Red Rock Resorts, inc (RRR) Q3 2021 Earnings Call Transcript

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Red Rock Resorts, inc (RRR -0.48%)
Q3 2021 Earnings Call
Nov 2, 2021, 4:15 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to Red Rock Resorts Third Quarter 2021 Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. Please note, this conference call is being recorded.

I would now like to turn the conference over to Stephen Cootey, Executive Vice President, Chief Financial Officer and Treasurer of Red Rock Resorts. Please go ahead.

Stephen Cootey -- Executive Vice President, Chief Financial Officer & Treasurer

Thank you, operator, and good afternoon, everyone. Thank you for joining us on today's Red Resorts Third Quarter 2021 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 the call, we will also discuss non-GAAP financial measures. For definitions and complete reconciliation of these figures to GAAP, please refer to the financial tables in our earnings press release, Form 8-K and investor deck, which were filed this afternoon prior to the call. Also, please note that this call is being recorded.

Now let's take a look at our third quarter results. On a consolidated basis, our third quarter net revenue was $414.8 million, up 17.4% from $353.2 million in the prior year's third quarter. Our adjusted EBITDA was $184.5 million, up 14.7% from $160.9 million in the prior year's third quarter. Our adjusted EBITDA margin was 44.5% for the quarter, a decrease of 107 basis points from the third quarter of 2020. With respect to our Las Vegas operations, excluding the impact from our foreclosed properties, our third quarter net revenue was $407.4 million, up 28.9% from $316 million in the prior year's third quarter. Our adjusted EBITDA was $200.5 million, up 37.2% from $146.1 million in the prior year's third quarter. Our adjusted EBITDA margin was 49.2%, an increase of 296 basis points from the third quarter of 2020. On a same-store basis, we achieved the highest third quarter net revenue, adjusted EBITDA and adjusted EBITDA margin in the history of our company.

During the quarter, we continued to prioritize free cash flow converting 70% of our adjusted EBITDA to operating free cash flow, generating $126.3 million or $1.10 per share. This brings operating free cash flow generated by the company for the first 3 quarters of 2021 to approximately $365 million or $3.18 per share, with virtually every dollar being returned to our stakeholders.

Taking a look behind the numbers, the third quarter saw impressive growth versus the prior third quarter with increased visitation, time on device and spend per visit experienced across our database, which allowed the company to deliver record gaming revenue in the quarter. The reimplementation of the mask mandate across the State of Nevada on July 30 as well as a return of customary third quarter seasonality did have a modest impact on our visitation and time and device metrics in the latter half of the quarter, but we expect those trends to reverse as COVID-19 restrictions are eventually lifted.

Turning to the non-gaming segments. We saw considerable strength in food and beverage and hotel as both segments built upon their strong second quarter performance to deliver their best third quarter results in the history of the company.

With regard to group sales and catering business segments, while these business lines have been slower to recover post pandemic, we are seeing our lead pipeline grow into the back half of 2022 and into 2023.

Finally, as mentioned on prior earnings calls, our financials are still carrying approximately $2.4 million of COVID-19 mitigation costs for the quarter and approximately $2.6 million in carry costs associated with our closed properties for the quarter.

On the expense side, we continue to expect to achieve approximately $200 million per annum of cost savings compared to our pre-pandemic cost structure. 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.

On the technology front, we are making substantial progress on several initiatives. With regard to cashless gaming, we have entered into a field trial with IGT at our Red Rock and Green Valley branch properties with the initial focus of introducing cashless payments on the slot floor, with the eventual goal to allow our customers to play and pay from one mobile digital wallet across all of our amenities at each of our Las Vegas properties. There will be more to come as we proceed with our field trial in this exciting product.

Also in October, we entered into a partnership with GAN Limited to build and deploy the next-generation infrastructure stations STN Sports online sports platform, mobile applications and retail over-the-counter and kiosk-based sports betting throughout Nevada. While the product launch is subject to regulatory approval, we are excited about the partnership and building upon our lean race and sports franchise.

Now let's cover a few balance sheet and capital items. The company's cash and cash equivalents at the end of the third quarter were $89.9 million, and the total principal amount of debt outstanding at quarter end was $2.68 billion. In the third quarter, we paid down $37.5 million in debt bringing total debt reduction for the first 3 quarters of 2021 to approximately $265 million. Additionally, the company used $85.5 million during the third quarter to purchase approximately 2.1 million Class A shares at an average price of $41.44 per share under its previously disclosed $150 million share repurchase program, bringing total shares repurchased for the first 3 quarters of 2021 to over 3.2 million Class A shares at an average price of $39.08, thus reducing our share count to approximately 114.7 million Class A and Class B shares combined.

Within the quarter, our Board authorized an increase of $150 million to our existing share repurchase program, giving us over $173 million of availability for future share repurchases. When combined with our debt repayment, we returned $123 million and $391.1 million to our stakeholders during the third quarter and during the first 3 quarters of 2021, respectively. As mentioned on our prior call, we are well on our way to having one of the most solid balance sheets in the industry, which gives us the ability to focus on longer-term growth opportunities, including the development of our 6 owned strategically located gaming and title properties and the ability to consider additional ways of returning capital to our stakeholders as we move forward.

Since the close of the third quarter, the company's consolidated subsidiary Station Casinos issued a notice of redemption for the remaining $280.3 million 5% senior notes due 235%. The company used cash on hand and borrowings under its revolving credit facility to pay the redemption premium, accrued and unpaid interest and any fees or expenses related to the redemption. The transaction closed on October 29 and is expected to save the company approximately $14 million per annum to the life of the senior notes, while further deleveraging the balance sheet, increasing our financial flexibility.

Capital spend for the third quarter was $14.7 million. As mentioned in our previous earnings call, we anticipate our 2021 maintenance capital spend to be between $65 million and $75 million.

Also during the third quarter, we made a tax distribution of approximately $51.1 million to the LLC unitholders of Station Holdco, which included a distribution of approximately $33.5 million to Red Rock Resorts.

Now let's provide a short update on our development pipeline. Starting with our Durango development, we are extremely excited about this project, which is situated on a 71-acre parcel ideally located off the 215 Expressway and Durango Drive in the Southwest Las Vegas Valley. The project is located within the fastest-growing area of Las Vegas Valley, a very favorable demographic profile. The project site provides favorable ingress egress off the 215 Expressway, which handles over 166,000 vehicles per day as within the 5-mile radius to approximately 350,000 people. Further, there are no unrestricted gaming competitors within the 5-mile radius of the project site. We are working through the planning and budgeting phases of this project with the goal and expectation to have a shovel in the ground in the first quarter of 2022. Once the project has started, we anticipate construction will take approximately 18 to 24 months. When complete, the project will be approximately 533,000 square feet and include over 73,000 square feet of casino space with over 2,000 slots and 46 table games, over 200 hotel rooms and suite product, over 21,000 square feet of convention meeting and catering space, 4 full-service food and beverage outlets, a state-of-the-art sports book and a resort-style pool.

While we are still refining the final budget, we expect to spend approximately $750 million, which includes all design costs, construction hard and soft costs, preopening expenses and any financing costs associated with the project. We expect to entering through a guaranteed maximum price contract for approximately 70% of the total project cost. The company expects the return profile of this project to be consistent with past greenfield projects in our portfolio, while the funding of this project is expected to come from a combination of cash flow from operations and the sale of a portion of the current Durango site to multifilm development projects for approximately $24 million.

Turning now to North Fork. Since we last spoke, we received a positive opinion from the Federal District Court of the Eastern District of California, which ends all federal court litigation affecting the project. With respect to the California state courts, while we were disappointed by certain of the results of the California state courts, we do not believe that any of those state court decisions will ultimately affect Norfork tribe's ability to conduct gaming on their trust property. We have continued to progress our efforts with respect to this very attractive project, including development and design and initial talks with our prospective lending partners. We will continue to provide updates on our quarterly earnings calls.

Lastly and as previously disclosed on our prior earnings call, on May 3, we entered into definitive agreements to sell Palms Casino Resort and Palms Place for an aggregate price of $650 million in cash to an affiliate of the San Manuel 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 this year. In conclusion, while the third quarter presented some headwinds, our disciplined approach to running our business allow the company to enjoy record high EBITDA, EBITDA margin and free cash flow conversion. With our best-in-class assets and locations, unparalleled distribution and scale and our own pipeline of 6 strategically located gaming and title properties, we believe that we are uniquely positioned to capitalize on the very favorable long-term demographic trends and the high barriers of entry that characterize the Las Vegas locals market. Lastly, we'd like to recognize and extend our thanks to all of our team members for their hard work to our guests for their support throughout this pandemic.

And with respect to our team members, a special note of thanks for voting us a top casino employer in the Las Vegas Valley. Operator, this concludes our prepared remarks today, and we are now ready to take questions from participants on the call.

Questions and Answers:

Operator

[Operator Instructions] And the first question comes from Joe Greff with JPMorgan. Please go ahead.

Joseph Greff -- JPMorgan -- Analyst

Good afternoon, everybody. I have a question, I think, probably more for Frank Lorenzo on strategic issues in terms of how your thoughts and views on monetizing casino real estate have evolved, particularly given where valuation multiples are for real estate EBITDA streams. You have $740 million run rate of EBITDA. Mid-teens on 1/2 of that -- mid-teens multiple on 1/2 of that EBITDA is like 80% of your float, that kind of does a lot of interesting things for you. How do you think about those things?

Lorenzo Fertitta -- Vice Chairman

Well, I think the value should be an applied into the fact that we own all of our real estate, whether we have a PropCo or an OpCo, I mean, I think we sit in the perfect position by controlling all the real estate, owning all of the real estate, owning the growth pipeline, we kind of like it. But we also like looking at what people are willing to pay for that kind of 2x coverage on the rent stream. But there's no reason that, that shouldn't be implied into our stock price as well. That's how we look at it.

Frank Fertitta -- Chairman & Chief Executive Officer

Yes. I mean, look, we -- looking at the Cosmopolitan transaction, I think that was implied at about a 20x multiple ish. Certainly, that's -- we like that valuation I think right now, as you can see, we're kind of in the development mode. We've got 6 undeveloped pieces of property that we think are very attractive. And based on our historical returns, we've been able to generate. We really like the idea of doubling the size of our -- essentially doubling the size of our current operating platform here in Las Vegas by developing those properties. And we've always got that option down the road once we build that out to consider an opco/propco structure, if we think it makes sense at the time. We're going to be focused on what's the best way to maximize shareholder value. So we're always going to look at the options.

Joseph Greff -- JPMorgan -- Analyst

Okay. Great. And then Steve, SG&A was up 10% quarter-over-quarter and that drove an EBITDA variance versus consensus. Was there anything onetime in there? Or -- and -- if you could explain that sort of sequential trend? And then how do you think SG&A and corporate expenses trend from here?

Stephen Cootey -- Executive Vice President, Chief Financial Officer & Treasurer

Yes, I would just start with corporate. And corporate is mainly -- I mean, in corporate and SG&A, the majority of that is payroll and bonus expense. We've performed really well. We've accrued higher bonuses, so we can pay our employees. There's also a lot of IT expense, mainly related to the cashless initiatives that have taken place. But there's nothing unusual or onetime in SG&A or corporate.

Joseph Greff -- JPMorgan -- Analyst

Great. Thank you very much.

Operator

The next question comes from Carlo Santarelli with Deutsche Bank. Please go ahead.

Carlo Santarelli -- Deutsche Bank -- Analyst

Hey guys, good afternoon. Steve, just to follow up on Joe's question, talking more about just kind of Las Vegas specifically. It looks like if you just kind of do the simple net revenue less EBITDA and kind of get your implied opex in there, it looks like that's up about 5%. Could you comment at all about maybe the exit rate coming out of the quarter? Was it pretty consistent throughout the quarter in terms of staffing and expense run rates? Or do we -- or should we perhaps expect that to tick up a little bit more as we move forward.

Stephen Cootey -- Executive Vice President, Chief Financial Officer & Treasurer

I think from an operational expense, we were pretty consistent throughout the quarter, as we talked about, we were -- we fully staffed up in June last year. So we have all of our amenities open. We are completely staffed. What you're seeing quarter-over-quarter is really is a tale of 2 halves. The first half of the quarter was very consistent with the second half of the quarter. And then upon the mask mandate, we did see some degradation in volume. And we expect that to reverse once those -- the COVID mitigations -- restrictions get reversed.

Lorenzo Fertitta -- Vice Chairman

The Las Vegas operations margins were higher this Q3 than they were a year ago.

Frank Fertitta -- Chairman & Chief Executive Officer

We were able to increase margin by about 300 basis points versus Q3 of '20. But like Steve said, it was really more of a revenue issue relative to the margins.

Carlo Santarelli -- Deutsche Bank -- Analyst

Right. So that kind of takes me to my next question. As you guys look out to 2022 and 2023, how much of the ability to keep margins kind of in these high 40s band that you've kind of been in since the start of this year and obviously north of that in the 2Q, north of 50% in the 2Q, how much of that boils down to the revenue run rate that we're currently looking at remaining where it is or even perhaps growing versus being able to continue to control cost as you think about maybe some of the things that are out there that could perhaps impact kind of the expense line as we move forward?

Stephen Cootey -- Executive Vice President, Chief Financial Officer & Treasurer

I mean, Carlo, I mean, that question gets asked every quarter of, are margins sustainable? So let's just -- let's go back and take a history lesson. Q3 -- going back to Q3 '20 moving forward right, same-store margins of 46.2%, 45.5%, 48.9%, 53.4%. And then this quarter was 49.2%. So what I'm seeing is a seismic change in the way we're running the business from an operational focus, and we see a lot of these cost savings that we've put in place and a lot of the processes we've put in place are permanent. And while we have no crystal ball in terms of a revenue standpoint, we do expect several high-margin lines of business to come back in '22 and '23 to help grow the top line, namely catering sales and the theater business. So yes, we do expect to maintain these margins.

Carlo Santarelli -- Deutsche Bank -- Analyst

Great. Thanks, everybody.

Operator

The next question comes from Shaun Kelley with Bank of America. Please go ahead.

Shaun Kelley -- Bank of America -- Analyst

Hey, good afternoon, everyone. Steve, maybe I just want to follow up on that last point about some of the non-gaming entities coming back on board. I think we look at your sort of non-gaming revenues, we're almost virtually the same in the third quarter between the second. We were expecting that to maybe ramp up a little bit just as things some of the restrictions were lifted. And obviously, there were restrictions that were put back in place. But can you talk about the non-gaming amenity openings. And I think I heard in the prepared remarks something about looking out a little later in 2023 for, I think, some of the banquet and catering side. But can you just talk about how you expect maybe the non-gaming piece to ramp up over the next couple of quarters?

Stephen Cootey -- Executive Vice President, Chief Financial Officer & Treasurer

Sure. I mean, right now, I mean, you've seen we've had quite a successful quarter in Q3 from a non-gaming perspective. Hotel, food and beverage also all returned, built up their second quarter growth, all returned record growth, and we continue to expect the hotel to deliver that performance as we get sales and group coming back. With the restrictions going on in June -- July 30, we did see a slowdown in bookings throughout 2021 and the first half of 2022. But as I mentioned in our remarks, from a lead generation perspective, we're starting to see return of that corporate business in like the back half of '22 and into '23. So we expect good things from there. And on the theater side, which is also non-gaming, the slate continues to get better, and they continue to sequentially trend -- each month tends to be better than the last month. So we expect good things from there. And again, the hotel from what the team is doing, not only we had record occupancy and record ADR. We're yielding the hotel in a much better way. So there are more casino guests in the hotel, so much more profitable holistically, and they're less wholesale business, which is a change that we put in place at the beginning of this year, and we're starting to see the fruits of that labor.

Shaun Kelley -- Bank of America -- Analyst

Great. And I'm not sure where exactly here in Las Vegas is recovery yet, but we did see many years ago when the strip was kind of as hot as it probably is now. We did see some spillover into the locals, more of your destination-oriented properties like GVR, Red Rock. Do you think you're seeing that guest yet? Or how would you characterize, again, a little bit of a crossover from maybe strip customer kind of pulling down into locals properties as the strip's own occupancy and pricing continue to push higher?

Stephen Cootey -- Executive Vice President, Chief Financial Officer & Treasurer

Yes. We are starting to see that regional out-of-town guests kind of push over, particularly into the higher-end properties.

Shaun Kelley -- Bank of America -- Analyst

Thank you very much.

Operator

The next question comes from Stephen Grambling with Goldman Sachs. Please go ahead.

Stephen Grambling -- Goldman Sachs -- Analyst

Hi, thanks. Realizing you're still in the early stages for development for Durango. But in your initial conversations, have you seen any color on procurement pressures given some of the supply chain concerns we've heard out there. Have you been able to think about ways to control construction costs between now and when you start to break ground?

Frank Fertitta -- Chairman & Chief Executive Officer

Yes. I think the planning process for this has been quite extensive. As you've probably heard in some of the calls we've delayed given the budget until just now. And so through that, we've identified all the long lead procurement items that need to be done and bought prior to us breaking ground in Q1, and we've procured them or we've at least put those under contracts, we feel pretty good from a pricing perspective. And frankly, construction costs have risen, but we feel we've captured that in the $750 million number.

Stephen Grambling -- Goldman Sachs -- Analyst

That's helpful. And then separately, maybe I missed this, too, but how do you think about capturing the value of some of the still undeveloped land that you still have that maybe won't be utilized?

Lorenzo Fertitta -- Vice Chairman

Well, we're planning on monetizing the back 23 acres of the Durango site, so we're taking the front 50 acres to develop. We'll monetize the back, probably resulting in multifamily residential behind the property, which will be good for the property. And we're going to continue to look at each one of the development sites here in Vegas as we roll forward, try to build out the portfolio, double the footprint here in Las Vegas. We'll take basically the heart of each of the properties and sell off the remaining real estate surrounding those development sites.

Stephen Grambling -- Goldman Sachs -- Analyst

And any sense for where some of that land value kind of sits from your standpoint at this point?

Lorenzo Fertitta -- Vice Chairman

What do you have for the value on the back 23 acres.

Frank Fertitta -- Chairman & Chief Executive Officer

Well, we just talked about in the release, the back half, we have under contract, about $23 million, so about a little bit over $1.1 million an acre.

Stephen Grambling -- Goldman Sachs -- Analyst

And would you think some of the other land that you have that's undeveloped, would you characterize that as equal more or less valuable?

Frank Fertitta -- Chairman & Chief Executive Officer

Land prices in Las Vegas trending up...

Lorenzo Fertitta -- Vice Chairman

They're not going down.

Frank Fertitta -- Chairman & Chief Executive Officer

They really have been trending up. I think you're seeing a real supply demand dynamic there. There's a lot of demand from multifamily builders, industrial, I mean, a lot of different uses. So the trends seem to be in our favor is a big land owner in this valley.

Stephen Grambling -- Goldman Sachs -- Analyst

Great, thanks so much.

Operator

The next question comes from Steve Wieczynski with Stifel. Please go ahead.

Steven Wieczynski -- Stifel -- Analyst

Yes. Hey guys, good afternoon. So it sounds like from Steve's remarks in his prepared remarks, the promotional environment in the locals market still seems pretty rational if I read into your comments. So I guess the question is the Palms deal does close and you see a new competitor come into the market and operate the palms. Do you think there's any risk that a new competitor comes in and tries to steal some share initially? And if so, how would you guys react in that situation?

Lorenzo Fertitta -- Vice Chairman

I think you can see a complete pivot and basically, our approach to the market. It's relying on our A+ locations, A-class buildings, A-class employees, relationship marketing, we basically pretty much gotten out of the promotional business of the mass market here, and we're relying on personal relationships. And our intent is to stick to that strategy even if you're going to get a one-off player or someone maybe come in and want to be promotional and spend money. I mean you have a couple of them in the market right now. But at the end of the day, we are the leader in the market. We have the A locations in the suburban locations. And we just really don't see the need to return to where things were.

Steven Wieczynski -- Stifel -- Analyst

Okay. Got you. And the second question would be around the -- you mentioned the mask mandate a couple of times in your remarks. And now I guess the question is, what conversations have you had with your customer base in terms of folks that aren't coming back in? Is it something where they're just sitting on the sidelines waiting for that to be removed? Or is there something else going on? And then the second part of that question is, have you heard anything in terms of potential timing around the removal of that mandate?

Lorenzo Fertitta -- Vice Chairman

Look, I think it varies by age group on how people react to the new cycle, Delta variant, mask mandates. And I think the older the segmentation of the population, the more adverse they are to deal with mask and react to the new segments. So I think the younger demographic is not as impacted by mass mandate, but I don't know if you guys have anything you want to add.

Frank Fertitta -- Chairman & Chief Executive Officer

I think the other area where we're seeing a little bit of dialogue is in groups that are looking to book whether it's conventions meetings, social events. I think that the mask mandate definitely impacts that line of business. As Steve had mentioned, we're starting to see that pipeline kind of come back into late '22, '23. I think as people are presuming that masks, hopefully, by then will be, I think, in the past. We don't have really any updates from the governor of the state relative to exactly what they're thinking on the mask mandate. We now tracking the numbers, they seem to be going in the right direction. So we're hopeful that sometime in the near future that, that can be lifted. I think we're 1 of 6 states that still have a mask mandate in place. So certainly, we think when the mask mandate hopefully ends, it should be relatively positive from a psychological and just an overall for our business.

Steven Wieczynski -- Stifel -- Analyst

Okay, great. Thanks guys. Thanks for the color.

Operator

Next question comes from Chad Beynon with Macquarie. Please go ahead.

Chad Beynon -- Macquarie Research -- Analyst

Hi, thanks for taking my question. Regarding the four properties that remain closed, can you help us think about what you need to see in the existing business or in the market to allow you to open up 1 or all these properties going forward?

Lorenzo Fertitta -- Vice Chairman

Well, the polls is going to be sold. So it's down to 3 properties. And I think what we have to look at is that those 3 properties represented less than 10% of the cash flow even though they were 1/3 of the casinos. And we've been very successful at moving a lot of the business at those closed properties to the 6 open properties, which has resulted in the higher margins that we're seeing at 49% for Las Vegas operations before allocation. I don't know if you have anything to add, Steve. And until we're confident that we can deliver incremental absolute profitability we're not going to go and open something and cannibalize our other properties and end up making us money.

Stephen Cootey -- Executive Vice President, Chief Financial Officer & Treasurer

Yes. And I think just to add to Frank's point because you nailed them all with SB 386 in place, it really makes it administratively hard to open up a brand-new property.

Chad Beynon -- Macquarie Research -- Analyst

And then regarding your comment around Durango, your goal of generating returns that are similar to prior projects, obviously, with the cost of capital down at this point, you can certainly get a positive IRR at a lower return. When you talk about consistent with prior projects, should we think somewhere in the ballpark between kind of the 10% and 20% goal post depending on what happens between now and '23? Or is there a more finite number that you're willing to provide?

Stephen Cootey -- Executive Vice President, Chief Financial Officer & Treasurer

I think that's the right range. And typically, we've been able to get into the 20s type return on a stabilized basis.

Frank Fertitta -- Chairman & Chief Executive Officer

If you look at just kind of where we sit today, you look at our trailing 12 EBITDA at $730-ish million being generated by 6 properties. That kind of comes out to an average per property of about 122 -- $120 million to $122 million of property and looking at the demographics, we actually posted some information on the investor deck on our website. When you look at the demographics, the traffic flows, everything else, we certainly expect this to be an above-average property relative to the rest of the portfolio.

Lorenzo Fertitta -- Vice Chairman

If you compare the adult population and a 5-mile radius, per gaming position to Red Rock and Green Valley, Durango is 2x the amount of adults per gaming position. So we feel pretty good about it.

Chad Beynon -- Macquarie Research -- Analyst

Thanks for the additional color. Appreciate it.

Operator

The next question comes from Barry Jonas with Truist Securities. Please go ahead.

Barry Jonas -- Truist Securities -- Analyst

Thank you. Have you gotten historically are you now seeing any impacts from higher gas prices? And I guess I'd extend that to any thoughts on the wider inflation we're seeing either from the revenue or the cost perspective.

Stephen Cootey -- Executive Vice President, Chief Financial Officer & Treasurer

On the cost side, you're definitely seeing cost of goods sold. That's up year-over-year, about 12% on a per cover base to on a food standpoint. But on the revenue side, they really haven't seen that impact. It's been more -- it's been tough to see because you're seeing -- you have the mask mandate in place.

Barry Jonas -- Truist Securities -- Analyst

Got it. Got it. And can you give any color -- I'm not sure if you've talked about where you're seeing across the Jada base. Any color you can give on any segments or demographics, if anything is performing better than others?

Frank Fertitta -- Chairman & Chief Executive Officer

The higher-end segments continue to perform -- outperform, no question about that. And then the other area is the growth we've seen in the younger demographic. We were just looking at kind of where we sat in the 21 to 35 demo prior to COVID and now coming out of post COVID, I think they're theoretical when is up about 75% versus pre-COVID. So we've been successful in driving that incremental kind of younger demo into our properties, which we think is super healthy and good long term for the business.

Barry Jonas -- Truist Securities -- Analyst

Great. If I could just sneak one more in. It's been a few years since you guys have issued a dividend. I'm just curious where a resumption of the dividend would rank in terms of your capital allocation strategies.

Stephen Cootey -- Executive Vice President, Chief Financial Officer & Treasurer

I think the good thing is we're starting from a great place. We've got probably the strongest balance sheet in the industry. In about a month, we're going to get about $650 million on the Palms closing the good end of what the Board is considering is you got to balance return of capital versus also the 6 strategically located properties that we can start developing. So we're going to consider all

Lorenzo Fertitta -- Vice Chairman

We have a balanced approach.

Stephen Cootey -- Executive Vice President, Chief Financial Officer & Treasurer

All options are on the table.

Barry Jonas -- Truist Securities -- Analyst

Thanks so much guys.

Operator

The next question comes from Dan Politzer with Wells Fargo. Please go ahead.

Daniel Politzer -- Wells Fargo -- Analyst

Hey guys, good afternoon and thanks for taking my questions. So most of have been answered, but on the 55 plus 65 customer core customer, in what inning are we of that customer base returning? And as the broader reopening has occurred, have you seen any declines at all in that unrated higher-margin player?

Frank Fertitta -- Chairman & Chief Executive Officer

We definitely have some room to go. I mean, they're not all back yet. I don't know necessarily what inning we're in. I think that

Lorenzo Fertitta -- Vice Chairman

The inning changes depending on Delta variant announcement.

Frank Fertitta -- Chairman & Chief Executive Officer

Yes. They're definitely the most affected by kind of what's going on with COVID. We're hopeful that if the mask mandate comes off sometime in the near future that, that segment will really start to kind of comeback [indecipherable] but the older portions of our database is definitely where we're seeing that we have room to grow.

Lorenzo Fertitta -- Vice Chairman

What was the second part of your question?

Frank Fertitta -- Chairman & Chief Executive Officer

I think it was on the unrated, which we've really seen no change in unrated play pre and post pandemic.

Daniel Politzer -- Wells Fargo -- Analyst

Got it. And then just in terms of the 3 properties that you guys have yet to open. I mean, is there any change in Civitas in your decision-making process there? Have you had any conversations with potentially interested parties?

Frank Fertitta -- Chairman & Chief Executive Officer

I mean, there's all sorts of inbound calls coming in for those 3 properties. But I think I can pretty say definitively, if we would never sell a property -- a gaming and title property, those 3 gaming entitled. So really no decision has been made whether we're going to open or potentially scrap or sell.

Daniel Politzer -- Wells Fargo -- Analyst

Understood. Thanks so much.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Stephen Cootey for any closing remarks.

Stephen Cootey -- Executive Vice President, Chief Financial Officer & Treasurer

Well, thank you, everyone, for joining the call. And we look forward to seeing you again in the next 90 days. Take care.

Operator

[Operator Closing Remarks]

Duration: 34 minutes

Call participants:

Stephen Cootey -- Executive Vice President, Chief Financial Officer & Treasurer

Lorenzo Fertitta -- Vice Chairman

Frank Fertitta -- Chairman & Chief Executive Officer

Joseph Greff -- JPMorgan -- Analyst

Carlo Santarelli -- Deutsche Bank -- Analyst

Shaun Kelley -- Bank of America -- Analyst

Stephen Grambling -- Goldman Sachs -- Analyst

Steven Wieczynski -- Stifel -- Analyst

Chad Beynon -- Macquarie Research -- Analyst

Barry Jonas -- Truist Securities -- Analyst

Daniel Politzer -- Wells Fargo -- Analyst

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