Monarch Casino & Resort Reports 2019 Second Quarter Net Revenue

MONARCH CASINO & RESORT REPORTS SECOND QUARTER RECORD NET REVENUE OF $62.8 MILLION, NET INCOME OF $9.3 MILLION AND Record ADJUSTED EBITDA OF $16.5 MILLION

 

RENO, NV, July 24, 2019 – Monarch Casino & Resort, Inc. (Nasdaq: MCRI) (“Monarch” or “the Company”) today reported operating results for the quarter ended June 30, 2019, as summarized below:

 

($ in thousands, except per share data and percentages)

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

Increase

 

2019

 

2018

 

Increase

     Net revenue

 $62,761

 

 $59,909

 

4.8%

 

 $121,501

 

 $116,177

 

4.6%

                       

     Adjusted EBITDA(1)

   16,519

 

   15,909

 

3.8%

 

   30,194

 

   28,724

 

5.1%

                       

     Net income

 $  9,279

 

 $  9,239

 

0.4%

 

 $  16,294

 

 $  15,980

 

2.0%

                       

     Basic EPS

 $    0.52

 

 $    0.52

 

0.0%

 

 $    0.91

 

 $    0.90

 

1.1%

     Diluted EPS

 $    0.50

 

 $    0.50

 

0.0%

 

 $    0.88

 

 $    0.86

 

2.3%

 

  1. Definitions, disclosures and reconciliations of non-GAAP financial information are included later in the release.

 

 

CEO Comment

John Farahi, Co-Chairman and Chief Executive Officer of Monarch, commented: “Monarch delivered continued growth in the second quarter of 2019, with net revenue and adjusted EBITDA rising 4.8% and 3.8%, respectively, over the prior year. In particular, our financial performance in the quarter benefited from increased spend per visit across the business.

 

“Atlantis Casino Resort generated year-over-year net revenue growth in the second quarter as we continue to refine our guest experience in the healthy Reno market. While Atlantis’ EBITDA margin was impacted by higher payroll expenses and higher healthcare costs, the underlying performance of the property is strong and we expect to remain a prime beneficiary as the regional economy continues to expand.

 

“Monarch Casino Black Hawk grew both net revenue and adjusted EBITDA in the second quarter compared to the prior-year same period as we further increased our market share even as construction disruption continued at the property. Property-level net income and net income margin also improved on a year-over-year basis, despite $188 thousand in pre-opening expenses. Looking ahead, we expect pre-opening expenses to grow throughout the balance of the year as we prepare to open the new hotel tower and casino expansion later in 2019.

 

“As the transformation of Monarch Casino Black Hawk wraps up, we believe our positioning for long-term growth has never been stronger. We have been able to fund over half of the spending to date on the more than $400 million Black Hawk Casino project from operating cash flow, resulting in a leverage of below 2.2x, at the end of the second quarter of 2019. We expect to drive strong free cash flow growth as business at the new resort and expanded casino ramps up beginning in 2020. This is a very exciting time for the Company, our team and our guests.”

 

Summary of 2019 Second Quarter Operating Results

For the 2019 second quarter, consolidated net revenue of $62.8 million increased 4.8% from $59.9 million in the prior year. Casino revenue increased 5.4% year over year, food and beverage revenue grew 2.6% and hotel revenue rose 8.8%, as underlying trends across the Company’s business remain healthy.

Selling, general and administrative (“SG&A”) expenses for the second quarter of 2019 were $16.5 million compared to $16.2 million in the prior-year period, driven primarily by higher labor expense. As a percentage of net revenue, SG&A expenses decreased to 26.3% compared to 27.0% a year ago. Casino operating expense as a percentage of casino revenue decreased to 34.5% in the second quarter of 2019 compared to 34.9% in the second quarter of 2018 due to improved operational efficiency and revenue growth. Food and beverage operating expense as a percentage of food and beverage revenue increased to 79.6% during the second quarter of 2019 from 75.2% a year ago as a result of increased labor expense and higher cost of goods sold. Hotel operating expense as a percentage of hotel revenue increased to 39.1% in the second quarter of 2019 compared to 37.7% in the same period a year ago, primarily as a result of increased labor expense and a decline in cash occupancy.

 

The Company generated consolidated adjusted EBITDA of $16.5 million in the second quarter of 2019, an increase of $0.6 million, or 3.8%, over the same period a year ago. Net income for the second quarter of 2019 increased 0.4% and diluted EPS was unchanged, driven by an increase in federal income tax provision.

 

Monarch Black Hawk Expansion

Summarized below is an update on the Company’s ongoing upgrade and expansion of Monarch Casino Black Hawk: 

 

$ in millions

Budget Cost

 

Total Spent Through June 30, 2019

 

Left to Spend

 

Estimated
Completion Date

 

I. Existing Facility

             

 

  Monarch Casino Black Hawk (1)

$76

 

$76

 

-

 

Completed

 

  Existing Facility Upgrade (2)(3)

$34 - $36

 

$27

 

$7 - $9

 

Exterior 3Q19 Interior 4Q19

 

          Total Existing Facility

$110 - $112

 

$103

 

$7 - $9

   

 

               

 

II. Expansion

             

 

  Acquired Land Parcels

$10

 

$10

 

-

 

Completed

 

  Parking Structure

$38 - $41

 

$41

 

-

 

Completed

 

  Hotel Tower & Casino (3)

 $264 - $269

 

$201

 

$63 - $68

 

4Q19

 

  Other

  $8 - $10

 

$10

 

-

   

 

          Total Expansion

$320 - $330

 

$262

 

$63 - $68

   

 

          Total Cost

$430 - $442

 

$365

 

$70 - $77

   

 

               

 

(1) The Company paid $76.0 million cash or $69.2 million net of acquired working capital and NOLs when it acquired Monarch Casino Black Hawk (formerly Riviera Black Hawk Casino) in 2012.

 

(2) Includes upgrades to the interior, which were completed in August 2015, and additional work to tie the two buildings together, that will be performed in the fourth quarter of 2019, demolition of the original garage, and upgrades to the exterior of the existing facility to match the design of the master planned expansion.

(3) The Company anticipates funding the hotel tower and casino expansion, as well as the existing facility exterior upgrades, from a combination of operating cash flow and the amended and restated credit facility (the “Amended Credit Facility”).

 

                         

 

The general contractor of the Monarch Casino Black Hawk expansion project has informed the Company that it expects the first five floors of the new tower, which includes the expanded casino, restaurants and certain public areas, to be completed late in the third quarter or early in the fourth quarter of 2019, and the balance of the hotel tower and new amenities in the fourth quarter of 2019.

 

Credit Facility and Liquidity

Capital expenditures of $37.5 million in the second quarter of 2019 include construction costs related to the Monarch Casino Black Hawk expansion as well as ongoing capital maintenance spending at both properties. Capital expenditures were funded from the Company’s operating cash flows as well as $22.0 million of borrowings against Monarch’s Amended Credit Facility during the quarter. The amount of borrowings outstanding on Monarch’s $250.0 million Amended Credit Facility as of June 30, 2019 was $132.5 million.

 

All $1.4 million in interest in the second quarter of 2019 was capitalized, compared to $406 thousand of interest capitalized and $42 thousand expensed in the second quarter of 2018.

 

Monarch continues to believe that its operating cash flow and the $116.9 million available under its Amended Credit Facility will be sufficient to fund all remaining costs related to both the completion of the Monarch Casino Black Hawk expansion and the Company’s ongoing capital expenditures for the Atlantis in Reno.

 

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including, but not limited to, statements relating to (i) our plans, objectives, near- and long-term outlook, opportunities, expectations, growth prospects, future operations and anticipated financial results (including pre-opening expenses and cash flow) with respect to Atlantis Casino Resort Spa and Monarch Casino Black Hawk and the markets in their respective regions; (ii) our plans, costs, financing, and additional expenses and revenue opportunities as a result of project and budget modifications, construction, completion and opening timelines of upgraded, redesigned and/or expanded facilities at Monarch Casino Black Hawk; and (iii) our expectations regarding our future position in the market and the quality of service we provide to our guests. Actual results and future events and conditions may differ materially from those described in any forward-looking statements. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without limitation:

 

  • construction factors, including delays, disruptions, increased costs of labor and materials, contractor disagreements, availability of labor and materials, zoning issues, environmental restrictions, soil and water conditions, weather and other hazards, site access matters, building permit issues and other regulatory approvals or issues;
  • we have not yet entered into a guaranteed maximum price (“GMP”) construction contract with our Monarch Casino Black Hawk general contractor and negotiation of the GMP may involve disagreements between the parties, including potential disagreements over costs of and responsibility for delays and other construction related matters;
  • components of our Monarch Casino Black Hawk construction project will be outside the scope of any GMP contract;
  • risks related to development and construction activities (including disputes with and defaults by contractors and subcontractors; construction, equipment or staffing problems and delays; shortages of materials or skilled labor; environmental, health and safety issues; weather and other hazards, site access matters, and unanticipated cost increases);
  • access to available and reasonable financing on a timely basis;
  • our ability to generate sufficient operating cash flow to help finance our expansion plans;
  • our ability to effectively manage expenses to optimize its margins and operating results;
  • changes in laws and regulations permitting expanded and other forms of gaming in our key markets;
  • the effects of local and national economic, credit and capital market conditions on the economy in general and on the gaming industry and our business in particular;
  • guest acceptance of our expanded facilities once completed and the resulting impact on our market position, growth and future financial results; and
  • competition in our target market areas.

 

Additional information concerning potential factors that could adversely affect all forward-looking statements, including the Company's financial results, is included in our Securities and Exchange Commission filings, including our most recent annual report on Form 10-K and quarterly report on Form 10-Q, which are available on our website at www.monarchcasino.com.

About Monarch Casino & Resort, Inc.

Monarch Casino & Resort, Inc., through its subsidiaries, owns and operates the Atlantis Casino Resort Spa, a hotel/casino facility in Reno, Nevada, and the Monarch Casino Black Hawk in Black Hawk, Colorado, approximately 40 miles west of Denver. For additional information on Monarch, visit Monarch's website at www.monarchcasino.com.

 

The Atlantis features approximately 61,000 square feet of casino space; 824 guest rooms; eight food outlets; two espresso and pastry bars; a 30,000 square-foot health spa and salon with an enclosed year-round pool; two retail outlets offering clothing and traditional gift shop merchandise; an 8,000 square-foot family entertainment center; and approximately 52,000 square feet of banquet, convention and meeting room space. The casino features approximately 1,450 slot and video poker machines; approximately 38 table games, including blackjack, craps, roulette, and others; a race and sports book; a 24-hour live keno lounge; and a poker room.

 

The Monarch Casino Black Hawk features approximately 30,000 square feet of casino space; approximately 740 slot machines; 14 table games; a 250-seat buffet-style restaurant; a snack bar and a new nine-story parking structure with approximately 1,350 spaces, plus additional existing valet parking bringing total parking capacity to 1,500 spaces. Once completed, the Monarch Casino Black Hawk expansion will nearly double the casino space and will add a 23-story hotel tower with approximately 500 guest rooms and suites, an upscale spa and pool facility, three restaurants (bringing the total to four restaurants), additional bars, and associated support facilities.

 

Contacts:

David Farahi

Chief Operating Officer

775/825-4700 or dfarahi@monarchcasino.com

 

Joseph Jaffoni, Richard Land, James Leahy

JCIR

212/835-8500 or mcri@jcir.com

 

- financial tables follow -

 

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

 

 

Three months ended June 30,

 

   Six months ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Revenues

 

 

 

 

 

 

 

 

   Casino

 

$     32,836

 

$     31,142

 

$     61,812

 

$     61,087

   Food and beverage

 

     17,993

 

     17,541

 

       35,685

 

       34,479

   Hotel

 

       8,809

 

       8,097

 

       17,314

 

       14,460

   Other

 

       3,123

 

       3,129

 

         6,690

 

         6,151

     Net revenues

 

     62,761

 

     59,909

 

     121,501

 

     116,177

 

               

Operating expenses

               

   Casino

 

       11,337

 

       10,856

 

       22,157

 

       21,552

   Food and beverage

 

       14,321

 

       13,196

 

       28,319

 

       26,290

   Hotel

 

         3,447

 

         3,056

 

         6,577

 

         6,555

   Other

 

      1,634

 

      1,565

 

        3,214

 

        3,110

   Selling, general and administrative

 

      16,506

 

      16,152

 

       32,958

 

       31,337

   Depreciation and amortization

 

         3,695

 

         3,738

 

         7,298

 

         7,430

   Pre-opening expenses

 

188

 

-

 

624

 

-

   Loss on disposition of assets

 

           -

 

           4

 

           -

 

           4

     Total operating expenses

 

       51,128

 

       48,567

 

     101,147

 

       96,278

   

 Income from operations

 

       11,633

 

       11,342

 

      20,354

 

       19,899

 

               

Other expenses

               

   Interest expense, net of amounts capitalized

 

-

 

   (42)

 

        -

 

        (122)

     Total other expense

 

       -

 

       (42)

 

         -

 

         (122)

   

 

 

 

 

 

 

 

     Income before income taxes

 

       11,633

 

       11,300

 

       20,354

 

       19,777

Provision for income taxes

 

      (2,354)

 

      (2,061)

 

      (4,060)

 

      (3,797)

     Net income

 

$       9,279

 

$       9,239

 

$     16,294

 

$     15,980

                 

Earnings per share of common stock

               

   Net income

               

     Basic

 

$         0.52

 

$         0.52

 

$         0.91

 

$         0.90

     Diluted

 

$         0.50

 

$         0.50

 

$         0.88

 

$         0.86

 

               

Weighted average number of common shares and potential common shares outstanding

               

    Basic

 

       17,997

 

       17,821

 

       17,967

 

       17,795

    Diluted

 

18,666

 

18,569

 

18,643

 

18,556

 

 

 

 

 

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except shares)

   

June 30,

 

December 31,

   

2019

 

2018

ASSETS

 

(unaudited)

   

Current assets

       

    Cash and cash equivalents

 

 $                  26,526

 

$                       30,462

    Receivables, net

 

                    6,404

 

                       6,740

    Income taxes receivable

 

-

 

                            279

    Inventories

 

                    3,700

 

                         3,692

    Prepaid expenses

 

                   4,449

 

                         5,508

        Total current assets

 

                  41,079

 

                       46,681

Property and equipment

       

    Land

 

                 30,034

 

                       30,034

    Land improvements

 

                    7,719

 

                         7,645

    Buildings

 

                193,235

 

                     193,235

    Buildings improvements

 

                  26,019

 

                       25,995

    Furniture and equipment

 

                148,699

 

                     139,772

    Construction in progress

 

                  246,670

 

                     180,518

    Right of use assets

 

15,975

 

-

    Leasehold improvements

 

                    3,782

 

                         3,782

 

 

               672,133

 

                     580,981

    Less accumulated depreciation and amortization

 

             (213,301)

 

                   (206,657)

        Net property and equipment

 

               458,832

 

                     374,324

Other assets

       

    Goodwill

 

                  25,111

 

                       25,111

    Intangible assets, net

 

                    2,121

 

                         2,704

    Deferred income taxes

 

                     4,027

 

                         4,027

    Other assets, net

 

                     2,011

 

                         2,280

        Total other assets

 

                  33,270

 

                       34,122

          Total  assets

 

 $            533,181

 

$                     455,127

LIABILITIES AND STOCKHOLDERS' EQUITY

       

Current liabilities

       

    Accounts payable

 

$                   11,501

 

11,182

    Construction accounts payable

 

                    18,802

 

17,152

    Accrued expenses

 

31,038

 

31,111

    Income taxes payable

 

2,223

 

-

    Short-term lease liability

 

802

 

-

        Total current liabilities

 

64,366

 

                       59,445

Long-term lease liability

 

15,180

 

-

Long-term debt

 

           132,510

 

94,500

          Total liabilities

 

                  212,056

 

                       153,945

Stockholders' equity

       

    Preferred stock, $.01 par value, 10,000,000  shares authorized; none issued

 

-

 

-

    Common stock, $.01 par value, 30,000,000 shares authorized;

 

$                        191

 

$                            191

       19,096,300 shares issued; 18,015,734 outstanding at June 30, 2019;

       

       17,919,021 outstanding at December 31, 2018

       

    Additional paid-in capital

 

                  32,411

 

                  30,111

    Treasury stock, 1,080,566 shares at June 30, 2019; 1,177,279 shares at

 

               (14,527)

 

               (15,876)

       December 31, 2018

       

    Retained earnings

 

                303,050

 

                286,756

          Total stockholders' equity

 

                321,125

 

                     301,182

          Total liabilities and stockholders' equity

 

 $              533,181

 

 $                    455,127

 



MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME

 (In thousands, unaudited)

 

The following table sets forth a reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net income, a GAAP financial measure:

           

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

          Adjusted EBITDA (1)

 $16,519

 

 $15,909

 

$30,194

 

$28,724

Expenses:

             

     Stock based compensation

(1,003)

 

(825)

 

(1,918)

 

(1,391)

     Depreciation and amortization

(3,695)

 

(3,738)

 

(7,298)

 

(7,430)

     Interest expense, net of amount capitalized

-

 

(42)

 

-

 

(122)

     Gain (loss) on disposition of assets

-

 

(4)

 

-

 

(4)

     Provision for income taxes

(2,354)

 

(2,061)

 

(4,060)

 

(3,797)

     Pre-opening expenses

(188)

 

-

 

(624)

 

-

          Net income

 $9,279

 

 $9,239

 

$16,294

 

$15,980

           

  • Adjusted EBITDA, a non-GAAP financial measure, consists of net income plus loss on disposal of assets, provision for income taxes, stock based compensation expense, other one-time charges, pre-opening expenses, interest expense, depreciation and amortization less interest income, any benefit for income taxes and gain on disposal of assets. Adjusted EBITDA should not be construed as an alternative to operating income (as determined in accordance with US Generally Accepted Accounting Principles), as an indicator of the Company's operating performance, as an alternative to cash flows from operating activities (as determined in accordance with US GAAP) or as a measure of liquidity. This measure enables comparison of the Company's performance over multiple periods, as well as against the performance of other companies in our industry that report Adjusted EBITDA, although some companies do not calculate this measure in the same manner and, therefore, the measure as presented may not be comparable to similarly titled measures presented by other companies.

 

 

 

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