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RR

Red Rock Resorts, Inc. (RRR)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 was record-setting: consolidated net revenues rose 8.2% to $526.3M, adjusted EBITDA increased 13.7% to $229.4M, and diluted EPS was $0.95; Las Vegas operations achieved all-time quarterly highs in net revenue and adjusted EBITDA with margin expansion .
  • Results materially beat Wall Street consensus: revenue beat by ~$38.2M, EPS beat by ~$0.066, and adjusted EBITDA beat by ~$18.8M; strength was driven by gaming mix (VIP slots/tables), favorable hold, and revenue mix shift away from lower-margin F&B/hotel to higher-margin gaming .
  • Guidance updates: 2025 capex cut by $25M to $325–$375M (timing), North Fork development fees now recognized at ~$$3M per quarter through opening, and the company expects no cash taxes and no Station Holdco tax distributions for the remainder of 2025, adding ~$60M to operating FCF .
  • Capital returns remain active: $0.25 quarterly dividend declared for Q3 2025 and 672K shares repurchased (~$31M) in Q2; leverage improved to ~3.96x net debt/EBITDA, supported by record profitability .

What Went Well and What Went Wrong

  • What Went Well

    • Record quarter in Las Vegas operations with adjusted EBITDA margin expansion; “our Las Vegas operations delivered its highest quarterly net revenue and Adjusted EBITDA… with increased margin” .
    • Durango momentum: +108K new sign-ups, on pace to be one of highest-margin properties; net theoretical win and spend per visit rose, with strong VIP slot/tables contribution .
    • Operating free cash flow conversion robust (54%); CFO: “we converted 54% of our Adjusted EBITDA into operating free cash flow, generating $124.3M” .

  • What Went Wrong

    • Renovation disruption set to intensify in Q3–Q4, especially at Green Valley Ranch (rooms/convention) and Sunset (casino core), with management reminding ~$15M EBITDA disruption concentrated at GVR over the next two quarters .
    • Non-gaming softness and competitive ADR environment on the Strip; RRR maintains rate discipline but hotel is ~10% of revenue mix, limiting earnings sensitivity to ADR tactics .
    • Ongoing macro input cost headwinds (insurance, certain F&B COGS) and construction-related timing risks, even as capex guidance is reduced due to timing .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Net Revenues ($USD Millions)$486.403 $497.861 $526.273
Diluted EPS ($USD)$0.59 $0.75 $0.95
Adjusted EBITDA ($USD Millions)$201.657 $215.080 $229.359
Adjusted EBITDA Margin % (Consolidated)41.5% 43.2% 43.6%
Las Vegas Net Revenues ($USD Millions)$483.209 $495.000 $513.262
Las Vegas Adjusted EBITDA ($USD Millions)$223.147 $235.900 $239.444
Las Vegas EBITDA Margin %46.2% 47.7% 46.7%

Segment breakdown (Q2 2025):

SegmentQ2 2025 Value
Las Vegas Operations – Net Revenues ($USD Millions)$513.262
Las Vegas Operations – Adjusted EBITDA ($USD Millions)$239.444
Native American Management – Net Revenues ($USD Millions)$10.008
Native American Management – Adjusted EBITDA ($USD Millions)$10.008
Corporate & Other – Net Revenues ($USD Millions)$3.003
Reportable Segment Adjusted EBITDA ($USD Millions)$249.452
Corporate & Other – Adjusted EBITDA ($USD Millions)$(20.093)
Consolidated Adjusted EBITDA ($USD Millions)$229.359

KPIs and capital:

KPIQ1 2025Q2 2025
Operating Free Cash Flow ($USD Millions)$93.0 $124.3
FCF Conversion (% of Adj. EBITDA)43% 54%
Net Debt ($USD Billions)~$3.3 ~$3.3
Net Debt / EBITDA (x)4.1x 3.96x
Capex Spend ($USD Millions)$68.2 $78.2
Durango New-to-Brand Sign-ups (Cumulative)>95,000 >108,000
Share Repurchases (shares / $USD Millions)—672,000 / $31.0
Cash & Cash Equivalents ($USD Millions)$150.6 $145.2
Total Principal Debt ($USD Billions)$3.4 $3.4

Estimate comparison (Q2 2025):

MetricConsensusActualSurprise
Revenue ($USD Millions)488.040*526.273 +$38.233M; bold beat
Adjusted EBITDA ($USD Millions)197.207*229.359 +$32.152M; bold beat
Primary EPS ($USD)0.41099*0.95 +$0.539; bold beat

Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Capex ($USD Millions)FY 2025$350–$400 $325–$375 Lowered
Investment Capex ($USD Millions)FY 2025$260–$300 $235–$275 Lowered
Maintenance Capex ($USD Millions)FY 2025$90–$100 $90–$100 Maintained
Durango Expansion CompletionProjectLate Dec 2025 Late Dec 2025 Maintained
North Fork Development Fee RecognitionThrough opening—~$3M per quarter New
Seasonality (EBITDA)Q3 vs Q2—Q3 typically ~10% down vs Q2 New
Taxes/DistributionsRemainder of 2025—No cash taxes; no Station Holdco tax distributions; +$60M operating FCF rest of year New
DividendQ3 2025Regular $0.25 (ongoing) $0.25 declared (payable Sept 30, 2025) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Technology/Sports BettingExpanded STN Sports to Treasure Island; operates bookmaking for Fountainbleau and El Cortez; GA-N system audit to reduce duplicate costs No major update beyond ongoing strong gaming performance; non-core to quarter’s beatStable
Supply Chain/Tariffs/Construction CostsTariffs could add ~4–6% of project costs; mitigation via alternative sourcing; GMP contracts evolving Projects “on budget” at Durango, Sunset, GVR; construction progressing; temporary disruption expected Manageable
Product Performance (Durango, High-Limit)Durango ramping; VIP/HL rooms delivering outsized returns Durango added >108k sign-ups; VIP slot/table strength drove beat; HL expansion underway Improving
Regional Trends (Strip vs Locals)Locals stable; post-election acceleration; Strip events (F1) a “nonevent” for RRR CFO flagged “ADR war” on Strip; RRR insulated as hotel ~10% of revenue; value proposition anchors gaming-led mix Favorable mix
Regulatory/Legal (Tax Relief)—Tip/overtime/family/senior tax relief boosts customer discretionary income; no cash taxes for 2025; +$60M FCF Positive
Group/CateringTough comps in Q4/Q1; pipeline building into 2025 Forward bookings up mid-20%+; momentum into 2026 Improving

Management Commentary

  • “Our Las Vegas operations delivered its highest quarterly net revenue and Adjusted EBITDA in our 49-year history, all while sustaining near-record Adjusted EBITDA margin.”
  • “Durango continues to expand the Las Vegas Locals market… Since opening in December 2023, Durango has added over 108,000 new customers to our database.”
  • On operating leverage and mix: “You had some revenue mix shift from lower margin food and beverage and hotel and a higher margin gaming. Gaming actually had a flow-through north of 70%.”
  • On tax relief impact: “We do not expect to pay cash taxes for the remainder of 2025… we estimate [this] will increase our operating free cash flow by $60 million for the rest of the year.”
  • On renovations timing: “The bulk of the disruption you’re going to see in Q3 and Q4… with Green Valley Ranch rooms and conference center remodel on year-end cadence.”

Q&A Highlights

  • Disruption cadence: Sunset impact concentrated in Q3–Q4; Durango interior fit-out raises disruption noise; GVR rooms Tower 1 late Sep/early Oct and Tower 2 through year-end; conference center by early January .
  • Tax/Policy tailwinds: Tip and overtime tax relief, senior credits and expanded deductions expected to lift local discretionary income and RRR customer spend; corporate tax provisions raise near-term cash flow .
  • Seasonality and North Fork fees: Q3 EBITDA typically ~10% below Q2; North Fork development fee revenue recognition set at ~$3M per quarter through opening .
  • ADR environment: Competitive “ADR war” on Strip; RRR’s hotel mix is smaller (~10%), with gaming-centric model mitigating rate pressure .
  • Capital allocation: Leverage comfortable (~3.96x); focus in back half on executing Durango, Sunset, GVR; share repurchases continued (672K shares at ~$45.94 average) .

Estimates Context

  • Q2 2025 beats versus Wall Street (S&P Global): revenue +7.8%, EPS beat, and adjusted EBITDA beat; underlying drivers were gaming-led mix shift, favorable slot/table hold, and VIP strength, plus $10M Native American development fee recognition .
  • Forward consensus (context for modeling): Q3 2025 revenue ~$478.33M*, EPS ~$0.385*, EBITDA ~$186.93M*; Q4 2025 revenue ~$500.88M*, EPS ~$0.447*, EBITDA ~$204.97M*; target price consensus ~$65.77* [GetEstimates].

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Mix-driven margin expansion and VIP performance are sustaining earnings quality; expect gaming-centric model to continue offsetting non-gaming volatility and Strip ADR skirmishes .
  • Renovation disruption likely to weigh on Q3–Q4, particularly GVR and Sunset; management set expectations for typical seasonal downshift (~10% EBITDA Q3 vs Q2) and called out temporary impacts .
  • Capex guidance lowered on timing, with Durango expansion on-budget for late December; project returns remain attractive, especially in high-limit slots, positioning for FY26 upside .
  • Policy tailwinds (tip/overtime tax relief) and no 2025 cash taxes/tax distributions should bolster free cash flow by ~$60M; supports continued buybacks/dividends and balance-sheet flexibility .
  • North Fork development fees now recognized (~$3M/quarter) until opening; construction fully financed under GMP, with long-term strategic optionality intact .
  • Near-term trading: Expect some digestion on renovation commentary and seasonality; medium-term thesis supported by Locals market growth, Durango ramp, and reinvestment returns across the portfolio .