Red Rock Resorts - Earnings Call - Q1 2021

Transcript

Speaker 0

Good afternoon. Welcome to Red Rock Resorts First Quarter twenty twenty one Conference Call. All participants will be in listen only mode. Please note this conference is being recorded. I would now like to turn the conference over to Stephen Coutee, Executive Vice President, Chief Financial Officer and Treasurer of Red Rock Resorts.

Please go ahead.

Speaker 1

Thank you, operator, and good afternoon, everyone. Thank you for joining us today for Red Rock Resorts first quarter twenty twenty one earnings conference call. Joining me on the call today are Frank and Lorenzo Fertitta as well as our executive management team. I'd like to remind everyone that our call today will include forward looking statements under the safe harbor provisions of The United States federal securities laws. Developments and results may differ from those projected.

During this call, we will also discuss non GAAP financial measures. For the definitions and complete reconciliation of these figures to GAAP, please refer to the financial tables in our earnings press release and Form eight ks, which were filed this afternoon prior to the call. Also, note that this call is being recorded. Before we get started, I would like to note that we are comparing our twenty twenty-twenty twenty one first quarter results against our twenty nineteen first quarter results. Given that our properties were closed for a portion of the prior year's first quarter due to COVID-nineteen pandemic, we believe this financial comparison is a better reflection of our performance this past quarter.

Now let's take a look at our first quarter results. On a consolidated basis, our first quarter net revenue was $352,600,000 down 21.1% from $447,000,000 in the 2019. Our adjusted EBITDA was $156,600,000 up 8% from $145,100,000 in the 2019. Our adjusted EBITDA margin was 44.4% for the quarter, an increase of eleven ninety seven basis points from the 2019, and up 59 basis points from the 2020. With respect to our Las Vegas operations, excluding the impact from our foreclosed properties,

Speaker 2

our

Speaker 1

first quarter net revenues was $338,400,000 up 5.4% from $321,000,000 in the 2019. Our adjusted EBITDA was $165,600,000 up 38% from $120,000,000 in the 2019. Our adjusted EBITDA margin was 48.9%, an increase of eleven fifty five basis points from the 2019 and up three thirty nine basis points from the 2020. On a same store basis, we achieved the second highest net revenue and the highest adjusted EBITDA and adjusted EBITDA margin in the history of our operations. During the quarter, we continued to prioritize free cash flow, converting 57% of our adjusted EBITDA to free cash flow, generating $88,800,000 or $0.76 per share.

This brings our total free cash flow generated by the company from our June 2020 reopening through the end of the first quarter to almost $350,000,000 or $2.97 per share, with virtually every dollar going to pay down debt and fortify our balance sheet. Taking a look behind the numbers, the overall customer trends we saw in the first quarter were consistent with the trends we've seen since our reopening We continue to see strong visitation from a younger demographic, increased spend per visit, more time spent on device, plus the growing return of our core customer. These trends were all positively impacted by the continued rollout of the COVID-nineteen vaccination program, easing of capacity restrictions from 25% to 50% on March 15, and federal stimulus money. These positive trends were offset by approximately 4,800,000 of COVID-nineteen mitigation costs for the quarter, approximately $4,900,000 of good carry costs associated with our closed properties for the quarter and the continued negative impact of government mandated occupancy restrictions on several of our core business lines, including hotel, food and beverage and sales and catering.

As of May 1, occupancy restrictions were further eased to prevent 80% occupancy. And if at least sixty percent of Clark County residents are vaccinated by June 1, we expect occupancy to increase to 100%. While lease development should improve the business segments most impacted by these restrictions, we still expect to carry to continue to carry our COVID-nineteen mitigation costs as well as our carry costs associated with our closed properties at least over the short term. On the expense side, as we begin the anniversary of the government mandated closures in March 2020, we now expect to achieve over $200,000,000 per annum in cost savings. This new target is $50,000,000 above the $150,000,000 per annum cost savings we referenced on prior earnings calls as the company continues to benefit from the actions we took to streamline our business, optimize our marketing initiatives, and renegotiate a number of vendor and third party agreements.

These initiatives, along with maintaining a disciplined operational focus, have enabled the company to achieve and sustain higher profitability and drive more free cash flow. Now let's cover a few balance sheet and capital items. The company's cash and cash equivalents at the end of the first quarter were 117,900,000.0, and total principal amount of debt outstanding at quarter end was 2,870,000,000.00. In the first quarter, we paid down $78,000,000 in debt. And since our reopening in June, we've reduced our net debt levels by approximately $334,000,000 to a peak level of 3,100,000,000.0.

Capital spend in the first quarter was 5,100,000.0. And as mentioned in our previous earnings call, we anticipate our 2021 maintenance capital spend to be between 65 and 75,000,000. Also during the first quarter, we made a tax distribution of approximately 31,500,000.0 to the LLC unit holders of Station HoldCo, which included a distribution of approximately 18,100,000.0 to Red Rock Resorts. Because Red Rock Resorts does not expect to pay cash income taxes in 2021, the company elected to use $14,100,000 of its distribution to purchase slightly over 382,000 Class A shares and redeem 100,000 Class B shares at an average price of $29.16 per share under its previously disclosed $150,000,000 share repurchase program. When combined with our debt repayment, we returned $92,400,000 to our stakeholders in the first quarter.

Now let's provide a short update on our North Fork project. We continue to move forward on this project and are near completion with our design efforts. Over the next couple of weeks, we will be having discussions with our lending partners as to how we can most efficiently finance this project. We continue to expect to have a shovel in the ground in the 2021 with construction expected to take fifteen to eighteen months. As of now, the budget for the full completion of this project, excluding any financing costs, is expected to be between $3.50 and $400,000,000 Upon completion, we expect this project to include over 213,000 square feet, including almost 100,000 square feet of casino space, 2,000 Class III slots, and 40 table games and two stand alone restaurants as well as a food hall concept.

We are excited to begin the development of this very attractive project on behalf of the North Fork tribe, and we'll be providing more details in the coming quarters. Lastly, on May 3, we entered into definitive agreements to sell the Palms Casino Resort in Palms Place for an aggregate purchase price of $650,000,000 in cash to an affiliate of the San Dimel Band of Mission Indians. The closing of this transaction is subject to customary closing conditions, including regulatory approvals, and is expected to be completed before the end of the year. While we are incredibly proud of how we transformed this iconic property, we determined that the sale of the property is the best way to create shareholder value and enables us to emerge from the pandemic on a more accelerated timeline. Going forward, we will continue to focus on and improve operations of our existing portfolio of leading gaming assets in the Las Vegas locals market.

With this transaction, we can accelerate the development of our Durango project located in the fast growing and underserved Southwest Las Vegas market while maintaining a fortress balance sheet. Finally, this transaction will further reduce our interest expense cost and eliminate approximately 9,500,000.0 of our current annual closed property carry cost, of which 2,700,000.0 was incurred in the first quarter. In conclusion, with government mandated restrictions waning, with wide spread vaccinations and with significant pent up leisure demand, we believe the worst is finally behind us, and we look forward to a brighter future. We are proud of our team members and how we managed to to weather the storm in such a positive manner. We were one of the only gaming companies in The United States that did not raise additional debt or equity during this crisis.

Instead, we paid our team members during the crisis, increased team member benefits while simultaneously reducing its cost to our team members, kept our focus on being destinations of choice within the Las Vegas locals market by increasing our service levels and quality of our amenities, generated historically high EBITDA and EBITDA margins while converting 68% of that EBITDA to cash since our reopening in June 2020. We paid down $334,000,000 in debt, so we're now sitting at levels well below pre COVID level. Reduced our share count in a series of accretive transactions. Allwell continues to be one of the few gaming companies that still owns all of its real estate and operating assets. When these highlights are coupled with very stable supplydemand pandemic, the positive long term trends in population growth and the stable regulatory environment that characterize the Las Vegas locals market, and we are best in class through replaceable assets and locations, unparalleled distribution and scale in our deep organic development pipeline, we believe that we are uniquely positioned to thrive in this highly attractive market.

Lastly, we would like to recognize and extend our thanks again to all of our team members for their hard work and to our guests for their support through this pandemic. Operator, this concludes our prepared remarks for today, and we are now ready to take questions from participants on the call.

Speaker 0

We will now begin the question and answer session. Our first question is from Joe Greff from JPMorgan. Go ahead.

Speaker 3

Good afternoon, guys. Thank you for taking my questions. My question isn't really on the sustainability of margins maybe directly, Maybe that's unanswerable. But really, my my my question is focusing on how are you thinking about adding back, existing capacity, closed capacity to three properties, that are still closed versus, you know, the relaxation benefits, from, you know, having more hotel rooms and F and D space at your existing properties. And then you mentioned that Steve Steve there at the end, you mentioned about, you know, where the balance sheet's going, and that allows you to take on Durango development.

Maybe, Frank, you could update us on your current thoughts on the timing and scope of developing on the Durango side.

Speaker 1

Actually, yes, there's a few questions in there. So in terms of we'll talk about the closed properties. I mean, we're continuing to evaluate these closed properties. I think we're going take a very disciplined approach to any potential property reopening. In any case, I think what we're looking for is if we decide to open a project, it needs to generate incremental free cash to the entity.

In terms of bringing on more staff, I think we expect as volumes to increase, staffing in certain areas to also rise up. But when you look at where volumes are increasing, the majority of that is in non gaming entities such as hotels, sales of catering, theaters for that example, all of which are very high margin businesses. So we expect to get a return employee as we kind of

Speaker 4

load up on new hires.

Speaker 2

Plus, I think you have to look at our business model. We're primarily a gaming company. 80% of our revenues and cash flows primarily come from slots, table games, sports, and we're very levered to that side of the business. And while we still haven't gotten back to normal on the hotel catering and food and beverage, which we expect to normalize here very soon, those we do not think should really take away from, the margins, that we've been able to achieve given, you know, a better cost structure that we've gotten to under COVID. We think the theaters are basically lease income based on revenue, which flows through at 100¢ on the dollar.

Hotel and catering are typically between 4050%. We were one of the few companies that opened up initially with primarily all of our food outlets other than the buffets. And those have been capacity restrained, you know, between 25%, 50%, 80%, depending on where we've been in this COVID cycle. And so we would expect those margins to, if anything, get better than they would have been historically. So, you know, we're feeling pretty good about what we're seeing overall here in the local economy right now.

I don't know, Lorenzo, if you have anything that you'd like to add to that.

Speaker 4

No. I think that covers it. I mean, you said, we we opened with essentially all of our amenities on June 4. We wanted it to seem as normal as possible to our guests, the things that that haven't been opened are really, theaters and then whatever we incrementally through the hotel and food and beverage, but that should come in a fairly nice margin. So it shouldn't as far as bringing on additional amenities, nothing should really drag our margins from there.

And then he had asked about Durango.

Speaker 2

Yeah. I mean, look, at the end of the day, the company has a great development pipeline here in Las Vegas, primarily with gaming entitled A plus locations surrounding the Las Vegas Valley in the fastest growing areas of the city. We think Durango is the most prime of all of those development sites. It's the only nonrestricted gaming location on that part of the Beltway within a five mile radius. It's one of the fastest growing areas of the city.

We like everything we're seeing. We think it's very, very underserved. And we are currently very focused on the scope of the project and defining that and basically working to make that project the most efficient project that we have ever built as a company, trying to take everything that we've learned along the way. And so we hope to be sharing those details with you guys within the next, hopefully, by the next call. We'll be able to share with you guys the timing and the scope of that project, but we would like to be in a position to be in the ground in early, '22.

Speaker 3

Thanks very much, guys.

Speaker 5

Our

Speaker 0

next question is from Carlo Santarelli from Deutsche Bank. Go ahead.

Speaker 5

Hey, guys. Thank you for taking my question. To the extent you guys could comment, I I know, Steve, you kinda called out, obviously, the not only the closed property cost, but also some of the the health safety cost measures and and whatnot. If I'm not mistaken, those are kind of knocking your margins somewhere in the ballpark of $2.50 to 300 basis points a quarter. Clearly, I would imagine some of those things stay as we move forward here.

But when you think about the other pushes and pulls, and this is kind of getting into Joe's question, relative to the portfolio that you have open right now, you guys have been pretty comfortably in this 700 to 1,000 basis points of margin improvement on this same storage basis. As those costs go away, is it possible that perhaps we even see a little bit more expansion from here?

Speaker 1

Carl, that is a possibility. To say that these are historically high margins, I'd like to think that we can run at these levels. What I can comfortably say is think we'll be historically above what we've been for a long time. I think this has a lot to do with I think Frank touched on the best that the business model is a recurring revenue stream that's based on really centered around the high market slot business. And we've been maintaining our operational discipline around labor and around marketing.

And to your point, we do see some of the COVID mitigation costs leaning away. We also see some of the closed property costs leaning away. In fact, the $9,500,000 as pointed out earlier in the call, that's going to lean away as well. Plus the businesses that we're bringing along when occupancy restrictions are listed, your theaters, which opened up in early May, your hotel, which is seeing traction at the through the end of the first quarter, and that's continuing this quarter. The same with sales and catering, you're starting to see green shoots through the 2021 and then group business really returning in 2022.

Because, as Frank mentioned, we've opened up all of our amenities, even your F and B, the incremental margin is going be somewhat high because we're already covering our fixed costs with our existing operations.

Speaker 5

Right. Thank you, Steve. If I could, just one follow-up. Frank, acknowledging that you obviously did very clearly say you have more color on it perhaps next time we spoke. In terms of magnitude, clearly construction costs, things like that have gone up.

How do we think about the scope of the Durango project? Is that kind of construction impact or material impact something that influences the timing on going forward with the project? And then just if you could, like, to the extent you can kind of give us range of is it a $350,000,000 to $500,000,000 project? Is it is it maybe a little bit more than that? You know, how how we could think about what where where your head is on it?

Speaker 2

Look. We don't wanna get ahead of ourselves. We're we're going through the process. I can tell you the project is significantly tighter than anything that we've done in the past. We're gonna put the dollars into the place where we make money.

It's gonna be a focus on slot machines and table games, our primary business. We'll have several restaurant options. We will not have a buffet. And I don't wanna get ahead of ourselves on it. We're gonna go through and get the real cost on the project.

We're gonna bid it out, and we're gonna know exactly where we are. And we wanna give you guys good, solid information. But I can't tell you, invite anybody, go go do demographics around every local casino site in Las Vegas, and you'll see that Durango is an absolute no brainer. It's, like I say, it's the most underserved adult population, relative to the number of gaming positions within a three and a five mile radius. And so we feel really good about it, knowing what we're able to produce out of our other protected micro markets that we're in.

And I can tell you, we've seen a real inflection, and I'm telling you, it's real, in the type of person moving to Las Vegas where we have these locations, like Red Rock and Green Valley that are in the suburbs where everybody wants to live and the quality of the customer that's moving to Las Vegas and the high end part of our business is is stronger than it's ever been. Yeah. And this is Lorenzo.

Speaker 4

If you look historically, you know, we've been able to generate outsized returns on the projects that we, you know, find a location on the freeway, some great traffic, great demographics. We've been able to generate outsized returns, and, that's why we're so excited about the Durango project. And, you know, without committing to an actual size or certainly we don't have a budget yet, but we do feel comfortable that given the amount of free cash flow that the company is generating that we can build that project without affecting our debt levels and affecting our balance sheet. So you have that kind of powerful effect of being able to continue to have, you know, strong growing existing operations and then growth beyond that with all of our development opportunities coupled with the ability to essentially execute that with the free cash flow that we're generating and not having to lever the company up to do it.

Speaker 5

Thank you, guys.

Speaker 0

Our next question is from Steve Wieczynski from Stifel. Go ahead.

Speaker 6

Hey, good afternoon, guys. Want to ask a question about the palm sale. I guess the question actually, this is probably going to be a two part question. But first part would be, do you guys think you would actually have sold this asset if and this is somewhat hypothetical, but if COVID never happened? And then the second part of that question would be, I mean, looking back when you made the original Palms acquisition, what were some of the bigger challenges that maybe you didn't foresee when you originally made that deal?

Speaker 1

So in the first I guess, the first question, that's like trying to grab the tail of an odd bar, Frank. Sounds easy, but difficult to do.

Speaker 4

Who knows? I don't know. I mean, I think the job our job is to create shareholder and match my shareholder value. It wasn't something we were contemplating in pre COVID. We weren't talking about, really selling the palms or going through a process at the time.

Of course, when COVID hit, you know, we reassessed our entire business from top to bottom. And, you know, the the San Manuel tribe came forward and presented what we thought was a great opportunity for our company to, you know, refocus our strategy, which is on our current operations here and and accelerating the development of all these pieces of land that we have throughout the valley that focus on the growing areas of the Las Vegas local market, which which we love. Second part of your question.

Speaker 1

The challenges challenges at The Palms. Look. I mean,

Speaker 4

we were starting to actually get some traction at the Palms. I think if you go back and, you know, kind of if we look at you know, we're self critical about, you know, what maybe didn't go exactly what we planned at the Palms. I think that we invested too much and too much focus on the nightlife and daylight part of of the business. You know, I think we entered the market at a time when it was hypercompetitive. There were probably too many players in the market at the time, given the landscape of the competitive environment.

Speaker 2

And that market is reset as well.

Speaker 4

You know, the the the cost of entertainment, just the amount of players in the market, and the market didn't necessarily seem to grow. And I think that, you know, we we missed that. And we made a a decision seven months later later to to shut that part of the operation down, and we it you was kinda one of those things where we decided if we're gonna fail, we're gonna fail fast and move on. And from that time on, when we really started to focus on the core parts of the business, we were actually starting to get some traction on the casino side and the overall operation side of the business. And then COVID hit.

You know? And like I said, it kinda allowed us to to reassess everything. And look. We just we really like the idea. We have this very clean, simple story where we have a very simple balance sheet, very straightforward.

Speaker 2

We own all the real estate. Own all the real estate. We own

Speaker 4

all the development opportunities. Simple business. This is there's no flea flickers. This is literally like, you know, student body left, student body right, just march down the field and get a touchdown. That's what we're focused on.

Speaker 6

Okay. Got you. Thanks for that. That's great color. And then second question, you give us a little bit of color in terms of what you've seen over the past couple of months in terms of your loyalty program and the My Rewards boarding pass and in terms of new sign ups?

Then maybe what kind of movement you've seen inside of the loyalty club or program as well? Meaning, have you seen a lot of movement from guys going from platinum to chairman or kind of movement up inside of your loyalty program?

Speaker 1

Yeah. We're gonna stay away from a bunch of that, but what I can tell you is we are actively trying to grab new sign ups, and we're gaining a lot of traction. What we can see is the sign ups that we're getting are far more active in terms of their transition from just signing up to actually playing. Then when they play, they're much more valuable than sign ups at the pre COVID level, 2x times the size.

Speaker 6

Okay, great. Thanks guys.

Speaker 1

Appreciate

Speaker 3

it. Our

Speaker 0

next question is from Steven Grambling from Goldman Sachs. Go ahead.

Speaker 7

Hey, good afternoon. Thanks for taking the questions. This is a bit of a follow-up to Steve's first question on the Palms. But what's your latest thinking, I guess, on the Strip recovery given you sold the Palms? And it seems like we're hearing from some of your peers on The Strip a little bit of an inflection.

And how might this inform us how to think through a recovery eventually at at Palace Station?

Speaker 4

I think Palace Station is well recovered. Yeah. Palace Station is doing very well. The local business there has really, really driven that business. And, of course, you know, as as the Las Vegas Strip recovers and the room market recovers and you start to get the ability to start to push rate, not just on the weekends, but we get some a little bit more firm rates midweek, it's only gonna accrue to the better to to Palace.

It's in a really, really nice sweet spot there, given its overall location and the and the dollars we invested in the property over the last, two years. I mean, the whole place is completely redone, and, the customers have really taken to it very well.

Speaker 7

That's helpful. I finally got a property specific response there. As we think about free cash flow going forward, you gave the maintenance CapEx assumptions, but are there other factors that could influence free cash flow conversion either on the working capital or as we think about tax credits from the Palms sale to think through?

Speaker 1

Yeah. Think if you want to get a little framework around free cash flow, just take your EBITDA estimate. From a cash taxes standpoint, 2021 will be de minimis cash taxes. Palms will be able to shield any of its excuse me, Red Rock will shield any taxes paid on the Palms sale. Interest cash interest will fluctuate, I think, in a positive way, a lot of it because of the inflow of the $650,000,000 into our balance sheet.

So you could talk about interest between 105,000,000 and maybe $115,000,000 probably more likely on the lower side. And in terms of working capital, no real change in working capital. We're right now somewhat at a steady state in terms of working capital. So I wouldn't put too much credence in working capital fluctuation. Our

Speaker 0

next question is from Shaun Kelley from Bank of America. Go ahead.

Speaker 8

Hi, good afternoon everyone.

Speaker 5

I was just wondering if we

Speaker 8

could get a little color on some of the customer behavior as that played out maybe across the quarter. I think what we saw out there was obviously in many markets in hospitality, January and February were a little slow, but March was kind of off the charts good, probably helped a little bit by stimulus. So wondering if you could comment there and also just maybe any thoughts on just how the older demographic is coming back, at this stage in in the locals market?

Speaker 1

Yeah. I think from a trend you kinda nailed it, Sean. So you answered your own question. I mean,

Speaker 2

you did see you know? It's vaccination Yes. Stimulus. It's a multitude of things all coming together. I think getting the election behind us Yep.

Stimulus money, but as well as the vaccination, people being more comfortable going out.

Speaker 1

That's right. So you're seeing, you know, you're seeing an uptick in, you know, win hours per visit, visitation is is is up. And from an older demographic, you're seeing that, you know, you're seeing that core customer return.

Speaker 8

And maybe just given that you're already up on, if I if I caught it correctly, think on casino revenues, you're it looks like you're already up versus 2019. I think same store revenues, same. So, like, is there anything in here that that you look at and say you think it's unsustainable at least on the gaming operation side on the on the pure revenue line? Or do you think, look, this is here to stay, and like you said, you've got other drivers, midweek rooms, things like that, that can actually push things even maybe even higher from here?

Speaker 2

I mean, we're definitely midweek rooms. We can do a lot better. I think that catering, we can definitely do a lot better. I see that probably more as a slow recovery in the fourth quarter and probably doing much better in 'twenty two. But those are definitely areas that we have upside.

And I don't know, Steve, we feel pretty good about what we're seeing right now.

Speaker 1

Yes. Would say, Sean, I thought from a tone of business, think we feel really good about where we are, particularly again on the non gaming side. I mean, Frank touched on it just from a but hotel is coming back. I think it's up from an occupancy standpoint and an ADR standpoint as we're starting to be able to hold rate. And food and beverage, particularly with with the the restrictions kind of easing, you're definitely seeing an increase in coverage.

And I'm gonna say ex buffet, because obviously, we'd be down year over year because of the buffet, which I think we can fairly say will never return. And but we're also up in terms of price points. We're getting more from the customer per cover, which is more than making up for the revenue loss of the buffet.

Speaker 8

Thank you very much.

Speaker 0

Our next question is from Barry Jonas from Truist Security. Go ahead.

Speaker 7

Hi, thank you for taking my question. For starters, any updated thoughts on selling any excess land? Is there less urgency now?

Speaker 2

No. I mean, look, our goal is always to maximize shareholder value, and we always look to monetize any excess land that we may have. I think, you know, when you look at it, we think we have six great core development opportunities here in Las Vegas. As you know, you know, we have had had some traction on real estate. COVID kind of set that back a little bit, but we continue to work towards monetizing anything that we don't see being part of our development pipeline over the next, I would say, five years or so.

Speaker 1

Yes. Just to add what Frank said, mean, the demographic trends in Las Vegas are continuing to grow stronger week. And that same goes for the housing market and same goes for the real estate market. We have two things

Speaker 2

working our advantage. The geographic location of the development sites we have are A plus gaming and title in the areas of Las Vegas that are growing. And the demographics are working to our advantage, given the migration that we're seeing from other states where people want to avoid regulation, taxation and look to move to a great state like Nevada where there's opportunity.

Speaker 7

Great. And then as a follow-up question, we're hearing a lot about labor hiring issues across the country. Wondering if you're seeing an impact or expect to see an impact as you staff up.

Speaker 1

Mean, now, we feel really good about our labor situation. I mean, there's some open positions, but not to what hearing across the Valley. I have

Speaker 2

to remember, we did keep our team members on during COVID. We were one of the few companies that did that. And I think as a result, it's made it easier on us to basically be properly staffed as business returns to normal.

Speaker 1

Yes. And I think the focus on family initiative that we announced really last call, increasing wages, increasing training, increasing benefits have made us an employer of choice in the Valley.

Speaker 7

That's great. Thank you so much, guys.

Speaker 0

Our next question is from Chad Beynon from Macquarie. Go ahead.

Speaker 9

Hi, good afternoon. Thanks for taking my question. First, I wanted to ask about cashless gaming adoption at your properties, how you're thinking about rolling this out and how you think, your customers, will embrace this new technology. Thanks.

Speaker 1

Wait a minute. Sorry. Go ahead. I was going say there's clearly momentum in the industry to move forward in this technology. And we're currently in the process of developing an app and a OneWallet solution, which we think would increase customer convenience, reduce friction and I think ultimately lead to a positive customer experience as well as increased profits on our side.

And we plan to have more information on that in the next couple of quarters.

Speaker 6

Okay, great. And then just had

Speaker 9

a follow-up on the $50,000,000 of annual cost saves that you announced, the 150,000,000 going up to 200,000,000 Is that completely separate from, I guess, bringing back the non gaming amenities at a higher margin? Or should we think about some of that $50,000,000 is basically just operating some of those non gaming amenities that will come back on more efficiently?

Speaker 1

The latter. I mean, when we first started this program back in June when we reopened, it's a combination of managing labor efficiently, optimizing marketing programs, as well as managing our third party vendor and consulting and management contracts.

Speaker 9

Thanks, guys. Appreciate it.

Speaker 0

Our next question is from John DeCree from Union Gaming. Go ahead.

Speaker 10

Hi, everyone. Thanks for taking my question. Just to follow-up on Chad's question regarding the cost savings. Steve, just for clarity, I think you've maybe mentioned this earlier, the COVID mitigation costs fading as well as some of the closed property carrying costs, is that in addition to or would that be in addition to the total of $200,000,000 of operational cost savings that you've talked about?

Speaker 1

Yes.

Speaker 10

Got it. And second question on some of the share repurchase activity, you have a program or an amount outstanding. You've talked about Durango being on the horizon and deleveraging. So when we think about the share repo activity or returns to shareholders, what's your thought process going forward? Is it opportunistic, programmatic, and, bigger picture kind of thinking of all all of those buckets as uses of free cash flow going forward?

Speaker 4

I think it's the I think it's the latter.

Speaker 1

You guys are making it easy because you're answering your own questions. So I think it's actually the latter. And I think one of the reasons why we look to, you know, to, you know, to close the sale of the Palms is having that $650,000,000 just really increases our financial flexibility and allows us to look at all options and all ways to increase and maximize shareholder value.

Speaker 10

Got it. Think you guys made the story quite simple, making it easy for us to. Congratulations on the quarter, guys, and thanks for taking the question.

Speaker 5

Thanks, John.

Speaker 0

Concludes our question and answer session. I would like to turn the conference back over to Stephen Coote for closing remarks. Go ahead.

Speaker 1

Well, thank you everyone for joining the call, and we look forward to hearing we look forward to talking to again in about ninety days. Take care.

Speaker 0

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.