Red Rock Resorts, Inc. (NASDAQ:RRR) Q3 2018 Earnings Conference Call Transcript
Nov 07, 2018 • 04:15 pm ET
Good afternoon, and welcome to Red Rock Resorts Third Quarter 2018 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 Daniel Foley, VP of Finance and IR. Please go ahead.
Thank you, Debbie. Good afternoon, and welcome to Red Rock Resorts' third quarter 2018 earnings conference call. Joining me on the call today from Red Rock Resorts are Frank Fertitta, Chairman and CEO; Rich Haskins, President; Steve Cootey, EVP, CFO and Treasurer; and Joe Hasson, EVP and COO.
(Forward-Looking Cautionary Statements)
During this call, we will also discuss non-GAAP financial measures. For definitions and a complete reconciliation of these figures to GAAP, please refer to the financial tables in our earnings press release and Form 8-K we filed this afternoon prior to the call. Also, please note that this call is being recorded.
I would now like to turn the call over to Stephen Cootey.
Thank you, Dan, and good afternoon, everyone. Let's take a look at our third quarter results. For the quarter, consolidated net revenues increased 1.6% to $412.3 million. Adjusted EBITDA decreased 7.9% to $109.1 million and margins decreased 270 basis points to 26.5%.
With respect to our Las Vegas operations, net revenues for the quarter increased 3.9% to $389.7 million, as we saw some volume growth across every major gaming category. Notably, this marks our 21st consecutive quarter of same-store net revenue growth, which only serves to underscore the strength and resiliency of the Las Vegas locals market.
Adjusted EBITDA decreased 3.9% to $97.9 million and margins decreased approximately 200 basis points to 25.1%, mainly driven by the ongoing construction disruption at Palace Station and the Palms. Excluding the impact of our two disrupted properties, performance of our Las Vegas operations was solid as net revenues increased nearly 3.3%, adjusted EBITDA increased 2.2%, and margins decreased slightly to 30.6%.
In addition to experiencing ongoing construction disruption at Palace Station and the Palms, the quarter was negatively impacted by a number of other nonrecurring factors including -- onetime factors, including increased marketing and entertainment spends designed to drive greater trial and awareness regarding our exciting new offerings, including those at the Palace Station and the Palms, and increased CapEx and operating spend as we continue to enhance the guest experience across our portfolio. Due to this combination of factors, flow-through for these non-disrupted properties was just over 20% for the quarter. However, after adjusting for the nonrecurring factors we discussed, we would have seen flow-through win in our historical 50% to 70% range for the quarter, and we expect to return to our historical flow-through range in Q4.
The intra-quarter trends are also worth noting. During July, we experienced less-than-expected volumes during the month which led to lower top line performance and reduced flow-through. However, volumes recovered in both August and September, which led to top and bottom line performance that was more consistent with the trends we have experienced over