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Date

Tuesday, July 29, 2025, at 4:30 p.m. ET

Call participants

  • Chief Financial Officer — Stephen Cootey
  • Chairman and Chief Executive Officer — Frank Fertitta III
  • Vice Chairman — Lorenzo Fertitta
  • President — Scott Kreeger
  • Operator

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Risks

  • Renovation disruption: Stephen Cootey reported "almost $15 million" in disruption, primarily at Green Valley Ranch, anticipated over the next two quarters, with further disruption expected across Durango, Sunset Station, and Green Valley Ranch through the remainder of the year.

Takeaways

  • Las Vegas operations net revenue: $513.3 million, up 6.2%, representing the highest quarterly net revenue in company history.
  • Las Vegas operations adjusted EBITDA: $239.4 million adjusted EBITDA, up 7.3%, also the highest in company history.
  • Las Vegas adjusted EBITDA margin: 46.7%, an increase of 47 basis points in adjusted EBITDA margin.
  • Consolidated net revenue: $526.3 million, including $10 million from North Fork, up 8.2% from the prior year's second quarter.
  • Consolidated adjusted EBITDA: Adjusted EBITDA was $229.4 million, including $10 million from North Fork, up 13.7%.
  • Consolidated adjusted EBITDA margin: 43.6%, an increase of 212 basis points, representing the consolidated adjusted EBITDA margin (non-GAAP).
  • Operating free cash flow: $124.3 million or $1.18 per share in operating free cash flow (non-GAAP), converting 54% of adjusted EBITDA (non-GAAP).
  • Year-to-date operating free cash flow: $217.3 million or $2.06 per share in year-to-date cumulative free cash flow as of the second quarter of 2025.
  • Quarter-end cash and debt: $145.2 million in cash and $3.4 billion in debt as of the second quarter of 2025, with net debt of $3.3 billion as of the second quarter of 2025; net debt to EBITDA ratio was 3.96 times as of the second quarter of 2025.
  • Capital return: $200.3 million distributed to Station HoldCo unitholders, including $116.9 million to Red Rock Resorts in the second quarter of 2025; $31 million spent repurchasing approximately 672,000 shares at $45.94 per share in the second quarter of 2025; $0.25 quarterly dividend and $1.00 special dividend per Class A common share paid.
  • Share count: Quarter-end shares outstanding at approximately 105.4 million for the second quarter of 2025, cumulative repurchases since 2021 at approximately 15 million shares as of the second quarter of 2025, average price $45.35 per share for all Class A common shares repurchased through the second quarter of 2025.
  • Capital expenditure: $78.2 million in the second quarter of 2025 ($59.8 million investment and $18.4 million maintenance); guidance for full year 2025 reduced to $325-$375 million, with $235-$275 million for investment and $90-$100 million for maintenance.
  • Durango Casino Resort performance: Over 108,000 new customers have been added to the database since Durango opened in December 2023; return net of cannibalization projected to be over 15% through 2025.
  • Core property revenue backfill: Management reports recovery from cannibalization effects at Red Rock following the opening of Durango, with the worst of the impact now considered to be behind as of the second quarter of 2025, with full revenue recovery expected over the next couple of years.
  • Customer database growth: Excluding Durango, new sign-ups increased nearly 10% in the second quarter of 2025; uncarded slot coin-in saw the highest increase in two years in the second quarter of 2025.
  • Planned major projects: $120 million Durango expansion project (expected completion late December; project cost as stated by management), $53 million Sunset Station renovation, with new amenities expected to come online throughout the remainder of 2025 and into 2026, $200 million Green Valley Ranch refresh (projected total investment; time period not specified), Durango and Sunset Station projects remain on budget.
  • North Fork Casino: $750 million project (total all-in project cost for North Fork), fully financed, expected early fourth quarter 2026 opening; construction progressed to enclosing the facility by October, with completion anticipated to keep the project on track for an early fourth quarter 2026 opening; development fee revenue began in the second quarter of 2025.
  • Guidance on disruption and seasonality: The majority of renovation disruption is projected for the third and fourth quarters of 2025, especially at Green Valley Ranch and Sunset Station; from the fourth quarter to the third quarter or third quarter to the second quarter, EBITDA is usually down about 10%.
  • Group sales outlook: Forward bookings indicate "mid-20%" increases in group and catering revenue both for the remainder of 2025 and into 2026.
  • Tax legislation impact: Stephen Cootey said, "We do not expect to pay cash taxes for the remainder of 2025." Management estimates this will increase operating free cash flow by $60 million for the remainder of the year.

Summary

Red Rock Resorts(RRR 0.61%) set all-time records in net revenue and adjusted EBITDA for both its Las Vegas operations and on a consolidated basis in the second quarter of 2025, with margin expansion and historic conversion to operating free cash flow. Management attributed exceptional gaming performance to increased VIP and core slot play, higher spend per visit, and success in targeted demographic segments, particularly younger and new-to-brand customers, especially at Durango. The company continued rapid database growth across all customer cohorts and regions, including significant gains among non-rewards and uncarded players. Positive outlooks for group bookings and catering indicate momentum extending into 2026, as noted by management, while renovation investment at three flagship properties supports long-term growth despite adaptive near-term disruption. The board declared a regular quarterly dividend and a special dividend, while share repurchases further reduced the outstanding share count, reflecting a focus on capital returns alongside aggressive property reinvestment and development. Debt and leverage metrics remained stable with no near-term maturities, providing flexibility for ongoing and future projects funded from record free cash flow and forecast tax savings.

  • Stephen Cootey said, "gaming actually had a flow-through north of 70%," signaling a high incremental margin from the primary business driver in the second quarter of 2025.
  • Renovation-related disruption occurred at Green Valley Ranch but was said to be lighter than forecast during the quarter, with the majority of its impact expected in the third and fourth quarters.
  • Durango continues to "expand the Las Vegas locals market, drive incremental play from our existing customer base, and attract new guests to the Station Casinos brand."
  • Scott Kreeger reported, "mid-20% increases in group" bookings and catering for both the rest of 2025 and into 2026.
  • North Fork Casino construction remains on budget and schedule, with fee revenue now contributing to consolidated results.
  • Stephen Cootey stated, "We do not expect to pay cash taxes for the remainder of 2025." Management also stated that no tax distribution to Station HoldCo is expected for the rest of the year, which is estimated to increase operating free cash flow by $60 million for the remainder of the year.
  • Management stated, "second-quarter slot coin-in was the highest quarter of increase in uncarded play that we've seen in the last two years."
  • The company’s development pipeline is supported by more than 450 acres of Las Vegas Valley land, with decisions on new developments anticipated by year-end.

Industry glossary

  • Carded play: Casino gaming tracked through customer loyalty or rewards programs, typically used to gauge repeat and high-value customer engagement.
  • Uncarded play: Gambling activity conducted without player loyalty card tracking, representing play from anonymous customers and measured for segment analysis.
  • Backfill: Recovery of revenue at a property previously impacted by cannibalization after a new opening within the same market by the same operator.
  • Net theoretical win: Calculated expected value of all wagers made by tracked customers, used to analyze per-visit profitability and gaming spend.
  • VIP play: Gaming activity by high-value customers, often in dedicated high-limit areas, representing a segment with outsized revenue and margin contribution.
  • Guaranteed maximum price contract: A construction contract setting a ceiling on project costs, with the contractor bearing any overruns above that amount.

Full Conference Call Transcript

Stephen Cootey: Thank you, operator. Good afternoon, everyone. Thank you for joining us today for Red Rock Resorts' second quarter 2025 earnings conference call. Joining me on the call today are Frank Fertitta III, Lorenzo Fertitta, Scott Kreeger, and 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 definitions and complete reconciliation for these figures to GAAP, please refer to the financial tables in our earnings press release, Form 8-Ks, and our investor deck, which were filed this afternoon prior to the call.

Also, please note that this call is being recorded.

The second quarter was an exceptional one for the company by every measure. 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. In addition to delivering strong financial results, we remain highly encouraged by the continued performance of our Durango Casino Resort and the revenue backfill at our core properties. Durango continues to expand the Las Vegas locals market, drive incremental play from our existing customer base, and attract new guests to the Station Casinos brand.

The property once again demonstrated strong momentum within the quarter with increased visitation, higher spend per visit, and elevated net theoretical win from our carded customers in the Durango area. Since opening in December 2023, Durango has added over 108,000 new customers to our database. The resort remains on a solid trajectory and is paced to become one of our highest margin properties, delivering a return net of cannibalization of over 15% through 2025.

Regarding the cannibalization impact, which has occurred primarily at our Red Rock property following Durango's opening, we are encouraged by the pace of the revenue backfill. We suggest that the worst of the impact is behind us. Consistent with our historical experience, we continue to expect full revenue recovery over the next couple of years, supported by strong long demographic growth across Las Vegas Valley. This is particularly evident in Summerlin, where the combined build-out of the downtown Summerlin and Summerlin West is projected to add approximately 34,000 new houses. Across the rest of our portfolio, we demonstrated our ability to successfully manage costs while driving top-line growth, resulting in what was easily the best quarter in our company's history.

Strength was evident across all business lines as we execute our core strategy of reinvesting in existing properties to enhance amenities and deliver best-in-class customer service, also returning capital to our shareholders.

Now let's take a look at our second quarter. With respect to our Las Vegas operations, our second-quarter net revenue was $513.3 million, up 6.2% from the prior year's second quarter. Our adjusted EBITDA was $239.4 million, up 7.3% from the prior year's second quarter. Our adjusted EBITDA margin was 46.7%, an increase of 47 basis points from the prior year. On a consolidated basis, our second quarter net revenue, which includes $10 million from our North Fork project, was $526.3 million, up 8.2% from the prior year's second quarter. Our adjusted EBITDA, which also includes $10 million from our North Fork project, was $229.4 million, up 13.7% from the prior year's second quarter.

Our adjusted EBITDA margin was 43.6% for the quarter, an increase of 212 basis points from the prior year. In the quarter, we converted 54% of our adjusted EBITDA into operating free cash flow, generating $124.3 million or $1.18 per share. This brings our year-to-date cumulative free cash flow to $217.3 million or $2.06 per share. This strong level of free cash flow was strategically deployed to support our long-term growth initiatives, including our most recent projects at Durango, Sunset Station, and Green Valley Ranch, while returning to our stakeholders through debt reduction, dividends, and share repurchases.

As we begin the third quarter, we remain focused on our core local guests while continuing to drive our regional and national customer segments across the portfolio. Compared to the second quarter of last year, we saw continued strength in carded slot play across our entire database. Robust visitation and strong spend per visit, coupled with a strong table games business, helped drive the highest revenue and profitability in our gaming segment in the company's history. Turning to our non-gaming operations, both hotel and food and beverage divisions delivered a strong quarter, achieving near-record revenue and profitability in the second quarter.

Our hotel division recorded its highest second-quarter revenue and profit, driven by our team's success in increasing both ADR and occupancy across our portfolio. The food and beverage division also achieved near-record results for the quarter, supported by higher cover counts across our outlets. In group sales and catering, the team delivered near-record second-quarter revenue and profit, and we continue to see positive momentum in both business lines for the remainder of 2025 and into 2026.

As we look ahead to the third quarter, we are seeing continued stability in our core slot and table games business within the Locals market and across our carded database. We do expect a return to more typical seasonal visitation patterns, with some near-term disruption impact from our ongoing construction projects at Durango, Sunset Station, and Green Valley Ranch. We remain as confident as ever in the strength of our business and long-term growth prospects.

Let's cover a few balance sheet and capital items. The company's cash and cash equivalents at the end of the quarter were $145.2 million, and the total principal amount of debt outstanding was $3.4 billion, resulting in net debt of $3.3 billion. As of the end of the second quarter, the company's net debt to EBITDA ratio was 3.96 times. During the second quarter, we made total distributions of approximately $200.3 million to the LLC unitholders of Station HoldCo, including a distribution of approximately $116.9 million to Red Rock Resorts.

The company utilized its portion of the distribution to fund its first and second quarter estimated tax payments, pay its previously declared quarterly dividend of $0.25 per Class A common share, and a special dividend of $1 per Class A common share, and repurchase approximately 672,000 Class A common shares for $31 million at an average price of $45.94 per share under its previously announced $600 million share repurchase program.

The second quarter share repurchases bring the total number of Class A common shares repurchased, including the 2021 tender offer and open market repurchases, to approximately 15 million shares at an average price of $45.35 per share, reducing the company's share count to approximately 105.4 million shares at the quarter end.

Capital spend in the second quarter was $78.2 million, which includes approximately $59.8 million in investment capital as well as $18.4 million in maintenance capital. This brings our year-to-date capital spend to $146.4 million, which includes approximately $92 million in investment capital, as well as $54 million in maintenance capital. For the full year 2025, we now expect to spend between $325 and $375 million, down $25 million from our previous earnings call, mainly driven by the timing of capital expenditures. Full-year capital spend includes $235 to $275 million in investment capital, as well as $90 to $100 million in maintenance capital.

As mentioned on our last earnings call, we are making significant investments in our Durango Casino Resort, Sunset Station, and Green Valley Ranch properties. At Durango, construction continues on the next phase of our Durango master plan. This expansion will add over 25,000 square feet of additional casino space, including a new high-limit slot area bar. In total, the project will introduce 230 new slot machines, with 120 allocated to the high-limit room.

Operator: As part of this phase, we are also building a new covered parking garage with nearly 2,000 spots, which will enhance customer access and provide infrastructure flexibility.

Stephen Cootey: To support the future growth of the property. The total project cost is approximately $120 million and is currently operating under a guaranteed maximum price contract. The project remains on budget and is expected to be completed in late December. At Sunset Station, we are advancing our podium refresh to better position the property for continued growth in Henderson, particularly from the master-planned communities of The Sky and Cadence, which are to deliver over 12,500 new households at full build-out. The $53 million renovation includes an all-new country western bar and nightclub, a new Mexican restaurant, a new center bar, and a fully renovated casino floor.

We are pleased to report that customer feedback on the completed portions of the renovation has been overwhelmingly positive, reinforcing our confidence in the project's direction. The property remains on budget, with the new amenities expected to come online throughout the remainder of 2025 and into 2026.

At Green Valley Ranch, we have commenced a refresh of our guest rooms, suites, and convention space, aligning the hotel experience with the recently renovated and well-received high-limit table slot rooms at the property. Work on the rooms in the West Tower is currently underway, with the majority of all rooms in both towers expected to return to service by year-end. The total investment for the room and convention remodel renovation is projected to be approximately $200 million. As with our recently introduced amenities, we believe these upgrades will generate strong returns. However, we do anticipate some temporary disruption at the property as we bring these new offerings online for our guests.

Turning now to North Fork. Construction is progressing well. We've completed the slab on grade and anticipate enclosing the facility by October, keeping us on pace for an early fourth quarter 2026 opening. The total all-in project cost is expected to be approximately $750 million, is fully financed, and is currently being executed under a guaranteed maximum price contract. When complete, this best-in-class resort will include approximately 100,000 square feet of casino space, with over 2,400 slot machines, including 2,000 class three games, 44 table games, two food and beverage outlets, and a food court with many exciting options. In addition to the work continuing to progress as planned, the project remains on budget.

We are also pleased to report that we're now able to begin and have begun our development fee revenue starting this quarter. This will continue through the project's opening, marking another meaningful milestone in the advancement of this long-term project. Also, at the end of the quarter, Red Rock's outstanding balance due from the tribe stands at approximately $72.3 million. We're excited about this project, very happy with the progress in construction, and look forward to providing further updates on future earnings calls.

Lastly, the company's board of directors has also declared its regular cash dividend of $0.25 per Class A common share, payable on September 30 to Class A shareholders of record as of September 15. Following the payment of this dividend and the share repurchases completed during the quarter, we have returned approximately $189 million to our shareholders year-to-date. With two record quarters under our belt, the year is off to a strong start, and we remain confident in the strength and resilience of our business model.

The momentum continues to validate our long-term growth strategy, highlighting the value of our own development pipeline and real estate bank, which includes more than 450 acres of developable land positioned in highly desirable locations throughout the Las Vegas Valley. Combined with our existing portfolio of best-in-class assets and premier locations, this pipeline positions us for significant growth, enabling us to fully capitalize on the very favorable long-term demographic trends and the high barriers to entry that define the Las Vegas locals market.

We do want to take a moment to sincerely thank all of our team members for their continued hard work and dedication. Our success begins with them. They are the driving force behind the exceptional experiences that keep our guests coming back time and time again. Due to their efforts, we are proud to have been recognized with multiple accolades, including being voted a top casino employer in the Las Vegas Valley for five consecutive years, certified as a great place to work for three years running, and named one of America's best in-state employers by Forbes.

We are also honored as a top place to work by USA Today and recently recognized by Newsweek as one of America's greatest workplaces in Nevada. Finally, we extend our heartfelt gratitude to our loyal guests for their unwavering support over the past six decades. Operator, this concludes our prepared remarks for today, and we are now ready to take questions.

Operator: A question and answer session. To ask a question, press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up the handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Jordan Bender with Citizens. Please go ahead.

Jordan Bender: Backing out the Native American contributions in the quarter, flow-through is still incredibly strong. Are you maybe able to help us unpack where you're finding that incremental operating leverage? And I guess I'll just put the second part of the question there. Any impact from the renovation in the quarter that you can call out for EBITDA? Thank you.

Stephen Cootey: Yeah. I think the strength, Jordan, is evident across all business lines. You know, from a casino perspective, obviously, we had the best table and slot hold in the history of our company, led by great volume and some favorable hold. We also had our best hotel revenue and record profitability. And then not to be outdone, food and beverage had its second-best revenue quarter, only to be outshined by last quarter, which obviously had the trial from Durango. And, you know, the big change there, and you saw this in our margin, you had some revenue mix shift from, let's call it, lower margin food and beverage and hotel to higher margin gaming.

And gaming actually had a flow-through north of 70%.

Jordan Bender: Great. And then I guess on the renovation disruption in the quarter?

Stephen Cootey: Yes. We haven't seen too much impact from the renovation in this quarter. That said, you know, we're still sticking to our guns on some of the disruption as we're in the thick or the peak construction period now for all three projects: the Durango, Sunset Station, and Green Valley Ranch, but the majority of that disruption, almost $15 million, occurring at Green Valley as the West and East Towers are going to be taken down over the next two quarters.

Jordan Bender: Great. Thank you very much.

Operator: The next question comes from Joe Stauff with Susquehanna. Please go ahead.

Joe Stauff: Thank you. Good afternoon. I wanted to ask just to follow up on the construction disruption. Steve, you said you're sticking to your guns in terms of what you outlined for each property. Is July, August, September, say, the largest concentration of that disruption? Could you just remind us of the timing of that? And then I was wondering if you could share your analysis of how, you know, the tip tax relief kind of affects the locals market and your customer in particular?

Scott Kreeger: Hey, Joe. It's Scott. I'll take the disruption kind of schedule and timeline, and I think Steve will take the second question. A couple of quarters ago, Steve was pretty descriptive of what we thought disruption was going to be. He just mentioned that in the Q2 timeframe, it was a little lighter than we thought. Some of that is due to just the timing of construction. And in some respects, at Sunset, we switched around the order of what we were doing. So at Sunset, instead of going into our main pit, we went into an area that contained an entertainment lounge, so that switched around the impact a bit.

So you'll see Sunset impact to be more like Q3, Q4, and maybe a little bit of a bleed into 2026. Durango disruption has been relatively light, which is a good thing. But we are seeing impacts to parking, especially on the weekends. We're getting above 80% parking, and what's left over is less convenient parking. In our world, that's pretty impactful. And then the second piece of Durango is we're enclosed now, and so the interior fit-out is going to start, which tends to have more noise and kind of disruption on the adjacent construction wall than you saw in the past.

But all in all, we still think that the bulk of the disruption you're going to see in Q3 and Q4. And Green Valley is just getting started with the room renovation. That's right. So Green Valley's schedule is that we will be through tower one by late September, October, and then we'll be into tower two in October, with the goal for us to be done at the end of the year. And then in October, we'll also kick in the conference center remodel, which will be early January completion. And then suites will be done in March. So that gives you a kind of a timeline at Green Valley Ranch.

Stephen Cootey: Sure. I'll take the second one, Joe, and congratulate you because you gave the ultimate back-to-school question, one question, 27 parts. I think you actually just look at no tax or tips. I think, ultimately, the tax legislation can only be viewed as a good one for Las Vegas. And just given our position in the locals market, we do expect to benefit from the increased discretionary income it's going to bring to our customers.

You know, the key measures, as you mentioned, tax on tips, but there's also the elimination of federal tax on overtime pay, the new senior tax credit, as well as standard deductions, family tax credit, and some reductions in marginal tax credits, all of which would significantly enhance the discretionary income. While it's tough to say how much of this income is going to flow to Red Rock, you know, we can start framing that. I think you and I have talked through this, for example, when we ran our initial analysis on no tax for tips, for example, we estimated approximately $5 million annually would flow into Clark County.

And then we just kind of even view overtime, which is a little trickier, there's about 1.2 million workers in Clark County. And using some national estimates, roughly four to 8% of those typical people actually get overtime pay. And, ultimately, this could benefit, you know, through each worker up to $300 to $1,800 per worker annually. And then not to be outdone, it's, you know, just reminders, you know, remind everyone that there are about 390,000 seniors over 65. And just given the marginal, yeah, then the median household income of that cohort, we would expect a substantial portion of those seniors will qualify for at least part of the new senior deductions.

So all of this is fantastically good for our company. And then just the next 27 parts of the question, we move forward to forward, right? I mean, I think, you know, with the expansion of the you can expense immediately R&D expenses, the acceleration of bonus and the relief from, you know, interest deductibility, that is going to have an immediate impact on our cash flow for the remainder of 2025. We do not expect to pay cash taxes for the remainder of 2025.

And further, we do not expect to make, you know, any tax distribution to Station HoldCo for the rest of the year, which we estimate will increase our operating free cash flow by $60 million for the rest of the year.

Joe Stauff: Thanks, guys.

Operator: Thank you. The next question comes from Steve Wieczynski with Stifel. Hey, guys. Good afternoon. So, Steve, I want to ask about your new database sign-ups across your properties in the quarter. And I guess what, you know, what I'm trying to understand here is if you guys have seen any pickup in new customers given the, you know, the well-called, the well-documented slowdown, you know, along the strip. You know, basically trying to understand if the strip has, you know, essentially overpriced itself and some customers are, you know, are now looking for, you know, other alternatives. Hopefully, that makes sense.

Scott Kreeger: It does. Steve, this is Scott. Let me take that one. So from an overall database perspective, we saw strong positive performance across all of the segments. Trended from past quarters, because of our focus, because of the investments we're making in our properties, we're seeing particularly strong growth in our VIP, our core customer, our regional and national customer. But in this quarter, specifically, not to be outdone, we also saw a considerable improvement in what we would call our retail customer, our non-rewards customer. So across the database, pretty much homogeneously, we've seen positive increases. And you mentioned new member sign-ups particularly.

Interesting that if you've got to take into account this opening of Durango and the impact it had in the second quarter of last year. Durango has signed up 108,000 new-to-brand customers as of this quarter or as of the '2. So that's a sizable rather or sorry, database increase that comes from Durango. If you take that comparison of Durango out and you just look at the quarter six, they were up almost 10% in new sign-ups, which is really quite a sizable effort on the part of the operating teams to grow the database in general. The other thing that we look at is when we look at demographics, across all the age categories, we saw positive increases.

In the quarter, and most interesting as an absolute customer count in the database, we saw 35 grow 15%. I think that's attributable to the relevant amenities that we're putting in our properties, the way that we position our properties, and quite honestly, the team, the marketing team, and how they resonate with the younger demographic. So we're seeing strong demographic increases. And then not to be outdone, when we look at uncarded, second-quarter slot coin-in was the highest quarter of increase in uncarded play that we've seen in the last two years. Really, when you take a broad brush stroke across all of the aspects of demographic and customer database, we're seeing positive growth.

And then as we look into Q3, we're seeing very similar trends as we go. It's early, but as we look into the future, trend into Q3, it's very consistent.

Stephen Cootey: And, Steven, just to piggyback on what Scott was saying, that really highlights the difference between the Strip and Las Vegas locals. Right? While the Strip relies heavily on tourism, conventions, hotel-driven revenue, you know, we are anchored by a gaming-centric business model. Right? We focused on a deeply loyal customer base. Many of these customers, in fact, our customers, 75% are carded play business over four times a month. And so we feel Locals offers a stronger value proposition, which is driving more people to our casino, which includes accessible pricing, convenient locations, personalized service, and that continues to resonate not only with our locals guests but it's starting to increasingly resonate with our out-of-town guests as well.

Steve Wieczynski: Okay. Gotcha. That's great color, guys. And then I assume this is probably going to be for Scott, and I apologize if, Steve, you had this in prepared remarks. But wondering if we could get an update, Scott, in terms of what you're seeing from a group perspective, maybe, you know, in the fourth quarter of this year and then what you're seeing so far for '26?

Scott Kreeger: Yeah. We're seeing really positive forward bookings. So we're talking, you know, in the mid-20% increases in group. And then catering kind of rides shotgun with group sales, and we're seeing similar increases not only through the remaining quarters of this year but into '26 as well.

Steve Wieczynski: Okay. Gotcha. Thanks, guys. Appreciate it.

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

Shaun Kelley: Hi, good afternoon, everyone. Thanks for taking my question. Steve, whoever wants to take it, I know it's probably hard to put a finer point on it, but it sounds like there were several upside surprises in the quarter, both the backfill comment you made a number of times in the prepared remarks and then the strength in unrated play, which has been a segment that I think has come back better than expected across the locals.

So if you were to kind of divide out by those two, could you venture a guess or help us think a little bit about how much either of those two things in particular contributed to the kind of the outsized growth or the reacceleration in growth we saw in the quarter?

Stephen Cootey: I think you really look at really what the big contributor was, I think Scott had touched upon this, it's the VIP play in slots and in table games. And as we mentioned, I mean, we've invested quite a bit in high-limit areas and amenities over the past, I guess, four years, five years coming out of COVID, and we're really starting to see that pay off now. As we feel like that we're getting more than our fair share in those two areas from a gaming revenue standpoint.

Scott Kreeger: I would add to that. Steve, you can jump in. When you really look at the market in general, you know, Durango was the star of the show a year ago, but as Durango kind of matures into the market, one of the things that we're seeing, we mentioned it last quarter, and again in Q2 is the performance of our core six properties in growing market share and growing the market. So we're seeing all of our properties contribute to the revenue increases.

Shaun Kelley: Thanks for that. And then maybe just to kind of dig in on seasonality or however you want to think about it, but there have been a lot of call-outs and certainly a warning from your peers about concerns on sort of strip rate compression. As we move into the summer months here and some pretty serious discounting out there. I think we can all see on social media. Are you seeing that reflected in any of the hotel product or the prevailing rate there? How are you kind of insulated from that and just sort of, yes, bank shots, you know, around that for the Red Rock portfolio? Thanks.

Scott Kreeger: Yeah. Great question. This is Scott. One, let's just go back and say that Q2 was a great quarter for hotel. But as we look into the current trends and, you know, short-term booking window, yes, across the board, you are seeing kind of an ADR war, if you will, out there. Now how do we play into that? Certainly, we have to be competitive with the market rates, but we're certainly not completely dropping our rates to unreasonable levels. I think it's also important, Frank and Steve had just mentioned this, that we are a different makeup of business than the strip. So a majority of our revenue comes through the casino.

While the hotel is important to us, it really only represents about 10% of our overall revenue stream. And then when you look at FIT and transient, it's really only about 20% of the overall hotel mix. So while it's important to us and we stay competitive, it really doesn't represent the lion's share of the revenue stream of the company.

Operator: Thank you. The next question comes from Chad Beynon with Macquarie. Please go ahead.

Chad Beynon: Just in terms of the lower leverage at this point and maybe, you know, the business humming along slightly better than would have expected. You obviously have a full plate with some of the renovation projects that you outlined, and that'll hit in, you know, the end of '25 and '26. But as we think further down the track, you know, of the bigger developmental sites, has anything changed just given your cash position with respect to the timing of maybe green-lighting one of those next opportunities? Thanks.

Lorenzo Fertitta: This is Lorenzo, and obviously, Frank chime in, but nothing has changed. I mean, clearly, we are a development company. I mean, that's really what our focus is. We've got all of this real estate in Las Vegas, its strategic locations. And, you know, with Durango, we've proven again that we can develop these projects and get attractive returns from a timing standpoint. In a position, I think, we said before, where we're just continuing to design and go through the process of trying to figure out which project we think we're going to be able to get the best returns at and have the most impact to be able to create equity value for the company.

And these projects just take time. We want to make sure that, you know, we get good drawings. We go out on the street, get good pricing. So that, you know, when we do announce what the next project is and what the pricing is, that we're confident. We're delivering for everybody. I think we had said at one point, a quarter or two ago, that we would probably have an update when we were in Q4 of this year. I know, Frank, if you have anything you want to add.

Chad Beynon: Great. Thanks, guys. And then in terms of the Red Rock's impact, what inning are we in terms of, you know, just getting back on the right glide path to, you know, return to what some of the prior numbers are? I know you guys are looking at net of cannibalization, but I know that's kind of a key, you know, model driver just getting some of that backfilling some of that business back into Red Rocks. Thanks.

Stephen Cootey: Yeah. I think as I mentioned in the prepared remarks, you know, generally, these backfills historically have taken a little bit over three years. And so we feel very comfortable in the position we are from a backfill perspective. Scott alluded to the market share growth, you know, the market share comment. Where you looked at the twelve months, Durango is really driving the ship. When you look at sixteen months, three months, nine months, it is now really the core six, you know, kind of driving the ship, which kind of shows you the power of the platform and our ability to backfill our existing property. So we like where we are. We're mid-inning. Right?

We're kind of entering our second year of that backfill.

Chad Beynon: Appreciate it, guys.

Operator: The next question comes from Barry Jonas with Truist Securities.

Barry Jonas: Yes. Maybe it's for Steve. Any color you can give about thinking about seasonality for Q3 as we refine our models? Thanks.

Stephen Cootey: Yeah. No problem. And it's obviously, it's coming off of a big quarter. I think the first thing you have to do is just recognize that North Fork is in there, $10 million, and so not really part of seasonality. Just to give you some guidance there, we would expect that number to be $3 million a quarter through opening. Just to get that out of the way. And then usually Q4 to Q3 or Q3 to Q2, usually down about 10% from an EBITDA perspective.

Barry Jonas: That's helpful. And that's okay. So just to mention, alright. Go ahead, Steve, if you have a call.

Stephen Cootey: No. I was just going to tell you, yeah. I was just going to just reiterate that, you know, there's also that disruption that we talked about, but I think you got that.

Barry Jonas: Yeah. Understood. And then, you know, I know we'll get the big reveal later on, but any early puts and takes you can offer for the finalists for your next big greenfield project? You could sort of identify a few areas that, you know, that you're thinking about. So just curious if the order has changed or any puts or takes you'd be willing to share now.

Scott Kreeger: Yeah. I mean, I think the one thing that we've shared with you guys is a precursor to potential expansion of amenities at Toreno is the garage setting this up to be able to have more amenities accommodate the guests with convenient parking and all. So that is definitely an option. And in terms of the greenfield, I think we'll do that, you know, at the end of the year on our year-end call.

Barry Jonas: Great. Thanks so much.

Operator: The next question comes from Ben Chaiken with Mizuho. Please go ahead.

Ben Chaiken: Hey, good afternoon. Thanks for taking my question. As you get into some of the renovation work, primarily GVR and Sunset, maybe you could just help us flush out some of the larger opportunities that you've projected you hope to solve for with the current renovations because, you know, these are more than, at least from my perception, they seem larger than just refreshes of the existing product. Thanks.

Scott Kreeger: Yeah. I can start that. This is Scott. And then, Steve, you can kind of jump in. So let's start with Sunset. So Sunset is an incredibly vibrant new emerging area of the valley. There's a development called Cadence over that area of the valley that represents about 12,500 new rooftops over the phasing of the project. At one time, Sunset was kind of an anchor property for us. And as the valley fills in on the east side, Sunset is being remodeled and refurbished to represent kind of the Red Rock of the east side for us. It's an incredibly dynamic property. It's a fully integrated property.

And so we started about a year and a half ago with the race and sports book and a yard house restaurant, which both have been incredibly successful. And then we've gone through and we're subsequently remodeling the entire casino floor. We're adding a country western dance hall. We'll go in and refurbish the lobby, the exterior of the property, add a Mexican restaurant, redo the center bar. And so, essentially, the main center or heart of the overall property will be refurbished. As we've been doing that over the last year and a half, it's been incredibly well received by our customers.

Each segment of the property that we renovate and reopen, we're seeing positive return in visitation and in the expansion of the demographic profile that we're able to attract to the property. So, I mean, we feel like we have pretty good traction over there. And we really believe in the return on investment that we'll get over there at Sunset, given the area in the market that it's in, which is growing, and the ability for us to attract a younger gaming profile.

And I think we've seen since post-COVID with all these investments that we've made, we really have been able to lower the age group that we're able to attract to the property, which I think is very important for the long-term growth here.

And then switching to GVR, you know, same story. Incredibly vibrant area, one of the higher network areas of the valley. GVR rooms were in need of a refresh. We really started with adding high-limit rooms, which we've done on all of our core properties, pretty much all of the core properties, which we've seen incredible return on investment. And so we did that first at Green Valley. New high-limit rooms, both slots and tables. New restaurants. So we're bringing the hotel rooms up to, you know, a five-star level of finish to complement the high-limit rooms and the restaurants. And at the same time, bringing our meeting space in alignment with that level of quality.

So you're going to have fresh new rooms, fresh new dimension and meeting space, fresh suite product, great high-limit rooms, new higher-class restaurants, and so on.

Stephen Cootey: Right. And I think what you'll see when you see the Green Valley Ranch room product, I mean, it is more than just a refresh or a re-rag of the room. It's a complete repositioning of the property into the luxury space where the bathrooms are being completely redone. And I think we'll have one of the nicest room products in the city. So we're excited about that. And we have some of the renderings for those in the investor deck if you want to take a look.

Ben Chaiken: Got it. Helpful. And then just a really quick one. I think you helped us with some of the benefit to free cash flow for the remainder of the year, you know, tied to the 100% bonus depreciation. How do we think about that number in '26, even just in broad strokes? Yeah. Maybe similar?

Stephen Cootey: That's exactly where I was going to go, Frank. So let's assume that the interest limitation is going to be a good guy. The, you know, the main driver here in '26 is going to be the accelerated depreciation, and we're really going through our capital planning right now. But I think that puts us in a good step that any investment that Frank and Lorenzo want to make, we know we're going to be able to take that tax credit immediately.

Operator: Thanks. The next question comes from David Katz with Jefferies. Hi. Afternoon. Covered a lot of ground already. Appreciate it.

David Katz: I just wanted to get a sense for, you know, Steve, how you're sort of thinking about your sort of ideal leverage range, you know, given the spending, which has been super productive, given the capital return plans, etcetera, you know, where would you like to sort of range that over time?

Stephen Cootey: Yeah, David. I don't think there's any change right now. As you can do, we've kind of knocked down leverage over the last several quarters just naturally through generating higher EBITDA. So very comfortable with the balance sheet and the overall leverage position. You know, again, as I mentioned previously, it's supported by a very flexible credit agreement and no near-term debt maturities. And that's the financial flexibility that enables Frank and Lorenzo to give, you know, kind of operate or give a balanced and disciplined approach to capital allocation.

You did mention that this quarter, you know, we did take an opportunity to return a lot of capital to the 670,000 share repurchase, our quarterly dividend, as well as our special dividend. I think the focus in the back half of the year is primarily going to be focused on getting Green Valley, Sunset, and Durango online.

David Katz: Got it. Okay. Thanks. Congrats on your quarter.

Operator: Thanks, David. The next question comes from John DeCree with CBRE.

John DeCree: Hey, all. Thanks for taking my question. Maybe just one in regard to the 100,000-plus customers you've acquired since opening Durango. Curious if you could give us any insight into the behavior of that segment of the database, you know, relative to previous customers? Do they, you know, spend more? Do they visit more frequently? Do they move about your other properties? You know, is their behavior any different if they're acquired at Durango versus the rest of the portfolio?

Scott Kreeger: Yeah, John. This is Scott. I think generally, because you're talking about a large sample size of people, they behave very similarly to the rest of our customers. I mean, they are in and among, you know, a three-to-five-mile radius of other customers. Now, well, I guess I'll enhance your question by saying, does Durango behave a little differently than some of our other properties? The answer would be yes. I think that Durango is catering to a younger demo. We tend to see a lot of industry folks coming off the strip and stopping off at Durango maybe on the way home. So we have a little bit more visitation on the later-day parts of Durango.

I think it's a function of the incredible food and beverage programming we have there that it's kind of a lifestyle-oriented property, and you're seeing a young And just the location is unbelievable. And it's a growing area of the valley, both residentially and commercially. There's a lot of activity going on around there, and as Scott said, it's broadened the demographic profile. And definitely a higher spend per person on food and beverage, for sure.

John DeCree: That's all helpful. That's it. Thanks, guys.

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

Stephen Cootey: Well, thank you, everyone, for joining the call, and we'll see you and talk again in ninety days. Take care.

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