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Red Rock Resorts, Inc. 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Red Rock Resorts, Inc.

Filing date:

02/21/2025

TLDR:

Red Rock Resorts experienced revenue growth due to the opening of Durango Casino & Resort, but net income decreased. Key risks include market dependence and high debt, while opportunities exist in new projects.

ELI5:

Red Rock Resorts made more money overall, but their profits were slightly down. They have some risks like relying on one market and owing a lot of money, but also opportunities to grow.

Accession #:

0001653653-25-000004

Published on

Analyst Summary

  • Net revenues increased by 12.5% year-over-year, driven by the opening of Durango.
  • Casino Revenue Margin: 72.2% (2024) vs. 74.0% (2023) – A slight decrease.
  • Food and Beverage Margin: 18.1% (2024) vs. 21.9% (2023) – A notable decrease.
  • Room Revenue Margin: 68.2% (2024) vs. 69.9% (2023) – A slight decrease.
  • SG&A as % of Net Revenue: 22.3% (2024) vs. 21.7% (2023) – A slight increase.
  • Total Assets: Increased from $3.95 billion to $4.05 billion.
  • Long-term Debt: Increased from $3.30 billion to $3.35 billion.
  • Gross Profit Margin: 61.1% (2024) vs. 62.4% (2023) -2.1% decrease
  • Operating Profit Margin: 29.3% (2024) vs. 32.4% (2023) -9.6% decrease
  • Net Profit Margin: 7.9% (2024) vs. 10.2% (2023) -22.5% decrease
  • Return on Assets (ROA): 3.8% (2024) vs. 4.4% (2023) -13.6% decrease
  • Return on Equity (ROE): 71.6% (2024) vs. 104.3% (2023) -31.3% decrease
  • Basic EPS 2024: $2.61, Basic EPS 2023: $3.04, -14.1% decrease
  • Diluted EPS 2024: $2.53, Diluted EPS 2023: $2.94, -13.9% decrease
  • Current Ratio: 0.91 (2024) vs. 0.81 (2023) 12.3% increase
  • Quick Ratio: 0.86 (2024) vs. 0.76 (2023) 13.2% increase
  • Cash Ratio: 0.51 (2024) vs. 0.39 (2023) 30.8% increase
  • Debt-to-Equity Ratio: 12.2 (2024) vs. 15.2 (2023) -19.7% decrease
  • Debt-to-Assets Ratio: 0.92 (2024) vs. 0.94 (2023) -2.1% decrease
  • Interest Coverage Ratio: 2.5 (2024) vs. 3.1 (2023) -19.4% decrease
  • Asset Turnover: 0.48 (2024) vs. 0.44 (2023) 9.1% increase
  • Price-to-Earnings Ratio (P/E): 19.7 (2024)
  • Price-to-Book Ratio (P/B): 17.7 (2024)
  • Price-to-Sales Ratio (P/S): 2.8 (2024)
  • Enterprise Value to EBITDA (EV/EBITDA): 10.9 (2024)
  • Revenue Growth: 12.5% (2024)
  • Net Income Growth: -13.8% (2024)
  • EPS Growth: -14.1% (2024)
  • Adjusted EBITDA: $795,900 (2024), $745,968 (2023), 6.7% increase
  • Native American Development Costs: $81.7 million (2024), $45.9 million (2023), 78% increase

Opportunities and Risks

  • Las Vegas Market Dependence: The company’s concentration in the Las Vegas regional market makes it vulnerable to local economic downturns and increased competition.
  • Competition: Intense competition from other casinos, including Native American gaming and potential expansion of online gaming, could negatively impact revenue.
  • Substantial Indebtedness: High debt levels could limit financial flexibility and increase vulnerability to interest rate fluctuations.
  • Construction Risks: Potential delays and cost overruns in current and future construction projects.
  • Unionization: Potential for increased labor costs and disruptions due to union activities.
  • Regulatory Risks: Extensive regulation and potential changes in gaming laws could adversely affect operations.
  • Cybersecurity: Risk of data breaches and cyberattacks.
  • Durango Casino & Resort: The new property is driving revenue growth and attracting new customers.
  • Native American Project Development: The North Fork Project and potential future management agreements offer growth opportunities.
  • Developable Land: The company’s land holdings in Las Vegas provide opportunities for future expansion.
  • Equity Repurchase Program: The authorized repurchase program could enhance shareholder value.

Potential Implications

Stock Price

  • A HOLD recommendation is appropriate at this time. Investors should closely monitor the company’s ability to improve profitability, manage its debt, and successfully execute its expansion plans.

Red Rock Resorts, Inc. (RRR) 2024 10-K Filing Report

Executive Summary

This report analyzes Red Rock Resorts, Inc.’s 2024 10-K filing. The company experienced revenue growth driven by the opening of Durango Casino & Resort, but net income decreased slightly. Key risks include reliance on the Las Vegas regional market, competition, and substantial indebtedness. Opportunities exist in Native American project development and potential future expansions. Overall, a HOLD recommendation is appropriate, pending further assessment of the impact of economic uncertainties and the success of Durango.

Company Overview

Red Rock Resorts, Inc. is a holding company that owns and manages Station Casinos LLC, a gaming, development, and management company focused on the Las Vegas regional market. The company operates seven major gaming and entertainment facilities and 12 smaller casinos. A key recent development is the opening of Durango Casino & Resort in December 2023.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management highlights favorable customer trends, including strong carded slot play and customer engagement. They acknowledge economic uncertainties related to inflation and interest rates. The tone is cautiously optimistic, emphasizing operational excellence and cost management. The narrative aligns with the reported revenue growth, but the decrease in net income warrants further investigation into cost increases.

Financial Statement Analysis

Revenue Trends

Net revenues increased by 12.5% year-over-year, driven by the opening of Durango. Casino, food and beverage, and room revenues all experienced growth.

Key Ratios

  • Casino Revenue Margin: 72.2% (2024) vs. 74.0% (2023) – A slight decrease.
  • Food and Beverage Margin: 18.1% (2024) vs. 21.9% (2023) – A notable decrease.
  • Room Revenue Margin: 68.2% (2024) vs. 69.9% (2023) – A slight decrease.
  • SG&A as % of Net Revenue: 22.3% (2024) vs. 21.7% (2023) – A slight increase.

The margin decreases, particularly in food and beverage, suggest rising costs are impacting profitability. The increase in SG&A as a percentage of revenue indicates that operating expenses are growing at a faster rate than revenue.

Balance Sheet Highlights

  • Total Assets: Increased from $3.95 billion to $4.05 billion.
  • Long-term Debt: Increased from $3.30 billion to $3.35 billion.

The increase in assets is primarily driven by property and equipment. The high level of debt remains a significant risk factor.

Cash Flow Analysis

Cash flow from operations increased, indicating strong underlying business performance. However, significant capital expenditures and debt service requirements continue to strain cash flow.

Risk and Opportunity Assessment

Risks

  • Las Vegas Market Dependence: The company’s concentration in the Las Vegas regional market makes it vulnerable to local economic downturns and increased competition.
  • Competition: Intense competition from other casinos, including Native American gaming and potential expansion of online gaming, could negatively impact revenue.
  • Substantial Indebtedness: High debt levels could limit financial flexibility and increase vulnerability to interest rate fluctuations.
  • Construction Risks: Potential delays and cost overruns in current and future construction projects.
  • Unionization: Potential for increased labor costs and disruptions due to union activities.
  • Regulatory Risks: Extensive regulation and potential changes in gaming laws could adversely affect operations.
  • Cybersecurity: Risk of data breaches and cyberattacks.

Opportunities

  • Durango Casino & Resort: The new property is driving revenue growth and attracting new customers.
  • Native American Project Development: The North Fork Project and potential future management agreements offer growth opportunities.
  • Developable Land: The company’s land holdings in Las Vegas provide opportunities for future expansion.
  • Equity Repurchase Program: The authorized repurchase program could enhance shareholder value.

Red Flags and Uncommon Metrics

  • Decreasing Margins: The decline in casino, food and beverage, and room revenue margins suggests rising costs are impacting profitability.
  • Increased SG&A: The increase in selling, general, and administrative expenses as a percentage of net revenue indicates that operating expenses are growing at a faster rate than revenue.

Conclusion and Actionable Insights

Red Rock Resorts demonstrates solid revenue growth, primarily fueled by the opening of Durango. However, decreasing margins and increasing SG&A expenses raise concerns about profitability. The company’s high debt load and reliance on the Las Vegas market remain significant risks. While opportunities exist in Native American project development and future expansions, these are subject to regulatory and financing uncertainties.

Recommendation: A HOLD recommendation is appropriate at this time. Investors should closely monitor the company’s ability to improve profitability, manage its debt, and successfully execute its expansion plans. Further analysis of the impact of economic uncertainties on the Las Vegas market is also warranted.

Red Rock Resorts, Inc. (RRR) Financial Analysis – 2024

1. Financial Ratio and Metric Analysis:

Profitability:

  • Gross Profit Margin:

    • Calculation: ((Net Revenues – Casino Expenses – Food and Beverage Expenses – Room Expenses – Other Expenses) / Net Revenues)
      • 2024: (($1,939,011 – $354,597 – $295,193 – $63,768 – $30,669) / $1,939,011) = 61.1%
      • 2023: (($1,724,086 – $293,993 – $244,786 – $55,064 – $32,549) / $1,724,086) = 62.4%
    • Trend: (61.1% – 62.4%) / 62.4% = -2.1% decrease
    • Industry: The gaming industry typically sees gross profit margins ranging from 50% to 70%. RRR’s margin is within this range.
  • Operating Profit Margin:

    • Calculation: (Operating Income / Net Revenues)
      • 2024: ($568,691 / $1,939,011) = 29.3%
      • 2023: ($558,688 / $1,724,086) = 32.4%
    • Trend: (29.3% – 32.4%) / 32.4% = -9.6% decrease
    • Industry: An operating profit margin of 15-30% is generally considered healthy in the casino/gaming industry. RRR’s margin is within this range, but trending down.
  • Net Profit Margin:

    • Calculation: (Net Income Attributable to Red Rock / Net Revenues)
      • 2024: ($154,051 / $1,939,011) = 7.9%
      • 2023: ($176,004 / $1,724,086) = 10.2%
    • Trend: (7.9% – 10.2%) / 10.2% = -22.5% decrease
    • Industry: The net profit margin for the casino industry is typically between 5% and 15%. RRR’s margin is within this range, but trending down.
  • Return on Assets (ROA):

    • Calculation: (Net Income Attributable to Red Rock / Total Assets)
      • 2024: ($154,051 / $4,045,531) = 3.8%
      • 2023: ($176,004 / $3,954,512) = 4.4%
    • Trend: (3.8% – 4.4%) / 4.4% = -13.6% decrease
    • Industry: An ROA of 5% or higher is generally considered good in the casino industry. RRR’s ROA is below this benchmark.
  • Return on Equity (ROE):

    • Calculation: (Net Income Attributable to Red Rock / Total Red Rock Resorts, Inc. Stockholders’ Equity)
      • 2024: ($154,051 / $215,066) = 71.6%
      • 2023: ($176,004 / $168,839) = 104.3%
    • Trend: (71.6% – 104.3%) / 104.3% = -31.3% decrease
    • Industry: An ROE of 10-15% is generally considered good. RRR’s ROE is significantly higher, which could indicate high leverage or efficient use of equity, but the decrease is concerning.
  • Earnings Per Share (EPS) – Basic and Diluted:

    • Calculation: (Net Income Attributable to Red Rock / Weighted-Average Common Shares Outstanding)
      • Basic EPS 2024: ($154,051 / 59,025) = $2.61
      • Basic EPS 2023: ($176,004 / 57,875) = $3.04
      • Diluted EPS 2024: ($262,471 / 103,666) = $2.53
      • Diluted EPS 2023: ($303,804 / 103,217) = $2.94
    • Trend:
      • Basic EPS: ($2.61 – $3.04) / $3.04 = -14.1% decrease
      • Diluted EPS: ($2.53 – $2.94) / $2.94 = -13.9% decrease
    • Industry: EPS varies widely. The trend is more important than the absolute value.

Liquidity:

  • Current Ratio:

    • Calculation: (Total Current Assets / Total Current Liabilities)
      • 2024: ($295,364 / $325,202) = 0.91
      • 2023: ($282,292 / $349,219) = 0.81
    • Trend: (0.91 – 0.81) / 0.81 = 12.3% increase
    • Industry: A current ratio of 1.0 or greater is generally considered healthy. RRR is slightly below 1.0, but improving.
  • Quick Ratio (Acid-Test Ratio):

    • Calculation: ((Total Current Assets – Inventories) / Total Current Liabilities)
      • 2024: (($295,364 – $16,409) / $325,202) = 0.86
      • 2023: (($282,292 – $15,255) / $349,219) = 0.76
    • Trend: (0.86 – 0.76) / 0.76 = 13.2% increase
    • Industry: A quick ratio of 0.8 or greater is generally considered healthy. RRR is close to this benchmark and improving.
  • Cash Ratio:

    • Calculation: (Cash and Cash Equivalents / Total Current Liabilities)
      • 2024: ($164,383 / $325,202) = 0.51
      • 2023: ($137,586 / $349,219) = 0.39
    • Trend: (0.51 – 0.39) / 0.39 = 30.8% increase
    • Industry: A cash ratio of 0.5 or greater is generally considered healthy. RRR is at this benchmark and improving.

Solvency/Leverage:

  • Debt-to-Equity Ratio:

    • Calculation: (Total Liabilities / Total Stockholders’ Equity)
      • 2024: ($3,738,698 / $306,833) = 12.2
      • 2023: ($3,710,625 / $243,887) = 15.2
    • Trend: (12.2 – 15.2) / 15.2 = -19.7% decrease
    • Industry: A debt-to-equity ratio above 2.0 is generally considered high. RRR’s ratio is very high, but decreasing, indicating improved solvency.
  • Debt-to-Assets Ratio:

    • Calculation: (Total Liabilities / Total Assets)
      • 2024: ($3,738,698 / $4,045,531) = 0.92
      • 2023: ($3,710,625 / $3,954,512) = 0.94
    • Trend: (0.92 – 0.94) / 0.94 = -2.1% decrease
    • Industry: A debt-to-assets ratio above 0.6 is generally considered high. RRR’s ratio is very high, but decreasing, indicating improved solvency.
  • Interest Coverage Ratio (Times Interest Earned):

    • Calculation: (Operating Income / Interest Expense, Net)
      • 2024: ($568,691 / $228,804) = 2.5
      • 2023: ($558,688 / $181,023) = 3.1
    • Trend: (2.5 – 3.1) / 3.1 = -19.4% decrease
    • Industry: An interest coverage ratio of 1.5 or greater is generally considered acceptable. RRR’s ratio is above this benchmark, but decreasing.

Activity/Efficiency:

  • Asset Turnover:

    • Calculation: (Net Revenues / Total Assets)
      • 2024: ($1,939,011 / $4,045,531) = 0.48
      • 2023: ($1,724,086 / $3,954,512) = 0.44
    • Trend: (0.48 – 0.44) / 0.44 = 9.1% increase
    • Industry: Asset turnover varies. The increase is a positive sign.

Valuation:

  • Price-to-Earnings Ratio (P/E):

    • Calculation: (Stock Price / EPS – Basic)
      • 2024: ($51.40 / $2.61) = 19.7
    • Industry: The average P/E ratio for the S&P 500 is around 20-25. RRR’s P/E ratio is within this range.
  • Price-to-Book Ratio (P/B):

    • Calculation: (Market Cap / Total Stockholders’ Equity)
      • Market Cap = $51.40 * (60,058,276 + 45,985,804) = $5,440,288,000
      • 2024: ($5,440,288 / $306,833) = 17.7
    • Industry: A P/B ratio between 1 and 3 is considered a good value. RRR’s P/B ratio is very high.
  • Price-to-Sales Ratio (P/S):

    • Calculation: (Market Cap / Net Revenues)
      • 2024: ($5,440,288 / $1,939,011) = 2.8
    • Industry: A P/S ratio below 1 is considered good. RRR’s P/S ratio is above this benchmark.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Calculation: ((Market Cap + Total Debt – Cash) / Adjusted EBITDA)
      • 2024: (($5,440,288 + $3,407,480 – $164,383) / $795,900) = 10.9
    • Industry: An EV/EBITDA ratio between 8 and 12 is considered fair. RRR’s EV/EBITDA ratio is within this range.

Growth Rates

  • Revenue Growth:

    • Calculation: ((Net Revenues Current Year – Net Revenues Previous Year) / Net Revenues Previous Year)
      • ($1,939,011 – $1,724,086) / $1,724,086 = 12.5%
    • Industry: The gaming industry is expected to grow at a rate of 5-10% annually. RRR’s revenue growth is above this benchmark.
  • Net Income Growth:

    • Calculation: ((Net Income Current Year – Net Income Previous Year) / Net Income Previous Year)
      • ($291,292 – $337,776) / $337,776 = -13.8%
    • Industry: Net income growth varies. The decrease is a negative sign.
  • EPS Growth:

    • Calculation: ((EPS Current Year – EPS Previous Year) / EPS Previous Year)
      • ($2.61 – $3.04) / $3.04 = -14.1%
    • Industry: EPS growth varies. The decrease is a negative sign.

Other Relevant Metrics:

  • Adjusted EBITDA:

    • 2024: $795,900
    • 2023: $745,968
    • Trend: ($795,900 – $745,968) / $745,968 = 6.7% increase
    • Significance: Adjusted EBITDA is a non-GAAP metric that reflects the company’s operating performance, excluding the impact of non-cash items and other adjustments. The increase indicates improved operating profitability.
  • Native American Development Costs:

    • 2024: $81.7 million
    • 2023: $45.9 million
    • Trend: ($81.7 – $45.9) / $45.9 = 78% increase
    • Significance: These costs relate to the North Fork Project. The increase suggests continued investment in this project, but also highlights the risk associated with its successful completion and the recoverability of these costs.

2. Commentary:

Red Rock Resorts demonstrated revenue growth in 2024, driven by strong performance in its Las Vegas operations, as well as an increase in Adjusted EBITDA. However, profitability metrics such as net profit margin, ROA, ROE, and EPS experienced declines compared to the previous year. The company maintains a high level of debt, although the debt-to-equity ratio has improved slightly. The increasing Native American development costs associated with the North Fork Project present a potential risk, while the company’s liquidity position has improved.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️