarter represented the 10th consecutive quarter of double-digit year-over-year growth in this business. Despite a difficult year-over-year comparison, we continue to see positive momentum in this business driven by growth in both room nights and ADR as our pipeline continues to grow into 2024. As we begin the new year, we remain confident in our business, particularly with the addition of our Durango property. However, we will continue to face challenging year-over-year comparisons throughout 2024, as well as face continuing disruption on our Palos Station property due to ongoing traffic work around the property during the first half.
Speaker Change: Our hotel division experienced its highest quarterly revenue and profit in our company's history, driven by our team's success on continuing to drive higher occupancy and ADR across our hotel portfolio.
Speaker Change: Food and beverage experienced its highest quarterly revenue and profit in our company's history, driven by higher average check and cover counts across our food and beverage outlets and the continued strength of our catering business.
Speaker Change: Our catering revenue continues to remain strong as this quarter represented the 10th consecutive quarter of double digit year over year growth in this business line.
Speaker Change: With regard to our group sales.
Speaker Change: Despite a difficult year over year comparison, we continue to see positive momentum in this business driven by growth in both room nights and ADR as our pipeline continues to grow into 2024.
Speaker Change: As we begin the new year, we remain confident in our business, particularly with the addition of our Durango property. So we will continue to face challenging year over year comparisons throughout 2024, as well as face continuing disruption of palace station property due to ongoing traffic work around the property during the first half of 2024.
Speaker Change: On the expense and labor side, we remain operationally disciplined and continue to look for ways to become more efficient while continuing to provide best in class customer service to our guests and remaining the top employer of choice in the Las Vegas Valley.
Stephen Lawrence Cootey: On the expense and labor side, we remain operationally disciplined and continue to look for ways to become more efficient while continuing to provide best-in-class customer service to our guests and remaining the top employer of choice in the Las Vegas Valley. Despite a tougher year-over-year comparison, the company continues to manage its expenses, generate record financial performance, and return capital to its shareholders. These results demonstrate the resilience of our business model, the sustainability of our operating margins, and the ability of our management team to execute a long-term growth strategy while taking a balanced approach to returning capital to our shareholders. Also, during the quarter, we successfully opened our Durango Casino Resort on December 5th with rave reviews from our customers. Our newest destination is located off the 215 Expressway in Durango Drive in the southwest Las Vegas Valley, within the fastest-growing area in the Las Vegas Valley, with a very favorable demographic profile and no unrestricted gaming competitors within a five-mile radius. But we are still in the early days. We are extremely pleased with the resort's opening.
Speaker Change: Despite a tougher year over year comparable the company continues to manage its expenses generate record financial performance and return capital to our shareholders.
Speaker Change: These results demonstrate the resilience of our business model the sustainability of our operating margins and the ability of our management team to execute our long term growth strategy, while taking a balanced approach to returning capital to our shareholders.
Speaker Change: Also during the quarter, we successfully opened our Durango casino resort on December 5th to rave reviews from our customers.
Our newest destination is located off the $2 15 Expressway in Durango drive in the southwest Las Vegas Valley within the fastest growing area in the Las Vegas Valley, very favorable demographic profile and no unrestricted gaming capacity by bio Rad.
Speaker Change: While we are still in early days, we are extremely pleased with the resilience of our resorts opening the property. Thus far has grown the surrounding market has attracted new customers to our brand and has been profitable since day one.
Speaker Change: As we've stated on past earnings calls, we expected to experience that have experienced some cannibalization across our core portfolio.
Speaker Change: The Durango opening but this has been largely in line with our expectations and is expected to backfill given the strong long term demographic growth profile velocity Magus valley and our proximity of our properties to those high growth areas within the valley.
Stephen Lawrence Cootey: The property thus far has grown the surrounding market, has attracted new customers to our brand, and has been profitable since day one. As we have stated on past earnings calls, we expected to experience and have experienced some cannibalization across our core portfolio due to the Durango opening, but this has been largely in line with our expectations and is expected to backfill given the strong long-term demographic growth profile of the Las Vegas Valley and our proximity of our properties to those high-growth areas within the valley. Now let's cover a few balance sheet and capitalizing. The company's cash and cash equivalents at the end of the fourth quarter were $137.6 million, and the total principal amount of debt outstanding was $3.3 billion, resulting in a net debt of $3.2 billion.
Speaker Change: 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 $137 6 million and the total principal amount of debt outstanding was $3 3 billion, resulting in a net debt of $3 2 billion.
Speaker Change: As of the end of the fourth quarter, the company's net debt to EBITDA and interest coverage ratio was four three times and four seven times respectively as.
Speaker Change: As we stated on our previous earnings calls, our Leverages, peaking as we wrap up our Durango project as expected to ramp down as we look to delever to a long term net leverage target of three times.
Speaker Change: Capital spend in the fourth quarter was $187 million.
Speaker Change: Which includes approximately $168 7 million of investment capital inclusive of Durango as was $18 3 million in maintenance capital.
Stephen Lawrence Cootey: As of the end of the fourth quarter, the company's net debt to EBITDA and interest coverage ratio are 4.3 times and 4.7 times, respectively. As we stated on our previous earnings calls, our leverage is peaking as we wrap up our Durango project and is expected to ramp down as we look to de-lever to our long-term net leverage target of three times. Capital spent in the fourth quarter was $187 million, which included approximately $168.7 million of investment capital, inclusive of Durango, as well as $18.3 million in maintenance capital.
Speaker Change: For the full year 2023 capital spend was $699 5 million, which includes approximately $615 4 million in investment capital inclusive of Durango.
Speaker Change: As well as $84 1 million and maintenance cap.
Speaker Change: As we look into our capital spending for 2024, we expect to spend between $140 million to $180 million spread between maintenance and investment capital.
Speaker Change: During the quarter, along with the opening of Durango, we remain committed to strategically investing in our core strategy of offering new amenities to our guests our existing locations.
Speaker Change: Over the past several months, we have successfully opened a new high limit table room in our Green Valley Ranch property. We are pleased with the early results from this room as well as all the other amenities we have opened up in 2023.
Stephen Lawrence Cootey: For the full year 2023, capital spend was $699.5 million, which included approximately $615.4 million in investment capital, inclusive of Durango, as well as $84.1 million in maintenance capital. As we look into our capital spending for 2024, we expect to spend between 140 and 180 million dollars spread between maintenance and investment capital. During the quarter, along with the opening of Durango, we remain committed to strategically investing in our core strategy of offering new amenities to our guests at our existing locations. For example, over the past several months, we have successfully opened a new high-limit table room at our Green Valley Ranch property. We are pleased with the early results from this room, as well as all the other amenities we have opened up in 2023.
Speaker Change: We expect to continue to invest in our existing properties in 2024, including a new high limit slot room to do high limit slot room as well as two new restaurant offerings at Green Valley Ranch, and upgraded race and sports book, a partial casino remodel and new yard house restaurant at Sunset station.
Speaker Change: We are very excited to move beyond the challenges created by the construction of these properties and introduce these new amenities to our customers later this year.
Speaker Change: Like our other more recently introduced amenities, we expect the solid investments over the medium and long term.
Speaker Change: And consistent with our balanced approach to investing in our long term growth strategy and returning capital to our shareholders. We are pleased to announce the company's board of directors have declared a special cash dividend of $1 per class a share.
Speaker Change: The special dividend will be payable on March 4th to all shareholders of record as of the close of business on February 20 <unk>.
Stephen Lawrence Cootey: We expect to continue to invest in our existing properties in 2024, including a new high-limit slot room, as well as two new restaurant offerings at Green Valley Ranch and an upgraded racing sports book, a partial casino remodel, and a new Yardhouse Restaurant at Sunset Station. We are very excited to move beyond the challenges created by the construction of these properties and introduce these new amenities to our customers later this year. Like our other recently introduced amenities, we expect these to be solid investments over the medium and long term, with our balanced approach to investing in our long-term growth strategy and returning capital to our shareholders. We are pleased to announce that the company's Board of Directors has declared a special cash dividend of $1 per Class A share. A special dividend of a special nature will be payable on March 4th to all shareholders of record as of the close of business on February 22nd.
Speaker Change: The dividend reflects our board and management team's continued confidence in the resilience of our business model and the strength of the Las Vegas locals market.
Speaker Change: Lastly in November 2023, we successfully completed the sale of approximately 73 acres at our former Fiesta, Rancho and Texas station properties for approximately $58 million.
Speaker Change: The proceeds from this transaction were used to pay down debt and represent the continued execution of our long term real estate development strategy as we look to reposition and upgrade our real estate portfolio for the next chapter of growth.
Speaker Change: Yes.
Speaker Change: Turning now to North work as you may be aware, our management agreement with the tribe was approved by the chairman of the National Indian Gaming Commission in early January clearing one of the last hurdles to the development of this project.
Which will be located on the <unk> 305 acre profitable Trust land site is located north of Fresno, California, and office convenient ingress and egress and excellent visibility from highway 99.
Stephen Lawrence Cootey: The dividend reflects our board and management team's continued confidence in the resilience of our business model and the strength of the Las Vegas local market. Lastly, in November 2023, we successfully completed a sale of approximately 73 acres at our former Fiesta Rancho and Texas Station properties for approximately $58 million. The proceeds from this transaction were used to pay down debt and represent the continued execution of our long-term real estate development strategy as we look to reposition and upgrade our real estate portfolio for the next chapter of growth at Station C. Turning now to North Fork, as you may be aware, our management agreement with the tribe was approved by the chairman of the National Indian Gaming Commission in early January, clearing one of the last hurdles to the development of this project, which will be The site is north of Fresno, California and offers convenient ingress and egress and excellent visibility from Highway 99.
Speaker Change: The design is near complete and we expect we are fully engaged in the process of retaining a general contractor and discussing the project project with finance years.
Speaker Change: Very excited to be making great progress on this project and we will continue to provide updates quarterly.
Speaker Change: In addition to our previously announced special dividend on February 7th.
Speaker Change: Company announced that the board of directors has declared a regular cash dividend of <unk> 25 per class a common share payable for the first quarter of 2024.
Speaker Change: The regular dividend will be payable on March 29 to all shareholders of record as of the close of business on March 15th.
Speaker Change: When we combine our special dividend with a regular declared first quarter dividend, we expect to return approximately $136 6 million to our shareholders. During the first quarter of 2024.
Speaker Change: With our best in class assets and locations coupled with our development pipeline of seven owned sites located in the most desirable locations in the Las Vegas Valley, we have an unparalleled growth story that will allow us to double the size of our portfolio and capitalize on with very favorable long term demographic trends and high barriers to entry that characterize the Las Vegas locals market.
Stephen Lawrence Cootey: The design is near complete, and we expect to be fully engaged in the process of retaining a general contractor and discussing the project with financiers. We are very excited to be making great progress on this project, and we will continue to provide updates, in addition to our previously announced special dividend on February 7th. The company announced that the board of its directors has declared a regular cash dividend of $0.25 per Class A common share payable for the first quarter of 2024. The regular dividend will be payable on March 29th to all shareholders of record as of the close of business on March 15th.
Speaker Change: We'd like to recognize and extend our thanks to all of our team members for their hard work our success starts with them.
Speaker Change: Continue to be the primary reason why our guests return time after time.
Speaker Change: We'd like to thank them again for voting us the top casino floor in the Las Vegas Valley for the third consecutive year.
Speaker Change: And finally, we'd like to thank our guests for their loyal support in each of the last six decades.
Speaker Change: Operator. This concludes our prepared remarks for today and we are now ready to take questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Stephen Lawrence Cootey: When we combine our special dividend with our regularly declared first quarter dividend, we expect to return approximately $136.6 million to our shareholders during the first quarter of 2025, with our best-in-class assets and locations. Coupled with our development pipeline of seven owned sites located in the most desirable locations in the Las Vegas Valley, we have an unparalleled growth story that will allow us to double the size of our portfolio and capitalize on the very favorable long-term demographic trends and high barriers to entry that characterize the Las Vegas locals market. We would like to recognize and extend our thanks to all of our team members for their hard work. Success starts with them, and they continue to be the primary reason why our guests return time after time. We'd like to thank them again for voting us the top casino employer in the Las Vegas Valley for the third consecutive year.
Speaker Change: Using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Yeah.
Speaker Change: The first question today comes from Joe Greff with Jpmorgan. Please go ahead.
Joseph Greff: Good afternoon, guys. Thanks for taking my questions.
Joe Greff: Obviously the results were.
Joseph Greff: You know better than we and consensus.
Consensus, we're expecting from an EBITDA perspective.
Joseph Greff: EBITDA 13, a little over $13 million.
Joseph Greff: Year over year.
Joseph Greff: I'm, assuming there is net cannibalization of our cannibalization ex Durango in there I was hoping you could maybe sort of quantify.
Joseph Greff: Same store EBITDA performance.
Joseph Greff: And then maybe also frame it with same store EBITDA margin performance.
Operator: And finally, we'd like to thank our guests for their loyal support in each of the last six decades. Operator, this concludes our prepared remarks for today, and we are now ready to take questions. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
Joseph Greff: In the quarter or in December as we think about kind of modeling the ramp.
Joseph Greff: Or the anticipation of a ramp throughout the balance of 2024 between Durango and the rest of the portfolio.
Joseph Greff: Hey, Joe This is Steve so before I hand over to Scott at this point.
Steve: We haven't broken out properties in the past.
Joseph Greff: If at 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 J.P. Morgan. Please go ahead.
Steve: So I don't think.
Steve: We're going to be doing so in the future, but just for general note on cannibalization of our Durango is doing I'll turn it back over to Scott.
Scott Kreger: Yes, Hi, Joe.
Scott Kreger: As far as <unk> goes.
We've opened up in the property is performing above our expectations, we're super happy with.
Joseph Greff: Good afternoon, guys. Thanks for taking my question. Obviously, the results were better than we had consensus, and we're expecting from an EBITDA perspective, a little over $13 million year over year. I'm assuming there is net cannibalization or cannibalization ex-Durango in there.
Scott Kreger: How we opened up the <unk>.
Scott Kreger: Tougher across the whole employee base of the company, we want to extend our thanks for all of the support.
Scott Kreger: And things are going great. When we talk about cannibalization, specifically, we're not experiencing any different levels of cannibalization than we forecasted in previous calls so.
Steve: I was hoping you could maybe sort of quantify maybe same-store EBITDA performance and then maybe also frame it with same-store EBITDA margin performance in the quarter or in December as we think about kind of modeling the ramp or the anticipation of a ramp throughout the balance of 2024 between Durango and the rest of the portfolio. Joe, this is Steve. Before I hand it over to Scott, I just want to say we haven't broken up properties in the past, and so I don't think we're going to be doing so in the future. But just for a gentle note on cannibalization and how Durango is doing, I'll turn it back over to Scott. Yeah, hi Joe.
Scott Kreger: We think that it's running.
Scott Kreger: And I think that it's important to note that we've and we've always said that these properties ramp and that our focus in the early days with Durango is right great quality service quality product.
Scott Kreger: We're working through the efficiencies of Durango.
Scott Kreger: Everything is really trending as we expected.
Great. Thanks.
Speaker Change: I was hoping maybe you can give us.
Speaker Change: Some sort of perspective to the locals market and the benefits from I guess specific activities that have started around the Super Bowl and continuing through through the weekend.
Speaker Change: How much of a lift.
Scott: As far as Durango goes, we've opened up, and the property is performing above our expectations. We're super happy with how we increased the team's effort across the whole employee base of the company. We want to extend our thanks for all of the support. And things are going great. When we talk about cannibalization specifically, we're not experiencing any different levels of cannibalization than we forecasted in previous calls.
Speaker Change: Do you think that is for the property surrounding districts.
Speaker Change: This is Lorenzo I think <unk>.
Lorenzo Fertitta: Everybody around here is pretty positive and pretty excited about the Super Bowl event.
It feels like it's shaping up to be one of the if not maybe the best weekend biggest weekend from events Big events standpoint to Las Vegas is seeing which is obviously quite a statement.
Scott: So, you know, we think that it's okay and I think that it's important to note that we've always said that these properties ramp and that our focus in the early days with Durango was to provide great quality service and quality products. And, you know, we're working through the efficiencies of Durango, and everything is really trending as we expected. Great. Thanks.
Lorenzo Fertitta: I will say that we're definitely feeling the impact.
Lorenzo Fertitta: From a regional standpoint inbound from.
Lorenzo Fertitta: Guests that are.
Lorenzo Fertitta: And we're seeing it in the hotel side and also on the casino side relative to people wanting to come in for the game. So.
Lorenzo Fertitta: Even more so obviously Super Bowl is always a big week in Las Vegas, but I would say that this this seems to be shaping up to be bigger than a normal Super Bowl weekend for the city and for us per se.
Lorenzo: And I was hoping maybe you could give us some sort of perspective for the local market and the benefits from, I guess, the festivities that have started around the Super Bowl and continuing through the weekend. How much of a list do you think that is for the properties surrounding the strip? This is Lorenzo, I think.
Speaker Change: And then one final question if I may Steve.
Speaker Change: Steve You mentioned about some disruption in the first half of this year at Palace station can you sort of help us understand and maybe think about an impact there and was there anything that commenced in the fourth quarter.
Lorenzo: Everybody around here is pretty positive and pretty excited about the Super Bowl event. It feels like it's shaping up to be one of the best weekends, the biggest weekend, from a big event standpoint that Las Vegas has seen, which is obviously quite a statement. We'll say that we're definitely feeling the impact from a regional standpoint inbound from guests that are coming in. We're seeing it on the hotel side and also on the casino side relative to people wanting to come in for the game. So, even more so, obviously, the Super Bowl is always a big weekend in Las Vegas, but I would say that this seems to be shaping up to be bigger than a normal Super Bowl weekend for the city and for us personally.
Speaker Change: That generated some disruption that obviously, we can see the aggregated reported results.
Speaker Change: Hey, Joe This is Scott again.
Scott Kreger: We will break it down by property.
Scott Kreger: Powers.
Is undergoing around.
Scott Kreger: Perimeter road work that roadwork was expected to be done by the end of the year and has now been extended.
Scott Kreger: Into all the way to May based on complications of underground and different scheduling issues. So we continue to try to mitigate the impact to <unk>, but it is a pretty disruptive getting in and out of the property.
Speaker Change: On another note.
Scott: And then one final question, if I may, Steve, you mentioned some disruption in the first half of this year at Palace Station. Can you sort of help us understand and maybe think about an impact there? And was there anything that commenced in the fourth quarter that generated some disruption that, obviously, we couldn't see in the aggregated reported results? Hey Joe, this is Scott again. We'll break it down by property. PALOS is undergoing road work around its perimeter.
Speaker Change: As we see this as positive.
Speaker Change: We continue to reinvest in the properties, we've seen great success, with our new high limit rooms, and new amenities.
And <unk> has.
Speaker Change: A slight impact when it comes to the slot high limit room table.
Speaker Change: Table Island, which we've opened up the table iron ore, where a couple of weeks away from opening up the slot parlor room, and then offering two new restaurants. So while there is some short term disruption. The upside is we've been very successful with this formula and other properties like Red rock. So we look forward to the us.
Scott: That road work was expected to be done by the end of the year, and it has now been extended all the way to May based on complications with underground and different scheduling issues. So we continue to try to mitigate the impacts on PALOS, but it is pretty disruptive getting in and out of the property. On another note... As we see this as positive, we continue to reinvest in the properties. We've seen great success with our new high-limit rooms and new amenities. And GVR has a slight impact when it comes to the slot high-limit room, and the table high-limit room, which we've opened up.
Speaker Change: Side of that.
Speaker Change: Same token.
Speaker Change: We basically have gone in and were finding huge success in the race and sports book being Reformatted to more of a viewer style format than the traditional race and sports book, we're about over the counter wagering.
Speaker Change: So re configuring, our race and sports books to be more experiential has been a huge success in the <unk>.
Speaker Change: <unk> success, we've seen at Durango with what we did there and trying to bring as Sean said up to that level, yes. So we're investing.
Scott: We're a couple weeks away from opening up the slot high-limit room and then offering two new restaurants. So while there is some short-term disruption, the upside is we've been very successful with this formula in other properties like Red Rock. So we look forward to the upside of that, same token at Sunset. We basically have gone in, and we're finding huge success in the race and sports book being reformatted to more of a viewer-style format than the traditional race and sports book were about over-the-counter wagering. And so reconfiguring our race and sports books to be more experiential has been a huge success.
Speaker Change: And the new race and sports book, a new casino bar and a new high limit room.
Speaker Change: Area four so in the interim through the.
Speaker Change: Remainder of the spring will be under construction. There. We also are adding a yard house restaurants in that expansion and remodel so.
Speaker Change: Once we get through that it's going to be a great property.
Speaker Change: Great. Thank you guys.
Speaker Change: The next question comes from Carlo Santarelli with Deutsche Bank. Please go ahead.
Carlo Santarelli: Hey, guys.
Carlo Santarelli: We're standing you don't want to get into property level metrics. I guess my question was less around numbers and more maybe around experience so to speak.
Carlo Santarelli: If you kind of look at your margin profile throughout 2023 from a same store basis margins were kind of down in that 100 to 200 basis point range over the two Q3 Q4, you actually improved.
Carlo Santarelli: And the great success we've seen at Durango with what we did there and trying to bring Sunset up to that level. Yeah, so we're investing in a new race and sports book, a new casino bar, and a new high-limit room area for Sunset. So in the interim, through the remainder of the spring, we'll be under construction there. We are also adding a yardhouse restaurant in that expansion and remodel. So once we get through that, it's going to be a great addition to the property. Thank you, guys. The next question comes from Carlo Santarelli of Deutsche Bank. Please go ahead. Hey, guys. I understand you don't want to get into property level metrics.
Carlo Santarelli: Fight the opening so is it is it fair to assume that at this stage that that kind of in those 27 days that that property.
Carlo Santarelli: <unk>, specifically did not necessarily have a meaningful drag on your margins and is there anything.
Carlo Santarelli: Perhaps one time in nature that we need to be cognizant of as we look out to 2024 as it pertains to the margin profile of that asset.
Look.
Speaker Change: Durango I have to say, it's one of the best openings.
Carlo Santarelli: I guess my question was less around numbers and more maybe around experience, so to speak. If you kind of look at your margin profile throughout 2023 from the same store basis, your margins were kind of down in that 100 to 200 basis point range over the 2Q and the 3Q, while 4Q actually improved despite the opening.
Speaker Change: That I've seen in terms of the guest experience and again like Scott said, a special thanks to the other six properties in there exactly.
Speaker Change: The executive team and team members that fill them anywhere and everywhere that needed to make.
Speaker Change: Is greater and experience for the customer as possible you know, it's very difficult at the beginning when we opened Durango. The visitation was off the charts I mean, it's very hard to keep up.
Carlo Santarelli: So is it fair to assume at this stage that, in those 27 days, that property, Durango specifically, did not necessarily have a meaningful drag on your margins? And is there anything, you know, perhaps once in a lifetime in nature, that we need to be cognizant of as we look out to 2024 as it pertains to the margin profile of that asset? Look, you know, at Durango. I have to say, it's one of the best openings that I've seen in terms of the guest experience.
Speaker Change: And make it a good experience I think our team did that while no opening is perfect. This is as close as our seemed to a perfect. One so take that initial three weeks you have to realize everybody's come on and everybody wants to see it there's a tremendous amount of trial and just like we've seen with other every other property that we've opened.
Speaker Change: After that initial wave of the opening youre going to find out where your natural market settles into right and that's the stage that we're in right now I think we're settling into what is going to be like a base level of business and then over the next couple of quarters, we're going to start working to get more efficiencies.
Frank: And again, like Scott said, special thanks to the other six properties and their executive teams and team members that filled in, you know, anywhere and everywhere that needed to make that, you know, as great an experience for the customer as possible. You know, it's very difficult at the beginning; when we opened Durango, visitation was off the charts. I mean, it's very hard to keep up and make it a good experience.
Speaker Change: Out of that property, but the first focus for us there.
Speaker Change: I have a smooth opening have good word of mouth on the street.
Frank: I think our team did that. Well, no opening is perfect, but this is as close as I've seen to a perfect one.
Speaker Change: People want to go there.
Speaker Change: Worry about getting the efficiencies over the course of the next two to three quarters.
Frank: So take those initial three weeks; you have to realize everybody's coming, everybody wants to see it. There's a tremendous amount of trial and error. And just like we've seen with every other property that we've opened, after that initial wave of the opening, you're going to find out where your natural market settles into, right? And that's the stage that we're in right now. I think we're settling into what is going to be like a base level of business, and then over the next couple of quarters, we're going to start working to get more efficiencies out of that property. But the first focus for us there was to have a smooth opening, have good word of mouth on the street, and have people want to go there. And we'll worry about getting the efficiencies over the course of the next two to three quarters. Do you have anything else to add?
Speaker Change: Do you have anything else.
Speaker Change: Just say I'll go back to Frank said, it well with the right I'll just go back to the fundamentals for the kind of the key fundamentals of acquisition costs being very stable in the market our cost of goods sold year over year in the quarter actually went down.
Speaker Change: Our labor as a percentage of revenue.
So the teams out there properties are doing a super job of.
Speaker Change: Managing some of the key expense areas, we do still struggle a bit with energy costs were up about 1 million Bucks.
Speaker Change: Electrical cost.
Speaker Change: For the quarter, but otherwise as we go forward absent what Frank said.
Speaker Change: Base of our expenses looks pretty stable.
Speaker Change: And just just a quick follow up on that previously you guys had talked about given the demographic and the location of the asset you anticipated the table games side to be a little bit greater of the mix relative to slots than most other properties has kind of that held true thus far.
Scott: Yeah, I would just say, I'll go back to, Frank said it well with Durang, I'll just go back to the fundamentals, the kind of the key fundamentals of acquisition costs being very stable in the market. Our cost of goods sold year over year and quarter actually went down. Our labor as a percentage of revenue went down. So the teams out there at the properties are doing a great job of managing some of the key expense areas. We do still struggle a bit with energy costs.
Speaker Change: This is Lorenzo Carlo Yes, I mean, I think if you kind of take a look around the property I mean, obviously, we said pursue we're happy with the way things are going if you asked us what are we not necessarily surprised about but maybe a little bit but the table games business has been the drop has been.
Speaker Change: Better than we certainly projected I would say that in addition.
Speaker Change: Additional to that the food.
Carlo Santarelli: Putting the customers kind of reaction to overall food and beverage, particularly the food Hall is just been a smash Grand Slam hit so far.
Scott: We're up about a million bucks in electrical costs for the quarter, but otherwise, as we go forward, absent what Frank said, the base of our expenses looks pretty stable. And just a quick follow-up on that. Previously, you guys had talked about given the demographic and the location of the asset, you anticipated the table game side to be a little bit greater in the mix relative to slots than most other properties. Has that kind of held true thus far? This is Lorenzo. Carlo, yes.
Carlo Santarelli: Doing big volumes big numbers as well as People's reaction to the sports book connected to the George restaurant with the indoor outdoor feature restaurant basically inside of the sports book So.
Carlo Santarelli: People have reacted nicely to the different amenities, but yes, given the demographic in the area.
Carlo Santarelli: <unk> drop is stronger than we expected initially.
Carlo Santarelli: You can refer to the December quarter and market share report to kind of give you an indication that that is never perfect. Just given the schedule of drops we saw that in a table.
Lorenzo: I mean, I think if you kind of take a look around the property, I mean, obviously, we said we were super happy with the way things are going. If you ask us what we are not necessarily surprised about, but maybe a little bit, but the table games business has been, the drop has been better than we certainly projected. I would say that in addition to that, the customers' kind of reaction to overall food and beverage, particularly the food hall, has just been a smash, grand slam hit so far, doing big volumes, big numbers, as well as people's reaction to the sports book connected to the George restaurant with the indoor-outdoor feature and restaurant basically inside of the sports book.
Carlo Santarelli: Outperformed in December.
Speaker Change: For sure, it's just what would that data, sometimes especially around new year's.
Speaker Change: That could be kind of careful what youre looking at but I appreciate that guys. Thank you very much.
Speaker Change: Okay.
Speaker Change: The next question comes from Shaun Kelly with Bank of America. Please go ahead.
Shaun C. Kelley: Hi, good afternoon, Thanks for taking my question.
Shaun C. Kelley: Just yes.
Shaun C. Kelley: Hoping.
Shaun C. Kelley: You got to think a little bit forward about the the natural maturation curve here.
Shaun C. Kelley: Yes, I'm, just struggling a little bit to kind of get a sense of did this open.
Shaun C. Kelley: Better than sort of run rate expectation or typically we would expect that property to build and stabilize over time and it may be a combination of both but I guess trajectory wise I'm getting.
Lorenzo: So people have reacted nicely to the different amenities, but yes, given the demographic in the area, the table drop is stronger than we expected initially. You can refer to the December market share report to kind of give you an indication of that. That data is never perfect, but just given the schedule of drops, you saw that, you know, tables... outperformed. Yeah, no, for sure.
Shaun C. Kelley: I'm, just getting a few mixed signals and I'm trying to kind of get my arms around.
Shaun C. Kelley: It was both a revenue and EBITDA contribution of what we're seeing so far.
Carlo Santarelli: It's just with that data, sometimes, especially around New Year's, you have to be kind of careful what you're looking at, but I appreciate that, guys. Thank you very much. The next question comes from Shaun Kelley with Bank of America. Please go ahead.
Shaun C. Kelley: Yes.
Shaun C. Kelley: And we expect that to normalize a little bit down or actually is there just an implied ramp up which I think many of us would expect having looked at casino openings in the past just any directional help just given again the headline results here were excellent and clearly imply some great numbers for the property or the portfolio.
Shaun C. Kelley: Thanks for taking my question. Just, you know, just hoping, you know, as you kind of think a little bit forward about, you know, the natural maturation curve here. Yeah, I'm just struggling a little bit to kind of get a sense of, you know, did this open better than sort of run rate expectation? Or, you know, typically, we would expect the property to build and stabilize over time. And it may be a combination of both.
Speaker Change: Yes, Sean I think I'll start and then I'll hand, it over the team, but I think the opening as Frank.
Speaker Change: Said was was pretty damn near close to perfect.
But we also said our focus was on guest service our focus was on execution and the property was overwhelmed at times against frankly.
Speaker Change: The team did a fantastic job.
Speaker Change: We view this as a 40 year asset and so right now as we're starting to find our footing in terms of what's our normal business, we're going to be in there.
Speaker Change: Fine tuning Durango to make this the most efficient property that we can and in addition.
Shaun C. Kelley: But I guess, trajectory-wise, I'm getting, I'm just getting a few mixed signals, and I'm trying to kind of get my arms around, you know, is both the revenue and the EBITDA contribution of what we're seeing so far, way better, and do we expect that to normalize a little bit down? Or actually, is there just an implied ramp up, which I think many of us would expect having, both the casino openings in the past, just any directional help, just given, again, the headline results here were excellent and clearly implied some great numbers for the property or the portfolio. Shaun, I think I'll start and then I'll hand it over to the team. But I think that the opening, as Frank said, was pretty damned near perfect.
Speaker Change: Any of the cannibalization, we're expecting to backfill at the core properties just given the favorable long term demographic profile in Las Vegas.
Speaker Change: But we've always said this is a several year ramp to get to stabilization and so we think we're well on track to hit that target.
Speaker Change: Great. Thanks, Stephen and maybe just one smaller one but just sort of a.
Speaker Change: Tactical one around the way Preopening works here can you just give us a sense was there some loaded cost in terms of when you typically.
Speaker Change: Break employees on the line, but before the actual opening.
Speaker Change: A personal expenses or is the expense base really reflective of really just from December 5th Honor was again theres some expenses incurred in the quarter prior to opening up that might have just been the way that that's happened I think I've seen a little bit of both over the years I'm just kind of curious on how you did it.
Stephen: I mean, but we also said our focus was on guest service, our focus was on execution, and we were, you know, the property was on top of things. And again, as Frank said, the team did a fantastic job. We view this as a 40-year asset. And so right now, as we're starting to find our footing in terms of what's our normal business, you know, we're going to be in there fine-tuning Durango to make this the most efficient property that, In addition to any of the cannibalization, we're expecting to backfill at the core properties, you know, just given the favorable long-term demographic profile in But we've always said this is a several-year ramp to get to stabilization, and so we think we're well on track to hit that target.
Speaker Change: We incurred about $20 million of Preopening expenses in Q1, Q4, and again that was a little bit larger than we anticipated due to the delay of you recall, we moved the opening.
Speaker Change: From late November to December 15, So we had to incur additional preopening expenses, but those are kind of below the line and and we wouldn't expect any going forward with regard to Durango.
Speaker Change: But just to be clear were there any staff cost and that is in that kind of period of buildup as employees are joining in that in that period.
Speaker Change: Art.
Art: And pre opening is there something.
Art: Just that initial few weeks beforehand.
Art: Everything is captured in <unk> everything is captured in print.
Speaker Change: Okay. Thank you very much I appreciate that.
Stephen: Great. Thanks, Stephen. And maybe just one smaller one, but just sort of like a tactical one around the way pre-opening works here. Can you just give us a sense, were there some loaded costs in terms of, you know, when you typically, you know, bring employees on the line, but before the actual opening, did you incur some of those expenses, or is the expense base really reflective of really just from December 5th on, or was, again, there some expenses incurred I think I've seen a little bit of both over the years. I'm just kind of curious about how you did it.
The next question comes from Jordan Bender with citizen JMP. Please go ahead.
Jordan Bender: Great. Thanks for taking my question, Steve you kind of alluded to it in some of the prepared remarks, but with free cash flow ramping.
Jordan Bender: Turning to the special dividend in the first quarter, but you've also talked about debt reduction kind of following the opening Durango, assuming that you do turn to debt reduction using that free cash flow can you maybe give us a perspective of the potential cadence of.
Stephen: We incurred about $20 million in pre-opening expenses in Q4, and again, that was a little bit larger than we anticipated due to the delay. If you recall, we moved the opening from late November to December 5, and so we had to incur additional pre-opening expenses. But those are below the line, and we wouldn't expect any going forward with regard to direct, But just to be clear, were there any staff costs in that kind of period of buildup as employees joined in that period that aren't in pre-opening? Is there some just, you know, just that initial few weeks beforehand?
Jordan Bender: The reduction until we do hear something further on incremental projects coming from the company. Thank you.
Jordan Bender: I think the way the board views this quarter.
Jordan Bender: Quarter by quarter like we've always said, we're going to have a peak leverage when Durango wraps up which is around this time and then we're going to slowly marks down toward our long term target of three times net.
Jordan Bender: That said, we always said, we're going to take a balanced view of returning capital. So we spent the last two years investing in Durango, and it's off to a great start and given the confidence in the business model and the way to rank is going we felt now is the time to issue a special dividend.
Stephen: Everything is captured in the pre-opening. Okay, thank you very much. Appreciate that. The next question comes from Jordan Bender with Citizen JMP. Please go ahead.
Jordan Bender: Great. Thanks for taking my question. Steve, you kind of alluded to it in some of the prepared remarks, but with free cash flow ramping, you're turning to the special dividend in the first quarter, but you've also talked about debt reduction kind of following the opening of Durango. Assuming that you do turn to debt reduction using that free cash flow, can you maybe give us a perspective of the potential cadence of the reduction until we do hear something further on incremental projects coming from Thank you. I think the way the board views this, it's quarter by quarter.
Jordan Bender: Balanced I think maybe your question was more towards new or additional projects coming online.
Jordan Bender: Our thoughts are to basically take 24, good Durango fine tuned.
Jordan Bender: Delever the company and we're going to be in a position then in 'twenty five.
Jordan Bender: To.
Jordan Bender: Well evaluate which new projects, we should be bringing online.
Jordan Bender: Yeah.
Understood. Thanks, and then just on the follow up your free cash flow conversion no Ah just about 60% for the year is that kind of the right level to think about moving forward.
Stephen Lawrence Cootey: Like we've always said, we're going to have peak leverage when Durango wraps up, which is around this time, and then we're going to slowly march down toward our long-term target of three times net. That said, although we said we're going to take a balanced view of returning capital, we spent the last two years investing in Durango, and it's off to a great start. Given our confidence in the business model and the way Durango's going, we felt now was the time to issue a special dividend and balance that.
Speaker Change: Yes. It is because that's fully loaded I think <unk> was a little bit skewed to the higher end because it wasn't any tax payments are estimated tax payments at that quarter.
Speaker Change: Inventory was down 100% made mandatory debt pay and maintenance capital.
Speaker Change: Okay.
Speaker Change: The next question comes from Steve Fleishman with Stifel. Please go ahead.
Hey, guys good afternoon.
Steven Wieczynski: So Steve or Scott, if I could maybe ask I mean, Durango has been kind of beat dead here, a little bit, but if I could ask one more on Durango, just wondering maybe what new sign ups.
Stephen Lawrence Cootey: I think maybe your question was more about new or additional projects coming online. I think our thoughts are to basically take 24, get Durango fine-tuned, delever the company, and we're going to be in a position then in 25 to evaluate which new projects we should be bringing online. And then just on the follow-up, your free cash flow conversion, just about 60% for the year. Is that kind of the right level to think about moving forward? Yes, it is because it's fully loaded.
Steven Wieczynski: For your loyalty program look like relative to your expectations and I'm, just trying to get an idea of how.
Steven Wieczynski: The property has.
Steven Wieczynski: Been helping to bring new customers into your ecosystem of if all that makes sense.
Speaker Change: Yes blended for the quarter, our new sign ups are up.
Single digits for the quarter.
Speaker Change: Joining go in.
Speaker Change: In the limited time it was open for the quarter did have a definite impact.
Speaker Change: Okay. Thanks, Scott appreciate that and then Steve look we fully understand you guys don't provide.
Stephen Lawrence Cootey: I think 4Q is a little bit skewed to the higher end because it wasn't any tax payments or estimated tax payments. Thank you. The next question comes from Steve Wieczynski with Steeple. Please go ahead. Hey, guys, good afternoon. So Steve or Scott, if I could maybe ask, I mean, Durango has been kind of beat dead here a little bit.
Steven Wieczynski: Formal guidance for the year, but as we think about 2024 is there anything we need to be thinking about.
Steven Wieczynski: Whether it's in terms of headwind or tailwind for this year or anything that would disrupt the normal cadence.
Steven Wieczynski: But, you know, if I could ask one more question on Durango, just wondering maybe what new sign-ups for your loyalty program look like relative to your expectations. And I'm just trying to get an idea of how, you know, the property, you know, has been helping to bring new customers into your ecosystem, if that makes sense. He exploded for the quarter.
Steven Wieczynski: For how the year should normally play out and then maybe also just wondering what youre thinking about for <unk> for corporate expenses this year.
Speaker Change: So to kind of address that.
Kind of walk us through some of the construction disruption both due to the new amenities at Sunset and Green Valley as well as.
Scott: Our new signups are up high single digits for the quarter. And Durango had, in the limited time it was open for the quarter, did have a definitive. Okay, thanks, Scott. I appreciate that. And then and then Steve, look, you know, we fully understand you guys don't provide formal guidance for the year, but as you know, as we think about 2024, is there anything we need to be thinking about? You know, whether it's in terms of headwinds or tailwinds for this year or anything that would disrupt the normal cadence of how the year should normally play out and then maybe also just wondering what you're thinking about for corporate expenses this year. So to kind of address that, Scott kind of walked us through some of the construction disruptions, both due to the new amenities at Sunset and Green Valley, as well as, you know, NDOT's And then obviously, you know, Durango; we expect to continue to ramp it up. As far as forward, I think roughly around $19 million where we ended up in Q4 is right where I think we'd be for the rest of the year.
Speaker Change: <unk> work palace, which will affect us affect us during the first half.
Speaker Change: And then we've obviously Durango, we expect to continue to ramp up.
As far as corporate I think roughly around $19 million, where we ended up in Q4 is right where it needs to be the rest of the year.
Speaker Change: Per quarter.
Speaker Change: Okay perfect. Thanks, guys appreciate it.
Speaker Change: Yes.
Speaker Change: The next question comes from Barry Jonas with Chewy Securities. Please go ahead.
Barry Jonas: Hey, guys.
Barry Jonas: Culinary Union contract renewals saw a pretty large increases across the strip wondering if that's having any impact on your your revenues and should we expect any indirect pressures on your labor costs. Thanks.
Barry Jonas: Yeah. This is Scott I'll take that.
Barry Jonas: What else can jump in.
Scott Kreger: Let's start by just saying and reiterate what we have.
Scott Kreger: We said in the past we think we are an employer of choice for <unk>.
Scott Kreger: Reasons, one because of our culture.
Scott Kreger: Two because of our benefits side is very competitive in the marketplace.
Scott Kreger: Very successful hiring process for Durango.
Scott Kreger: We tested that in the market.
Scott Kreger: We found that our compensation package and benefits was very competitive that being said.
Stephen Lawrence Cootey: The Bulletproof Executive 2013, Okay, perfect. Thanks, guys. Appreciate it. The next question comes from Barry Jonas with Truist Securities. Please go ahead.
Scott Kreger: We want to remain competitive.
Scott Kreger: With the increases that will come with the new contracts, we're definitely going to have to look and make sure that we're competitive and so there will be some consideration there.
Barry Jonas: Hey guys, the culinary union contract renewals saw pretty large increases across the strip. Wondering if that's having any impact on your revenues? And should we expect any indirect pressures on your labor costs? Thanks. This is Scott.
Scott Kreger: But as Steve likes to say all the time.
All of those 60000, plus colony are workers that Scott raises are also a lot of them are our customers. So there's a.
Scott Kreger: Waterfall effect, there that benefits us on the other shock.
Scott: I'll take it, and maybe someone else can jump in. Let's start by just saying and reiterate what we've said in the past. We think we're an employer of choice for a lot of reasons. One, because of our culture, and two, because of our benefits package.
Speaker Change: Got it got it and then just for a follow up can you talk a little bit about your tavern strategy here and how you're thinking about organic growth versus M&A.
Speaker Change: Yes, so patterns are an interesting new segment that we're looking at it's a very micro local segment.
Scott: We think it's very competitive in the marketplace. We had a very successful hiring process for Durango, so we tested it in the market, and we found that our compensation package and benefits were very competitive. That being said, we want to remain competitive, and with the increases that will come with the new contracts, we're definitely going to have to look and make sure that we're competitive, and so there will be some consideration there. But as Steve likes to say all the time, you know, all of those 60,000 plus culinary workers that Scott raises are also, a lot of them are our customers. So there's a waterfall effect there that benefits us on the other side. Got it, got it.
Speaker Change: Neighborhood segment has a different customer profile.
Speaker Change: That we find attractive.
Speaker Change: And we find that the investment returns on to others is pretty attractive.
We have a strategy where we'd like to.
Speaker Change: Create pet.
Speaker Change: Penetration in high net worth high growth areas of OE kind of akin to our large.
Speaker Change: Development strategy.
Speaker Change: <unk>.
Speaker Change: Look we we look at everything whether that's an acquisition or a ground up or.
Speaker Change: Build to suit situation, but we always find that.
Barry Jonas: And then just for a follow-up, can you talk a little bit about your tavern strategy here and how you're thinking about organic growth versus M&A? Yeah, so taverns are an interesting new segment that we're looking at. It's a very micro-local segment.
Speaker Change: Having our own footprint to design a project the way we want it designed into new emerging areas probably R. R.
Speaker Change: Our method of choice.
Speaker Change: We'll look at everything that makes sense.
Speaker Change: Perfect. Thank you.
Speaker Change: The next question comes from Dan <unk> with Wells Fargo. Please go ahead.
Dan: Hey, good afternoon, everyone and thanks for taking my questions.
Scott: It's a neighborhood segment. It has a different customer profile that we find attractive, and we find that the investment returns on taverns are pretty attractive. We have a strategy where we'd like to create penetration in high network, high growth areas of the valley, kind of akin to our large site development strategy. And look, we look at everything, whether that's an acquisition or a ground-up or a build-to-suit situation. But we always find that having our own footprint to design a project the way we want it designed in the new emerging area is probably our method of choice, but we'll look at everything that makes sense. Perfect, thank you. The next question comes from Dan Collitzer with Wells Fargo. Please go ahead. Hey, good afternoon, everyone.
Dan: I was more curious just in general in the market, obviously, a big new property opening youre going to see a pickup in promotional spend I.
Dan: I guess any detail on what you saw over the course of the quarter and into January and maybe over the past week or so in terms of the market and remaining rational.
Scott Kreger: This is Scott.
Scott Kreger: Really a lot more of the same so it's.
Scott Kreger: It's stable.
Scott Kreger: A pretty rational market you do have the one off outliers that have been promotional and remain promotional is the strategy. There has not been any noticeable change in the market.
Scott Kreger: As affected.
Scott Kreger: Okay.
Speaker Change: Got it and then just for my follow up I think you guys have talked about that 20% return on capital and getting their fridge Rand over where I believe the course of three years, but given the strength of the opening in the mine.
Dan Collitzer: Thanks for taking my questions. I was more curious, just in general in the market, you know, obviously a big new property opening, you're going to see a pickup in promotional spend. I guess any detail on what you saw over the course of the quarter and into, you know, January, maybe over the past week or so, in terms of, you know, the market and, you know, remaining rational. This is Scott. It's really a lot more of the same. So it's stable.
Speaker Change: I'm out of the gate I mean is there any difference in cadence of how you're thinking about that and then just along those lines is there any nuance here in terms of gaming versus non gaming mix at that property I just noticed overall for the portfolio. It was a little different than typical seasonality.
Scott: And you have a pretty rational market; you do have, you know, the one-off outliers that have been promotional and remain promotional as a strategy. But there's not been any noticeable change in the market that has affected us.
Speaker Change: This is Steve I think that the profile that the ramping profiles remain sustained. This these are very early days, we're very happy with the opening but there's still a lot of work still shuttle and again they still settling in.
Dan Collitzer: And then just for my follow-up, I think you guys have talked about that 20% return on capital, you know, getting there for Durango over, I believe, the course of three years. But given the strength of the opening and the momentum out of the gate, I mean, is there any difference in cadence in how you're thinking about that? And then, just along those lines, is there any nuance here in terms of gaming versus non-gaming mixes?
Steven Wieczynski: The mix it should follow it should match our system.
Steven Wieczynski: Our system mix.
Steven Wieczynski: Be a little higher engagement higher gaming just given given.
Steven Wieczynski: Limited hotel rooms.
Steven Wieczynski: <unk>.
Speaker Change: Understood. Thanks, so much.
Speaker Change: The next question comes from Stephen Grambling with Morgan Stanley. Please go ahead.
Stephen Grambling: Hi, everyone I was just going to re ask a bit on.
Stephen Grambling: Cannibalization comment I guess any sense for how quickly you think you could backfill and did you take any actions or feel like you needed to take any actions to offset any of the cannibalization in any of your other properties from an expense stand point or was it just too small.
Steve: That property, I just noticed, overall, for the portfolio, it was a little different than typical seasonality. Thanks. Steve, I think the ramping profile has remained sustained. These are very early days. We're very happy with the opening, but there's still a lot of work. Still settling in.
Steve: It's still settling in. In terms of the mix, it should follow, it should match our system, our current system. A little higher gaming. A little higher gaming. Limited hotel rooms. Understandable. Thanks so much.
Speaker Change: Well I think I think it might be.
Speaker Change: Too early.
Speaker Change: So we.
Speaker Change: We want there to be.
Stephen Grambling: The next question comes from Stephen Grambling with Morgan Stanley. Please go ahead. Hey, everyone.
Speaker Change: The trial, we want everybody in the value could come.
Stephen Grambling: I'm just gonna re-ask a bit on the cannibalization comment. I guess, any sense for how quickly you think you could backfill? And did you take any actions or feel like you needed to take any actions to offset any of the cannibalization and any of your other properties from an expense standpoint? Or was it just too small?
Speaker Change: Sure.
Speaker Change: I don't see it.
Speaker Change: What you see typically from our previous openings as you see a very early strong visitation from.
Speaker Change: In brand customers, but then you tend to see a dip where they go back to their neighborhood property that they're familiar with so we're in the throes of kind of understanding what that period is.
Stephen Grambling: I think I think it might be just a little too early. We want there to be a trot. We want everybody in the valley to come and try it out, to hang on and see it. What you typically see from our previous openings is you see a very early, strong visitation from in-brand customers. But then you tend to see a dip where they go back to their neighborhood property that they're familiar with.
Speaker Change: And then over time, what we.
Speaker Change: You've seen in our previous openings is twofold, one you see the.
Speaker Change: The existing property backfill and grow and that will put all of the Red rock, which is in one of the highest growth areas in the valley in Summerlin.
Scott: So we're in the throes of kind of understanding what that period is. And then over time, what we've seen in our previous openings is twofold. One, you see the existing property backfill and grow. And for that, we're talking predominantly about Red Rock, which is in one of the highest growth areas in the valley. And Summerlin Master Plan of Development is the fourth best master plan of development in the country this year.
Speaker Change: Thus far in development support.
Speaker Change: Thus far in development in the country this year.
Speaker Change: So red rock has its own backfill story.
Speaker Change: And then the other thing we see as Durango being in a new market.
Scott: So Red Rock has its own backfill story. And then the other thing you see is Durango being in a new market that is underpenetrated and lacks additional competition. You're going to see Durango continue to grow its database and the surrounding area over the next three years, and really, it will never stop. I mean, yeah, there's a tremendous amount of new rooftops that will be coming online out there over the next year to three years, lots of apartments, and everything else. So we'll see where Durango settles in, you know, after a great opening. And then we'd expect it to be a growth asset for decades to come, just to get better. But, you know, we're in the early days right now.
Speaker Change: That was underpenetrated and blacks additional competition youre going to see Durango continue to grow.
Speaker Change: Database and the surrounding area over the next three years and really it never will stop.
Speaker Change: Yes, there is.
Speaker Change: A tremendous amount of new rooftops that will be coming online out there over the next year or two or three years.
Speaker Change: Lots of apartments.
Speaker Change: And everything else, so, we'll see where Durango settles in.
Speaker Change: After a great opening and then we'd expect it to be a growth elsewhere.
Speaker Change: For decades to come just to get better but.
Speaker Change: We're early days right now.
Scott: That's helpful. And one other clarification, you were talking about labor inflation a little bit earlier. I guess when we put it all together and you think about core ops-ec growth next year, how would you characterize where you're thinking about the kind of core OPEX growth? The kind of moving parts around Durango would be I think it's always looking for efficiency, right? It's relentless about how we run our business and looking at these core areas. We don't expect to have any real increases in the acquisition cost area.
Speaker Change: That's helpful and one other just clarification you were talking about labor inflation, a little bit earlier, I guess, when we put it all together and you think about core opex.
Speaker Change: Growth next year, how would you characterize where where you're thinking kind of core opex growth ex the kind.
Speaker Change: Moving parts around Durango would be.
Speaker Change: Well I think it is always looking for efficiency right it's being.
Speaker Change: It's about how we run our business and looking at these core areas. We don't expect to have any real increases the acquisition cost area. We think we're doing a great job on cost of goods sold but thats really a daily flight.
Scott: We think we're doing a great job on the cost of goods sold, but that's really a daily fight, you know. And then probably the biggest one is just us being very diligent about labor and energy costs.
Speaker Change: And then probably the biggest one is just us being very diligent about labor and energy costs.
Speaker Change: Energy costs, making sure that we're competitive so that we get that done.
Scott: Making sure that we're competitive so that we get the best employees in the market, but at the same time, making sure that where we deploy those employees and at what level is efficient for our business. Great, thanks so much. The next question comes from Chad Beynon with Macquarie. Please go ahead.
Speaker Change: Employees in the market, but at the same time, making sure that where we deploy those employees and then what level is efficient for our business.
Speaker Change: Great. Thanks, so much.
Speaker Change: The next question comes from Chad Beynon with Macquarie. Please go ahead.
Chad Beynon: Good afternoon, and thanks for taking my question and congrats on the strong opening.
Chad Beynon: Afternoon, thanks for taking my question and congrats on the strong opening. Wanted to ask, Scott, maybe one for you just in terms of pacing for 24 in terms of that meeting and banquet space. And now that Durango is open, and you know, groups can kind of rent that out. How that's looking in terms of what's on the books for 24 overall versus prior periods. Thanks. Yeah, so I kind of used that benchmark at the same time as last year's comparison.
Chad Beynon: Wanted to ask Scott maybe one for you just in terms of pacing for 24 for that meeting and banquet space and now the Durango is open air.
Chad Beynon: You know groups can kind of rent that out.
Chad Beynon: That's looking in terms of what's on the books for 24 overall versus prior periods.
Scott Kreger: Yes, so I kind of use the benchmark at the same time.
Scott Kreger: Last year's comparison.
Scott: We like where we're headed in the first quarter and the fourth quarter of 24 in both group room nights and catering. Summer's a bit soft.
Scott Kreger: We like where we're headed we especially like where we're headed in the first quarter and the fourth quarter of 'twenty four.
Scott Kreger: In both group room nights and catering summers a bit soft we've got some work to do in the summer, but with our booking window being pretty sure. We've got time to make that up a bit.
Scott: We've got some work to do in the summer, but with our booking window being pretty short, you know, we've got time to make that up a bit. And I, you know, I will caution you that these are super strong numbers, but they're not the numbers that we saw coming out of the pandemic that were 60 plus percent year over year increases, but they are still very robust for the brand, and we like where we're at. Great, thanks. And then, I think you talked about strength across the loyalty database. Did you see any declining weakness for that low-end tier or the unrated business? Or did that remain pretty consistent through the fourth quarter as well?
Scott Kreger: I will caution they are super strong numbers, but they are not the numbers that we coming out of <unk>.
The pandemic that were 64% year over year increases, but they are still very robust for the brand.
We like where we're headed.
Speaker Change: Great. Thanks, and then you talked about strength across the loyalty database did you see any declining weakness for that low end tier or the unrated business or did that remain pretty consistent through the fourth quarter as well.
Speaker Change: It's a consistent trend so.
Scott: It's a consistent trend. So we still see very robust numbers in the mid to higher end, but that's partly our strategy. And we see consistent and stable trends in the lower end of the data.
Speaker Change: We still see.
Speaker Change: Very robust numbers in the mid to higher end, but thats, partly our strategy.
Speaker Change: See consistent and stable trends in the lower end of the database.
Scott: Great, thanks, I appreciate it. The next question comes from Joe Stauff with Susquehanna. Please go ahead. Good evening, everyone.
Speaker Change: Great. Thanks, I appreciate it.
Speaker Change: The next question comes from Joe Stauff with Susquehanna. Please go ahead.
Joe Stauff: Good evening everyone.
Joe Stauff: Just a few follow ups, maybe on Durango one is.
Joe Stauff: Just a few follow-ups, you know, maybe on Durango. One is, you know, with the strong opening, I'm just trying to figure out essentially when you guys would expect visitation patterns to normalize. Would it be, you know, like a typical six months?
Joe Stauff: With a strong opening I'm just trying to.
Joe Stauff: Figure out it essentially when you guys would expect visitation patterns normalize would it be.
Joe Stauff: Like a typical six months would you expect it to be earlier and then would you expect this property in particular to be able to pull a certain amount of say consistent visitations from.
Joe Stauff: Would you expect it to be earlier? And then would you expect this property in particular to be able to pool a certain amount of, say, consistent visitations from, you know, further away than, say, your corporate average? Look, I think, you know, you have your peak at the opening, when everyone in town wants to come and see it, and you get a trial. And I would imagine, in Q1 and Q2, we will find out where the market is for Durango. We're settling in, you know, to not have grand opening volumes anymore. And so it'll take a quarter or two, and then I think from there, we should start to be able to build new customers and visitation and start growing from there.
Joe Stauff: Yeah.
Joe Stauff: Further away than say say your corporate average.
Speaker Change: Look I think you are.
Speaker Change: You have your peak that'd be opening where everyone in town wants to come and see it in your trial and I would imagine in Q1 and Q2, we will find out where the market is for Durango, we're settling in.
Speaker Change: Oh, not grand opening volley.
Speaker Change: Volumes anymore, and so it will take a quarter or two and then I think from there we should start to be able to build new customers and visitation.
Speaker Change: And start growing from there, yes Lorenzo.
Joe Stauff: Yes, Lorenzo, but relative to your question as well, the second part of it, given the fact that it's right there on the freeway, it should naturally draw from a wider radius than maybe, you know, some of our other properties that don't quite have the amount of traffic that that freeway has. I mean, it's one of the busiest kind of loops in the valley because everybody either going to work or coming home from work that lives on the west side of town or from the airport back and forth, I mean, they have to drive right by Durango. But I think if you look at our portfolio, one of the great things about our portfolio is location, location, location, right? Look at Red Rock, a great location right on the Beltway. You look at Sunset Station, right on the Beltway.
Lorenzo: Relative to your question as well on the second part of it given the fact is right there on the freeway it should naturally draw from a wider radius than maybe some of our other properties.
Speaker Change: That don't quite have the amount of traffic that that freeway has I mean, it's one of the busiest kind.
Speaker Change: Kind of loops in the valley, because everybody either going to work or coming home from work that lives on the west side of town from the airport back and forth I mean, they have to drive right by to rank them, but.
Speaker Change: If you look at our portfolio that's one of the.
Speaker Change: Great things about our portfolio is location location location right look at Red rock.
Speaker Change: Great location right on the Beltway you look at Sunset station right on the beltway.
Frank: You know, Boulder Station is right on the Beltway. So I think that's one of the long-term benefits as the town continues to grow is that I think we have probably the best traffic, ingress, egress, and car counts of anyone in the market. Subs by www.zeoranger.co.uk. Thank you for that. And, and Steve, maybe just a quick clarification on North Fork there that does not require any new capital from the company, correct? Now, we've invested the original capital, which is still sitting there, and it's a $40 million note, but the current balance is about $110 million.
Speaker Change: Boulder station right on the beltway.
Speaker Change: I think that's one of the long term benefits as we.
Speaker Change: It continues to grow as I think we have.
Speaker Change: Probably the best traffic ingress egress car counts.
Speaker Change: Anyone in the market.
Speaker Change: Sure.
Speaker Change: Thank you for that.
Speaker Change: And Steve maybe just a quick clarification on North Fork, there that does not require any new capital.
Speaker Change: From the company correct.
Steven Wieczynski: No we've invested the original capital, which is still sitting there and its a $40 million note, but the current balance is about $110 million.
Steve: We would anticipate raising non-recoursed financing around the project. Thanks, guys. As a reminder, if you have a question, please press star then 1 to be added to the question queue. The next question comes from John DeCree with CBRE. Please go ahead. Good afternoon, everyone.
Steven Wieczynski: We would anticipate raising nonrecourse financing around the project.
Steven Wieczynski: Thanks, guys.
On the financial markets right.
Steven Wieczynski: As a reminder.
Speaker Change: If you have a question. Please press star then one to be joined into the question queue.
Speaker Change: The next question comes from John Decree with CBRE. Please go ahead.
John Decree: Good afternoon, everyone.
John Decree: Most have been asked and answered, but maybe one more on Durango.
John Decree: Most have already been asked an answer, but maybe one more on Durango. And that is, given the successful opening that you've talked about, has that influenced or changed how you think about phase two prospects there, either in scope or timing? I know it's still only been several weeks, but you know, any thoughts on phase 2 would be interesting to hear. Thank you.
John Decree: And that is given the.
John Decree: Successful opening that you've talked about has that.
John Decree: Influenced or changed how you think about phase two prospects there either in scope or timing I know, it's still only been several weeks but.
John Decree: Any thoughts on.
Phase two it would be interesting to hear thank you.
Lorenzo: Yes, Lorenzo, I mean, really consistent with what we've communicated before. We're going to get, obviously, we have Durango open. We're going to continue to dial in the efficiency and efficiencies of the property. We are certainly working diligently on a phase two plan that we're actually pretty far along on the programming and putting the finer details of adding some entertainment, potentially adding to the number of hotel rooms, and adding a couple more food and beverage options as well. And then we're also pretty far along as far as the initial planning for Inspirata, which is out in Gree Valley and North Fork. And actually, we're fast and furious working on North Fork as well.
Lorenzo: Yes Lorenzo.
Lorenzo: Really consistent with what we've communicated before we're going to get obviously, we got Durango open we're going to continue to dial in the efficiency the efficiencies of the property. We are certainly working diligently on a phase III plans that we're actually pretty far along on the programming and promoting on the finer details of adding some entertainment amenities potentially.
Lorenzo: Adding to the <unk>.
Lorenzo: Number of hotel rooms.
Lorenzo: Adding a couple more food and beverage options as well.
Lorenzo: And then we're also pretty far along as far as the initial planning for his Ferrara, which is out in and Green Valley.
Our north Fork and actually we're faster for he is working on North Park as well. So we got plenty on our hands right now actively being worked on from a development standpoint.
Lorenzo: So we've got plenty on our hands right now actively being worked on from a development standpoint. But, you know, like I said, we're going to get Durango dialed in before we announce kind of what the next move is. But the good thing is the company has more optionality from a growth standpoint with deals and pieces of real estate that we control and we can bring online, you know, whenever we think it fits, but really consistent with where we've been in the past.
Lorenzo: But.
Lorenzo: As I said, we're going to we're going to get Durango dialed in before we announce kind of what the next move is.
Lorenzo: But the good thing is the company has more optionality from a growth standpoint with deals and pieces of real estate that we control and we can bring online whenever we think it fits but.
Lorenzo: Really consistent where we've been in the past.
Lorenzo: So we're just more to come as we kind of have a little bit more time under our belts with Durango. Perfect. Thanks so much, guys, and congratulations on the opening. Thank you. Subs by www.zeoranger.co.uk. This concludes our question and answer session. I would like to turn the conference back over to Stephen Cootey for any closing remarks. Thank you everyone for joining us, and we look forward to talking to you next quarter. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. BF-WATCH TV 2021
Lorenzo: So we're just more to come as we kind of have a little bit more time under our belt with Durango.
Speaker Change: Perfect. Thanks, so much guys and congratulations on the opening.
Thank you.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Stephen Coody for any closing remarks.
Stephen Lawrence Cootey: Well. Thank you everyone for joining us and we look forward to talking to you next quarter take care.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Okay.
Speaker Change: Yes.
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Speaker Change: Okay.