Red Rock Resorts, Inc. (RRR) Earnings

Management highlights

- Company Milestone & Brand * Station Casinos kicked off its 50th anniversary celebration on July 4, 2026, launching the new "From Vegas, For Vegas, Always Vegas" brand campaign. Approximately $8 million in one-time anniversary and brand marketing expenses will be recorded in Q3 2026, framed as a long-term investment in brand and community goodwill. * The company has received multiple employer recognition awards in 2026, including being named one of America's best large employers by Forbes. - Core Operational Performance * Las Vegas operations delivered the second-highest Q2 net revenue and adjusted EBITDA in company history, only behind the record Q2 2025, while maintaining strong margins. Demand trends are stable across the entire customer base, with growth in carded spend per visit and net theoretical win across local, regional, and national customer segments. * Non-gaming hotel and food & beverage operations delivered strong results, despite a temporary reduction of 21,000 available room nights at Green Valley Ranch during its ongoing renovation. Full hotel operations at Green Valley Ranch are expected to resume in late September 2026. * The Durango property continues to perform exceptionally well, establishing itself as a core growth driver for the Las Vegas locals market, proving that new best-in-class resorts expand the market rather than just redistribute existing demand. * The tavern business segment, which the company entered to reach underpenetrated local areas, has performed well to date. Six of eight planned taverns are open, with the remaining two set to open by the end of 2026. Management has observed new customer acquisition and positive cross-sell to larger casino properties. - Capital Project Progress * Durango North expansion construction is on schedule to open in the second half of 2027, supported by strong residential growth in southwest Las Vegas. * Sunset Station podium refresh is progressing on budget and on schedule: the newly reopened Goudy Bar has received positive customer feedback, with Stoney's Rocking Country bar/nightclub opening soon. The next phase of redevelopment (including theater upgrades, a permanent bingo hall, new premium steakhouse, and expanded high-limit gaming area) has a total project cost of $87 million, with completion extending into 2027. * Green Valley Ranch comprehensive hotel renovation is on track: the West Tower and convention space have reopened to positive feedback, with the full East Tower expected to come online in September 2026. The next phase of redevelopment (casino floor refresh, food & beverage upgrades, entertainment enhancements) has an estimated total cost of $56 million, with completion extending into 2027. * North Fork construction progresses on schedule and on budget, with total all-in costs remaining at $750 million. The project remains on track for an early Q4 2026 opening. - Balance Sheet & Capital Allocation * As of Q2 end, cash and cash equivalents totaled $136.5 million, total debt outstanding was $3.6 billion, and net debt was $3.5 billion, resulting in a net debt to EBITDA ratio of 4.21x. * The company generated $100 million in operating free cash flow in Q2 (48% of adjusted EBITDA), and $206.7 million year-to-date. Year-to-date, the company has returned ~$198 million to shareholders via dividends and share repurchases. The board declared a $0.26 per share dividend payable September 30, 2026. * Q2 capital spend totaled $139.8 million ($94.4 million investment capital, $45.4 million maintenance capital), bringing year-to-date capital spend to $257 million.

Guidance

- Full year 2026 total capital expenditure guidance is maintained at $375 - $425 million, consisting of $275 - $300 million in investment capital and $100 - $125 million in maintenance capital. - Q3 2026 is expected to be a seasonally softer quarter, typically 10% lower sequentially from Q2 2026 for Las Vegas operations. Q4 2026 is typically 10-11% higher sequentially from Q3 for Las Vegas operations. - Temporary construction disruption at Durango is projected to reach ~$2.5 million in Q3 2026, with ongoing disruption continuing through the back half of 2027 as construction progresses. All project disruption is expected to be temporary and offset by long-term operational benefits. - Major renovation projects at Green Valley Ranch and Sunset Station will have most first-phase assets placed in service in 2026, with remaining second-phase assets coming online in 2027. Management expects new projects to ramp returns over a 3-year timeline, with roughly 10% of total projected returns achieved in the first full year of operation. - More details on the next new casino development project are expected to be available in early 2027.

Segment performance

Las Vegas Operations: Q2 2026 net revenue was $503.2 million, down 2% year-over-year (YoY). Adjusted EBITDA was $227.5 million, down 5% YoY, with an adjusted EBITDA margin of 45.2%, a 143 basis point decrease YoY. This segment contributes 98.6% of consolidated net revenue. North Fork Development: Q2 2026 net revenue was $3.8 million, and adjusted EBITDA was $2.8 million. This segment contributes 0.7% of consolidated net revenue. Consolidated Results: Total Q2 2026 net revenue was $510.3 million, down 3% YoY. Adjusted EBITDA was $208 million, down 9.3% YoY, with an adjusted EBITDA margin of 40.8%, a 281 basis point decrease YoY.

Risks & headwinds

- Ongoing construction activity at multiple company properties (Durango, Sunset Station, Green Valley Ranch) and external Nevada Department of Transportation infrastructure projects near key properties create temporary operational disruption, including lost room nights, gaming, food, and beverage revenue. Disruption is expected to continue through 2027. - Pricing for new development projects is still being finalized, and unfavorable construction pricing could require design changes or delay project launches. - The competitive promotional environment in the Las Vegas locals market remains irrational, though management has stated this will not change their existing operating strategy. - Utilities (specifically electric) continue to create upward pressure on operating expenses, and this pressure is expected to remain for the rest of 2026.

Analyst Q&A

• Q: Analyst asked if there was underlying softness in June 2026 after reports of potential weakness, and requested clarification on Q3 2026 seasonality. /

  A: Management reported slot revenue, the company's core business, was consistent across all three months of Q2, with only a small single-digit percentage difference between April and May/June in sports and table games. The 2026 World Cup boosted June traffic and results. Management confirmed Q3 is typically one of the company's softer quarters, with sequential revenue down ~10% from Q2 for Las Vegas operations.

• Q: Analyst asked for the magnitude of temporary construction disruption in Q2 2026, expected disruption for the remainder of 2026, and detail on the impact of the $8 million 50th anniversary marketing spend. /

  A: Management reported Green Valley Ranch renovation disruption totaled $7 million in Q2, slightly lower than the prior guidance of $9 million, driven by the 21,000 lost room nights and associated cross-segment revenue. Durango disruption in Q2 was minimal, with $2.5 million of disruption expected in Q3. All impacts are temporary, and management expects the 50th anniversary marketing campaign to generate a net positive top-line impact from increased brand awareness and community goodwill.

• Q: Analyst asked if recent Strip promotional pricing and all-inclusive value offerings have impacted the local Las Vegas market and Red Rock's demand. /

  A: Management stated the local Las Vegas market is largely insulated from Strip pricing activity. Red Rock's core value proposition for locals is based on convenience, consistent value, and personal customer relationships, which has kept demand unaffected. Management added that increased value offerings on the Strip benefit the entire Las Vegas market long-term, which is a net positive for Red Rock.

• Q: Analyst asked when the company would launch its next new casino development project, and what benefits the company expects from growing major professional sports presence in Las Vegas. /

  A: Management confirmed two new greenfield development projects and a Durango master plan expansion (adding rooms and a spa) are in active design, with scope finalized and pricing currently being finalized with general contractors. More details are expected in early 2027. For major sports, management noted new teams and events increase overall city visitation and hotel demand, deliver direct benefits via partnerships with local teams, hosting visiting teams, and driving incremental high-end play, and provide marketing opportunities to build guest loyalty. This growth in Las Vegas events is a net positive for the company.

• Q: Analyst asked about current trends in key operating expenses (labor, utilities, insurance) and expected margin trajectory into 2027. /

  A: Management reported labor costs are up ~3% YoY, in line with expectations, but electric utility costs continue to pressure operating expenses and will remain a headwind for the rest of 2026. The Q2 2026 margin decline was an anomaly driven by temporary Green Valley disruption, the absence of a prior-year North Fork payment, and one-time items, with margins expected to recover after the full Green Valley product returns in September 2026.