rrr-20230630

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-37754

RED ROCK RESORTS, INC.

(Exact name of registrant as specified in its charter)


Delaware			47-5081182
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

1505 South Pavilion Center Drive, Las Vegas, Nevada

(Address of principal executive offices)

89135

(Zip Code)

(702) 495-3000

Registrant’s telephone number, including area code

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common Stock, $.01 par value	RRR	NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class						Outstanding at July 31, 2023
Class A Common Stock, $0.01 par value						58,390,843
Class B Common Stock, $0.00001 par value						45,985,804

Table of Contents

RED ROCK RESORTS, INC.

INDEX


Part I.	Financial Information
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets — June 3 0 , 2023 (unaudited) and December 31, 2022	3
	Condensed Consolidated Statements of Income — Three and six months ended June 30, 2023 and 2022 (unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) — Three and six months ended June 30 , 2023 and 2022 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows — S ix months ended June 3 0 , 2023 and 2022 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29

Part II.	Other Information
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	30
Signature		31

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

RED ROCK RESORTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)


	June 30, 2023		December 31, 2022
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	100,949	$	117,289
Receivables, net	41,738		43,630
Inventories	13,998		13,199
Prepaid gaming tax	25,554		22,834
Prepaid expenses and other current assets	27,681		24,043
Total current assets	209,920		220,995
Property and equipment, net of accumulated depreciation of $1,227,615 and $1,168,984 at June 30, 2023 and December 31, 2022, respectively	2,533,755		2,195,017
Goodwill	195,676		195,676
Intangible assets, net of accumulated amortization of $19,005 and $18,215 at June 30, 2023 and December 31, 2022, respectively	83,595		84,385
Land held for development	451,125		449,017
Native American development costs	43,859		41,687
Deferred tax asset, net	76,891		75,741
Other assets, net	92,765		83,232
Total assets	$	3,687,586	$	3,345,750
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11,481	$	11,381
Accrued interest payable	14,305		14,460
Income tax payable	4,587		—
Other accrued liabilities	262,079		234,718
Current portion of payable pursuant to tax receivable agreement	995		6,631
Current portion of long-term debt	26,079		26,059
Total current liabilities	319,526		293,249
Long-term debt, less current portion	3,183,891		2,958,717
Other long-term liabilities	42,498		39,581
Payable pursuant to tax receivable agreement, less current portion	20,964		21,960
Total liabilities	3,566,879		3,313,507
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred stock, par value $0.01 per share, 100,000,000 shares authorized; none issued and outstanding	—		—
Class A common stock, par value $0.01 per share, 500,000,000 shares authorized; 58,390,843 and 58,012,937 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	584		580
Class B common stock, par value $0.00001 per share, 100,000,000 shares authorized; 45,985,804 shares issued and outstanding at June 30, 2023 and December 31, 2022	1		1
Additional paid-in capital	1,104		—
Retained earnings	98,298		43,203
Total Red Rock Resorts, Inc. stockholders’ equity	99,987		43,784
Noncontrolling interest (deficit)	20,720		(11,541)
Total stockholders’ equity	120,707		32,243
Total liabilities and stockholders’ equity	$	3,687,586	$	3,345,750

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

RED ROCK RESORTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share data)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating revenues:
Casino	$	269,507	$	280,636	$	557,747	$	560,407
Food and beverage	77,623		73,756		155,770		139,455
Room	44,892		44,283		88,831		81,055
Other	24,108		23,566		47,418		42,960
Net revenues	416,130		422,241		849,766		823,877
Operating costs and expenses:
Casino	69,583		69,746		141,294		138,612
Food and beverage	60,883		57,839		120,995		111,062
Room	13,473		13,293		27,080		25,775
Other	8,994		8,792		16,706		15,162
Selling, general and administrative	93,480		90,193		185,985		176,489
Depreciation and amortization	32,738		33,097		63,833		66,522
Write-downs and other, net	10,066		2,045		29,685		12,225
Asset impairment	—		78,992		—		78,992
	289,217		353,997		585,578		624,839
Operating income	126,913		68,244		264,188		199,038
Earnings from joint ventures	754		1,012		1,653		1,856
Operating income and earnings from joint ventures	127,667		69,256		265,841		200,894
Other expense:
Interest expense, net	(44,340)		(28,748)		(86,796)		(55,422)
Income before income tax	83,327		40,508		179,045		145,472
Provision for income tax	(8,417)		(8,070)		(18,608)		(20,789)
Net income	74,910		32,438		160,437		124,683
Less: net income attributable to noncontrolling interests	35,397		16,690		76,248		60,589
Net income attributable to Red Rock Resorts, Inc.	$	39,513	$	15,748	$	84,189	$	64,094

Earnings per common share (Note 10):
Earnings per share of Class A common stock, basic	$	0.68	$	0.26	$	1.46	$	1.06
Earnings per share of Class A common stock, diluted	$	0.65	$	0.26	$	1.40	$	1.04
Weighted-average common shares outstanding:
Basic	57,828		59,514		57,741		60,255
Diluted	103,329		61,568		103,260		62,707

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

RED ROCK RESORTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(amounts in thousands)

(unaudited)


	Red Rock Resorts, Inc. Stockholders’ Equity
	Common stock						Additional paid-in capital		Retained earnings				Noncontrolling interest	Total stockholders’ equity
	Class A			Class B
	Shares	Amount		Shares	Amount
Balances, March 31, 2023	58,219	$	582	45,986	$	1	$	1,166	$	73,327	$	18,557		$	93,633
Net income	—	—		—	—		—		39,513		35,397			74,910
Share-based compensation	—	—		—	—		4,933		—		—			4,933
Distributions	—	—		—	—		—		—		(32,807)			(32,807)
Dividends	—	—		—	—		—		(14,542)		—			(14,542)
Stock option exercises and issuance of restricted stock, net	172	2		—	—		(2)		—		—			—
Withholding tax on share-based compensation	—	—		—	—		(5,420)		—		—			(5,420)
Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco	—	—		—	—		427		—		(427)			—
Balances, June 30, 2023	58,391	$	584	45,986	$	1	$	1,104	$	98,298	$	20,720		$	120,707


	Red Rock Resorts, Inc. Stockholders’ Equity
	Common stock						Additional paid-in capital		Retained earnings		Noncontrolling interest (deficit)			Total stockholders’ equity (deficit)
	Class A			Class B
	Shares	Amount		Shares	Amount
Balances, March 31, 2022	61,472	$	615	45,986	$	1	$	50,252	$	36,942		$	8,973		$	96,783
Net income	—	—		—	—		—		15,748			16,690			32,438

Share-based compensation	—	—		—	—		4,701		—			—			4,701
Distributions	—	—		—	—		—		—			(33,133)			(33,133)
Dividends	—	—		—	—		—		(14,671)			—			(14,671)
Stock option exercises and issuance of restricted stock, net	12	(1)		—	—		1,211		—			—			1,210
Withholding tax on share-based compensation	(1)	—		—	—		(1,398)		—			—			(1,398)
Repurchases of Class A common stock	(3,038)	(30)		—	—		(88,774)		(24,875)			—			(113,679)
Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco	—	—		—	—		34,008		—			(34,008)			—
Balances, June 30, 2022	58,445	$	584	45,986	$	1	$	—	$	13,144		$	(41,478)		$	(27,749)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

RED ROCK RESORTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)

(amounts in thousands)

(unaudited)


	Red Rock Resorts, Inc. Stockholders’ Equity
	Common stock						Additional paid-in capital		Retained earnings				Noncontrolling interest (deficit)	Total stockholders’ equity
	Class A			Class B
	Shares	Amount		Shares	Amount
Balances, December 31, 2022	58,013	$	580	45,986	$	1	$	—	$	43,203	$	(11,541)		$	32,243
Net income	—	—		—	—		—		84,189		76,248			160,437
Share-based compensation	—	—		—	—		10,317		—		—			10,317
Distributions	—	—		—	—		—		—		(44,303)			(44,303)
Dividends	—	—		—	—		—		(29,094)		—			(29,094)
Stock option exercises and issuance of restricted stock, net	407	4		—	—		(4)		—		—			—
Withholding tax on share-based compensation	(29)	—		—	—		(8,893)		—		—			(8,893)
Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco	—	—		—	—		(316)		—		316			—
Balances, June 30, 2023	58,391	$	584	45,986	$	1	$	1,104	$	98,298	$	20,720		$	120,707


	Red Rock Resorts, Inc. Stockholders’ Equity
	Common stock						Additional paid-in capital		Retained earnings		Noncontrolling interest (deficit)		Total stockholders’ equity (deficit)
	Class A			Class B
	Shares	Amount		Shares	Amount
Balances, December 31, 2021	61,427	$	614	45,986	$	1	$	55,028	$	3,851	$	(9,461)	$	50,033
Net income	—	—		—	—		—		64,094		60,589		124,683

Share-based compensation	—	—		—	—		8,243		—		—		8,243
Distributions	—	—		—	—		—		—		(54,931)		(54,931)
Dividends	—	—		—	—		—		(29,926)		—		(29,926)
Stock option exercises and issuance of restricted stock, net	281	2		—	—		(2)		—		—		—
Withholding tax on share-based compensation	(41)	—		—	—		(3,344)		—		—		(3,344)
Repurchases of Class A common stock	(3,222)	(32)		—	—		(97,600)		(24,875)		—		(122,507)


Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco	—	—		—	—		37,675		—		(37,675)		—
Balances, June 30, 2022	58,445	$	584	45,986	$	1	$	—	$	13,144	$	(41,478)	$	(27,749)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

RED ROCK RESORTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net income	$	160,437	$	124,683
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	63,833		66,522
Write-downs and other, net	(1,138)		205
Asset impairment	—		78,992
Amortization of debt discount and debt issuance costs	4,752		4,841
Share-based compensation	10,125		8,137
Deferred income tax	(1,150)		10,275
Changes in assets and liabilities:
Receivables, net	1,892		5,076
Inventories and prepaid expenses	(7,764)		(21,090)
Accounts payable	572		1,327
Accrued interest payable	(155)		(332)
Income tax payable	4,914		—
Other accrued liabilities	(2,265)		(1,363)
Other, net	1,128		387
Net cash provided by operating activities	235,181		277,660
Cash flows from investing activities:
Capital expenditures, net of related payables	(377,104)		(101,371)
Acquisition of land held for development	(2,108)		—
Native American development costs	(2,678)		(2,997)
Other, net	(2,244)		(246)
Net cash used in investing activities	(384,134)		(104,614)

Table of Contents

RED ROCK RESORTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(amounts in thousands)

(unaudited)


	Six Months Ended June 30,
	2023		2022
Cash flows from financing activities:
Borrowings under credit agreements with original maturity dates greater than three months	270,000		—
Payments under credit agreements with original maturity dates greater than three months	(47,390)		(12,390)
Distributions to noncontrolling interests	(44,303)		(54,931)
Repurchases of Class A common stock	—		(122,507)
Withholding tax on share-based compensation	(8,893)		(3,344)
Dividends paid	(29,532)		(30,286)
Payments on tax receivable agreement liability	(6,632)		—
Other, net	(637)		(575)
Net cash provided by (used in) financing activities	132,613		(224,033)
Decrease in cash and cash equivalents	(16,340)		(50,987)
Balance, beginning of period	117,289		307,255
Balance, end of period	$	100,949	$	256,268
Supplemental cash flow disclosures:
Cash paid for interest, net of $11,867 and $1,163 capitalized, respectively	$	82,330	$	50,926
Cash paid for income taxes	$	14,800	$	17,755
Non-cash investing and financing activities:
Capital expenditures incurred but not yet paid	$	114,540	$	33,454

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

RED ROCK RESORTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Organization, Basis of Presentation and Significant Accounting Policies

Organization

Red Rock Resorts, Inc. (“Red Rock,” or the “Company”) was formed as a Delaware corporation in 2015 to own an indirect equity interest in and manage Station Casinos LLC (“Station LLC”), a Nevada limited liability company. Station LLC is a gaming, development and management company established in 1976 that owns and operates six major gaming and entertainment facilities and ten smaller casino properties (three of which are 50% owned) in the Las Vegas regional market. In the first quarter of 2022, the Company commenced construction of Durango Casino & Resort (“Durango”) in the southwest Las Vegas valley. Durango is expected to open in the fourth quarter of 2023.

The Company owns all of the outstanding voting interests in Station LLC and has an indirect equity interest in Station LLC through its ownership of limited liability interests in Station Holdco LLC (“Station Holdco,” and such interests, “LLC Units”), which owns all of the economic interests in Station LLC. At June 30, 2023, the Company held 58% of the economic interests and 100% of the voting power in Station Holdco, subject to certain limited exceptions, and is designated as the sole managing member of both Station Holdco and Station LLC. The Company controls and operates all of the business and affairs of Station Holdco and Station LLC, and conducts all of its operations through these entities.

In June 2022, the Company permanently closed its Texas Station, Fiesta Henderson and Fiesta Rancho properties, which had been closed since March 2020 as a result of the COVID-19 pandemic. In addition, the Company permanently closed Wild Wild West in September 2022.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments necessary for a fair presentation of the results for the interim periods have been made, and such adjustments were of a normal recurring nature. The interim results reflected in these condensed consolidated financial statements are not necessarily indicative of results to be expected for the full fiscal year. These financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Certain amounts in the condensed consolidated financial statements for the prior year have been reclassified to be consistent with the current year presentation.

Principles of Consolidation

Station Holdco and Station LLC are variable interest entities, of which the Company is the primary beneficiary. Accordingly, the Company consolidates the financial position and results of operations of Station LLC and its consolidated subsidiaries and Station Holdco, and presents the interest in Station Holdco not owned by Red Rock within noncontrolling interest in the condensed consolidated financial statements. All intercompany accounts and transactions have been eliminated.

The Company has investments in three 50% owned smaller casino properties which are joint ventures accounted for using the equity method.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported and disclosed. Actual results could differ from those estimates.

Significant Accounting Policies

A description of the Company’s significant accounting policies is included in the audited financial statements within its Annual Report on Form 10-K for the year ended December 31, 2022.

Table of Contents

RED ROCK RESORTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Recently Adopted Accounting Standards

In March 2020 and December 2022, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848) and ASU 2022-06, Reference Rate Reform (Topic 848), Deferral of the Sunset Date of Topic 848, respectively. The ASUs were intended to ease the potential accounting and financial reporting burden of reference rate reform, including the expected market transition from London Interbank Offered Rate (“LIBOR”). ASU 2020-04 provides an optional expedient and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2022-06 extended the sunset date of Topic 848 to December 31, 2024 from December 31, 2022. The interest rates associated with the Company’s previous borrowings under its Credit Facility (as defined in Note 6) were tied to LIBOR. The Company adopted ASU 2020-04 upon the amendment of its Credit Facility on June 6, 2023, and effective July 1, 2023, the LIBOR rate will be replaced with the Term Secured Overnight Financing Rate (“Term SOFR”) (see Note 6). The Company elected to apply the optional expedient for contract modifications to the Credit Facility amendment and accordingly, will treat the interest rate replacement as a non-substantial modification. The adoption of ASU 2020-04 did not have a material impact on the Company’s financial condition or results of operations.

2. Noncontrolling Interest in Station Holdco

As discussed in Note 1, Red Rock holds a controlling interest in and consolidates the financial position and results of operations of Station LLC and its subsidiaries and Station Holdco. The interests in Station Holdco not owned by Red Rock are presented within noncontrolling interest in the condensed consolidated financial statements.

The ownership of the LLC Units is summarized as follows:


	June 30, 2023			December 31, 2022
	Units	Ownership %		Units	Ownership %
Red Rock	62,518,531	57.6	%	62,113,911	57.5	%
Noncontrolling interest holders	45,985,804	42.4	%	45,985,804	42.5	%
Total	108,504,335	100.0	%	108,099,715	100.0	%

The Company uses monthly weighted-average LLC Unit ownership to calculate the pretax income or loss and other comprehensive income or loss of Station Holdco attributable to Red Rock and the noncontrolling interest holders. Station Holdco equity attributable to Red Rock and the noncontrolling interest holders is rebalanced, as needed, to reflect LLC Unit ownership at period end. For the six months ended June 30, 2022, rebalancing was primarily due to repurchases of Class A common stock.

3. Asset Impairment

The Company reviews the carrying amounts of its long-lived assets, other than goodwill and indefinite-lived intangible assets, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. The Company’s long-lived asset impairment tests are performed at the reporting unit level, and each of its operating properties is considered a separate reporting unit.

The Company’s decision in June 2022 to permanently close three of its properties as described in Note 1 was an indicator of impairment. As a result, the Company tested each of these reporting units for impairment as of June 30, 2022 and recorded asset impairment charges totaling $79.0 million, primarily representing the write-off of the facilities to be demolished. The recoverability of the carrying amounts of the remaining assets, primarily land, was evaluated based on market prices for similar assets, which are considered Level 2 inputs under the fair value measurement hierarchy. There was no goodwill associated with the properties.

There were no asset impairment charges during the three and six months ended June 30, 2023.

Table of Contents

RED ROCK RESORTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

4. Native American Development

The Company has development and management agreements with the North Fork Rancheria of Mono Indians (the “Mono”), a federally recognized Native American tribe located near Fresno, California, which were originally entered into in 2003. In August 2014, the Mono and the Company entered into the Second Amended and Restated Development Agreement (the “Development Agreement”) and the Second Amended and Restated Management Agreement. The Mono has submitted a proposed Third Amended and Restated Management Agreement and a proposed Third Amended and Restated Development Agreement to the National Indian Gaming Commission (“NIGC”). Pursuant to the Development Agreement, the Company has assisted the Mono in developing a gaming and entertainment facility (the “North Fork Project”) to be located in Madera County, California and, pursuant to the proposed management and development agreements, the Company proposes to continue to assist the Mono in developing and to assist the Mono in operating the North Fork Project. The Company purchased a 305-acre parcel of land adjacent to Highway 99 north of the city of Madera (the “North Fork Site”), which was taken into trust for the benefit of the Mono by the Department of the Interior (“DOI”) in February 2013.

As currently contemplated, the North Fork Project is expected to include approximately 2,000 Class III slot machines, approximately 40 table games and several restaurants, and future development costs of the project are expected to be between $375 million and $425 million. The following table summarizes the Company’s evaluation at June 30, 2023 of each of the critical milestones that it has identified as necessary to complete the North Fork Project. As of June 30, 2023, each of these critical milestones has substantially been resolved, except for approval of the Management Agreement by the Chair of the NIGC.

Table of Contents

RED ROCK RESORTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The following table summarizes the Company’s evaluation at June 30, 2023 of each of the critical milestones necessary to complete the North Fork Project.


Federally recognized as an Indian tribe by the Bureau of Indian Affairs (“BIA”)			Yes
Date of recognition			Federal recognition was terminated in 1966 and restored in 1983.
Tribe has possession of or access to usable land upon which the project is to be built			The DOI accepted approximately 305 acres of land for the project into trust for the benefit of the Mono in February 2013.
Status of obtaining regulatory and governmental approvals:
Tribal-state compact			A compact was negotiated and signed by the Governor of California and the Mono in August 2012. The California State Assembly and Senate passed Assembly Bill 277 (“AB 277”) which ratified the Compact in May 2013 and June 2013, respectively. Opponents of the North Fork Project qualified a referendum, “Proposition 48,” for a state-wide ballot challenging the legislature’s ratification of the Compact. In November 2014, Proposition 48 failed. The State took the position that the failure of Proposition 48 nullified the ratification of the Compact and, therefore, the Compact did not take effect under California law. In March 2015, the Mono filed suit against the State to obtain a compact with the State or procedures from the Secretary of the Interior under which Class III gaming may be conducted on the North Fork Site. In July 2016, the DOI issued Secretarial procedures (the “Secretarial Procedures”) pursuant to which the Mono may conduct Class III gaming on the North Fork Site.
Approval of gaming compact by DOI			The Compact was submitted to the DOI in July 2013. In October 2013, notice of the Compact taking effect was published in the Federal Register. The Secretarial Procedures supersede and replace the Compact.
Record of decision regarding environmental impact published by BIA			In November 2012, the record of decision for the Environmental Impact Statement for the North Fork Project was issued by the BIA. In December 2012, the Notice of Intent to take land into trust was published in the Federal Register.
BIA accepting usable land into trust on behalf of the tribe			The North Fork Site was accepted into trust in February 2013.
Approval of management agreement by NIGC			In December 2015, the Mono submitted a Second Amended and Restated Management Agreement, and certain related documents, to the NIGC. In July 2016, the Mono received a deficiency letter from the NIGC seeking additional information concerning the Second Amended and Restated Management Agreement. In March 2018, the Mono submitted the Management Agreement and certain related documents to the NIGC. In June 2018, the Mono received a deficiency letter from the NIGC seeking additional information concerning the Management Agreement. In April 2021, the Mono received an issues letter from the NIGC identifying issues to be addressed prior to approval of the Management Agreement. In September 2022, the Mono received an additional issues letter from the NIGC identifying remaining issues to be addressed prior to approval of the Management Agreement. Approval of the Management Agreement by the NIGC is expected to occur following the Mono’s response to the most recent issues letter. The Company believes the Management Agreement will be approved because the terms and conditions thereof are consistent with the provisions of the Indian Gaming Regulatory Act (“IGRA”).
Gaming licenses:
Type			The North Fork Project will include the operation of Class II and Class III gaming, which are allowed pursuant to the terms of the Secretarial Procedures and IGRA, following approval of the Management Agreement by the NIGC.
Number of gaming devices allowed			The Secretarial Procedures allow for the operation of a maximum of 2,000 Class III slot machines at the facility during the first two years of operation and thereafter up to 2,500 Class III slot machines. There is no limit on the number of Class II gaming devices that the Mono can offer.
Agreements with local authorities			The Mono has entered into memoranda of understanding with the City of Madera, the County of Madera and the Madera Irrigation District under which the Mono agreed to pay one-time and recurring mitigation contributions, subject to certain contingencies. The memoranda of understanding have all been amended to restructure the timing of certain payments due to delays in the development of the North Fork Project.

Table of Contents

RED ROCK RESORTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

In addition to the critical milestones, there is a remaining unresolved legal matter related to the North Fork Project.

In March 2016, Picayune Rancheria of Chukchansi Indians (“Picayune”) filed a complaint for declaratory relief and petition for writ of mandate in California Superior Court for the County of Madera against Governor Edmund G. Brown, Jr., alleging that the referendum that invalidated the Compact also invalidated Governor Brown’s concurrence with the Secretary of the Interior’s determination that gaming on the North Fork Site would be in the best interest of the Mono and not detrimental to the surrounding community. The complaint seeks to vacate and set aside the Governor’s concurrence and was stayed from December 2016 to September 2021, when the Supreme Court of California denied the Mono’s and the State of California’s petition for review in Stand Up for California! v. Brown. As a result of the denial, litigation of this matter has resumed and a first amended complaint was filed by Picayune in December 2022. Each of the State of California and the Mono filed demurrers challenging the first amended complaint; in July 2023, the State of California’s demurrer was granted and the Mono’s demurrer was denied. As a result, the Mono will answer the first amended complaint.

Under the terms of the Development Agreement, the Company has agreed to arrange the financing for the ongoing development costs and construction of the facility, and has contributed significant financial support to the North Fork Project. Through June 30, 2023, the Company has paid approximately $59.0 million of reimbursable advances to the Mono, primarily to complete the environmental impact study, purchase the North Fork Site and pay the costs of litigation. The repayment of the advances is expected to come from the proceeds of the North Fork Project’s financing, from cash flows from the North Fork Project’s operations, or from a combination of both. In accordance with the Company’s accounting policy, accrued interest on the advances will not be recognized in income until the carrying amount of the advances has been recovered. The carrying amount of the reimbursable advances was reduced by $15.1 million to fair value upon the Company’s adoption of fresh-start reporting in 2011. At June 30, 2023, the carrying amount of the advances was $43.9 million.

In addition to the reimbursable advances, the Company expects to receive a development fee of 4% of the costs of construction for its development services, which will be paid upon the commencement of gaming operations at the facility. The proposed management agreement provides for the Company to receive a management fee of 30% of the North Fork Project’s net income. The repayment of all or a portion of the reimbursable advances is anticipated to be subordinated to the Mono’s debt service obligations under the North Fork Project’s financing. The proposed management agreement and the proposed development agreement have a term of seven years from the opening of the North Fork Project. The proposed management agreement includes termination provisions whereby either party may terminate the agreement for cause, and may also be terminated at any time upon agreement of the parties. There is no provision in the proposed management agreement allowing the tribe to buy-out the agreement prior to its expiration. The proposed management agreement provides that the Company will train the Mono tribal members such that they may assume responsibility for managing the North Fork Project upon the expiration of the agreement.

The Company expects that, upon termination or expiration of the proposed development agreement, the Mono will continue to be obligated to repay any unpaid principal and interest on the advances from the Company. Amounts due to the Company under the Development Agreement and Management Agreement are secured by, and amounts due to the Company under the proposed management agreement are intended to be secured by, substantially all of the assets of the North Fork Project except the North Fork Site. In addition, the Development Agreement contains, and the proposed development and management agreements are anticipated to contain, waivers of the Mono’s sovereign immunity from suit for the purpose of enforcing the agreements or permitting or compelling arbitration and other remedies.

The timing of both the North Fork Project and of the repayment of the reimbursable advances is difficult to predict and is contingent on the achievement of the critical milestones, the financing of the North Fork Project, and the cash flows from the North Fork Project. The Company currently estimates that construction of the North Fork Project may begin in the next six months and estimates that the North Fork Project would be completed and opened for business approximately 15 to 18 months after construction begins. The Company expects to assist the Mono in obtaining financing for the North Fork Project once all necessary critical milestones have been achieved and prior to commencement of construction.

The Company has evaluated the likelihood that the North Fork Project will be successfully completed and opened, and has concluded that the likelihood of successful completion is in the range of 75% to 85% at June 30, 2023. The Company’s evaluation is based on its consideration of all available positive and negative evidence about the status of the North Fork Project, including, but not limited to, the status of required regulatory approvals, as well as the progress being made toward the achievement of any remaining critical milestones, the arrangement of financing for the North Fork Project and the status of any remaining litigation and contingencies. There can be no assurance that all the necessary governmental and regulatory approvals will be obtained, that financing will be obtained, that the financing and/or the cash flows from the North Fork Project will be sufficient to repay the advances, that the North Fork Project will be successfully completed or that future events and

Table of Contents

RED ROCK RESORTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

circumstances will not change the Company’s estimates of the timing, scope, and potential for successful completion or that any such changes will not be material. In addition, there can be no assurance that the Company will recover all of its investment in the North Fork Project even if it is successfully completed and opened for business.

5. Other Accrued Liabilities

Other accrued liabilities consisted of the following (amounts in thousands):


	June 30, 2023		December 31, 2022
Contract and customer-related liabilities:
Rewards Program liability	$	11,427	$	11,620
Advance deposits and future wagers	13,960		18,346
Unpaid wagers, outstanding chips and other customer-related liabilities	19,772		20,508
Other accrued liabilities:
Accrued payroll and related	31,421		36,607
Accrued gaming and related	22,440		22,513
Construction payables and equipment purchase accruals	124,819		94,291
Operating lease liabilities, current portion	5,777		4,800
Other	32,463		26,033
	$	262,079	$	234,718

Construction payables and equipment purchase accruals at June 30, 2023 and December 31, 2022 included $108.8 million and $67.3 million, respectively, related to the development of Durango.

6. Long-term Debt

Long-term debt consisted of the following indebtedness of Station LLC (amounts in thousands):


	June 30, 2023		December 31, 2022
Term Loan B Facility due February 7, 2027, interest at a margin above LIBOR or base rate (7.45% and 6.64% at June 30, 2023 and December 31, 2022, respectively), net of unamortized discount and deferred issuance costs of $18.2 million and $20.4 million at June 30, 2023 and December 31, 2022, respectively	$	1,447,446	$	1,452,926
Term Loan A Facility due February 7, 2025, interest at a margin above LIBOR or base rate (6.70% and 5.89% at June 30, 2023 and December 31, 2022, respectively), net of unamortized discount and deferred issuance costs of $0.8 million and $1.1 million at June 30, 2023 and December 31, 2022, respectively	157,425		161,898
Revolving Credit Facility due February 7, 2025, interest at a margin above LIBOR or base rate (6.70% and 5.89% at June 30, 2023 and December 31, 2022, respectively)	384,500		149,500
4.625% Senior Notes due December 1, 2031, net of unamortized deferred issuance costs of $5.3 million and $5.5 million at June 30, 2023 and December 31, 2022, respectively	494,749		494,499
4.50% Senior Notes due February 15, 2028, net of unamortized discount and deferred issuance costs of $5.2 million and $5.6 million at June 30, 2023 and December 31, 2022, respectively	685,622		685,126
Other long-term debt, weighted-average interest of 3.88% at June 30, 2023 and December 31, 2022, net of unamortized discount and deferred issuance costs of $0.2 million at June 30, 2023 and December 31, 2022	40,228		40,827
Total long-term debt	3,209,970		2,984,776
Current portion of long-term debt	(26,079)		(26,059)
Total long-term debt, net	$	3,183,891	$	2,958,717

Credit Facility

Station LLC’s credit facility consists of the Term Loan B Facility, the Term Loan A Facility and the Revolving Credit Facility (collectively, the “Credit Facility”). Prior to the amendment of the Credit Facility described below, the Term Loan B

Table of Contents

RED ROCK RESORTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Facility bore interest at a rate per annum, at Station LLC’s option, equal to either LIBOR plus 2.25% or base rate plus 1.25%, and the Term Loan A Facility and Revolving Credit Facility bore interest at a rate per annum, at Station LLC’s option, equal to either LIBOR plus an amount ranging from 1.50% to 1.75% or base rate plus an amount ranging from 0.50% to 0.75%, depending on Station LLC’s consolidated total leverage ratio. The Credit Facility contains a number of customary covenants, including requirements that Station LLC maintain throughout the term of the Credit Facility and measured as of the end of each quarter, an interest coverage ratio of not less than 2.50 to 1.00 and a maximum consolidated total leverage ratio, with step-downs over the term of the Credit Facility, ranging from 5.50 to 1.00 at June 30, 2023 to 5.25 to 1.00 at December 31, 2023 and thereafter. A breach of the financial ratio covenants shall only become an event of default under the Term Loan B Facility if the lenders within the Term Loan A Facility and the Revolving Credit Facility take certain affirmative actions after the occurrence of a default of such financial ratio covenants. Management believes the Company was in compliance with all applicable covenants at June 30, 2023.

On June 6, 2023 the Company entered into the Seventh Amendment to the Credit Agreement for its Credit Facility to replace customary LIBOR language, including, but not limited to, the use of rates based on Term SOFR (“SOFR”). Effective July 1, 2023, the Term Loan B Facility bears interest at a rate per annum, at Station LLC’s option, equal to either SOFR plus 2.25% or base rate plus 1.25% and the Term Loan A Facility and Revolving Credit Facility bear interest at a rate per annum, at Station LLC’s option, equal to either SOFR plus an amount ranging from 1.50% to 1.75% or base rate plus an amount ranging from 0.50% to 0.75%, depending on Station LLC’s consolidated total leverage ratio. No other material terms of the Credit Facility were amended.

Revolving Credit Facility

At June 30, 2023, Station LLC’s borrowing availability under the Revolving Credit Facility, subject to continued compliance with the terms of the Credit Facility, was $613.0 million, which was net of $384.5 million in outstanding borrowings and $33.5 million in outstanding letters of credit and similar obligations.

Fair Value of Long-term Debt

The estimated fair value of Station LLC’s long-term debt compared with its carrying amount is presented below (amounts in millions):


	June 30, 2023		December 31, 2022
Aggregate fair value	$	3,077	$	2,796
Aggregate carrying amount	3,210		2,985

The estimated fair value of Station LLC’s long-term debt is based on quoted market prices from various banks for similar instruments, which is considered a Level 2 input under the fair value measurement hierarchy.

7. Stockholders’ Equity

Net Income Attributable to Red Rock Resorts, Inc. and Transfers from (to) Noncontrolling Interests

The table below presents the effect on Red Rock Resorts, Inc. stockholders’ equity from net income and transfers from (to) noncontrolling interests (amounts in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income attributable to Red Rock Resorts, Inc.	$	39,513	$	15,748	$	84,189	$	64,094
Transfers from (to) noncontrolling interests:
Rebalancing of ownership percentage between the Company and noncontrolling interests in Station Holdco	427		34,008		(316)		37,675
Net transfers from (to) noncontrolling interests	427		34,008		(316)		37,675
Change from net income attributable to Red Rock Resorts, Inc. and net transfers from (to) noncontrolling interests	$	39,940	$	49,756	$	83,873	$	101,769

Table of Contents

RED ROCK RESORTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Dividends

During the three and six months ended June 30, 2023 and 2022, the Company declared and paid cash dividends of $0.25 and $0.50 per share of Class A common stock, respectively. On August 3, 2023, the Company announced that it would pay a dividend of $0.25 per share to Class A shareholders of record as of September 15, 2023 to be paid on September 29, 2023. Prior to the payment of the dividend, Station Holdco will make a cash distribution to all LLC Unit holders, including the Company, of $0.25 per LLC Unit, a portion of which will be paid to the other unit holders of Station Holdco.

Equity Repurchase Program

The Company’s board of directors has authorized $600 million for repurchases of Class A common stock under the Company’s equity repurchase program through June 30, 2024. The Company made no repurchases during the three and six months ended June 30, 2023 under the program. At June 30, 2023, the remaining amount authorized for repurchases under the program was $312.9 million. During the three and six months ended June 30, 2022, the Company repurchased 3.0 million and 3.2 million shares, respectively, of its Class A common stock for an aggregate purchase price of $113.7 million and $122.5 million, respectively, and a weighted average price per share of $37.42 and $38.02, respectively in open market transactions.

8. Share-based Compensation

The Company maintains an equity incentive plan designed to attract, retain and motivate employees and align the interests of those individuals with the interests of the Company. A total of 23.7 million shares of Class A common stock are reserved for issuance under the plan, of which approximately 11.4 million shares were available for issuance at June 30, 2023.

The following table presents information about the Company’s share-based compensation awards:


	Restricted Class A Common Stock			Stock Options
	Shares	Weighted-average grant date fair value		Shares	Weighted-average exercise price
Outstanding at January 1, 2023	449,151	$	37.51	7,364,157	$	28.52
Activity during the period:
Granted	127,907	47.07		1,183,647	47.07
Vested/exercised (a)	(117,215)	29.48		(899,709)	22.62
Forfeited/expired	(23,798)	42.36		(118,348)	37.86
Outstanding at June 30, 2023	436,045	$	42.21	7,529,747	$	32.00

_______________________________________________________________

(a)Stock options exercised included 597,078 options that were not converted into shares due to net share settlements to cover the aggregate exercise price and employee withholding taxes.

The Company recognized share-based compensation expense of $4.8 million and $10.1 million for the three and six months ended June 30, 2023, respectively, and $4.6 million and $8.1 million for the three and six months ended June 30, 2022, respectively. At June 30, 2023, unrecognized share-based compensation cost was $58.9 million, which is expected to be recognized over a weighted-average period of 3.0 years.

9. Income Taxes

Red Rock is a corporation and pays corporate federal, state and local taxes on its income, primarily pass-through income from Station Holdco based upon Red Rock’s economic interest held in Station Holdco. Station Holdco is a partnership for income tax reporting purposes. Station Holdco’s members, including the Company, are liable for federal, state and local income taxes based on their respective share of Station Holdco’s pass-through taxable income.

The Company’s tax provision or benefit from income taxes for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the Company updates the estimate of the annual effective tax rate and makes necessary cumulative adjustments to the total tax provision or benefit.

The Company’s effective tax rate for the three and six months ended June 30, 2023 was 10.1% and 10.4%, respectively, as compared to 19.9% and 14.3% for the three and six months ended June 30, 2022, respectively. The Company’s

Table of Contents

RED ROCK RESORTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

effective tax rate for the three and six months ended June 30, 2023 differs from the 21% statutory rate primarily because its effective tax rate includes a rate benefit attributable to the fact that Station Holdco operates as a limited liability company, which is not subject to federal income tax. Accordingly, the Company is not taxed on the portion of Station Holdco’s income attributable to noncontrolling interests.

As a result of the Company’s 2016 initial public offering (“IPO”) and certain reorganization transactions, the Company recorded a net deferred tax asset resulting from the outside basis difference of its interest in Station Holdco. The Company also recorded a deferred tax asset for its liability related to payments to be made pursuant to the tax receivable agreement (“TRA”) representing 85% of the tax savings the Company expects to realize from the amortization deductions associated with the step-up in the basis of depreciable assets under Section 754 of the Internal Revenue Code. This deferred tax asset will be recovered as cash payments are made to the TRA participants. In addition, the Company records deferred tax assets related to net operating losses and other tax attributes, as applicable.

The Company considers both positive and negative evidence when measuring the need for a valuation allowance. A valuation allowance is not required to the extent that, in management’s judgment, positive evidence exists with a magnitude and duration sufficient to result in a conclusion that it is more likely than not that the Company’s deferred tax assets will be realized. The Company determined that the deferred tax asset related to the LLC Units issued in the IPO and reorganization transactions is not expected to be realized unless the Company disposes of its investment in Station Holdco. As such, the Company established a valuation allowance against this portion of its deferred tax asset. The Company recognizes changes to the valuation allowance through the provision for income tax or other comprehensive income, as applicable.

Tax Receivable Agreement

In connection with the IPO, the Company entered into the TRA with certain owners who held LLC Units prior to the IPO. In the event that such parties exchange any or all of their LLC Units for Class A common stock or cash, at the election of the Company, the TRA requires the Company to make payments to such holders for 85% of the tax benefits realized by the Company as a result of such exchange. The Company expects to realize these tax benefits based on current projections of taxable income. The annual tax benefits are computed by calculating the income taxes due, including such tax benefits, and the income taxes due without such benefits.

At June 30, 2023 and December 31, 2022, the Company’s liability under the TRA was $22.0 million and $28.6 million, respectively, of which $6.0 million and $9.2 million, respectively, was payable to entities related to Frank J. Fertitta III, the Company’s Chairman of the Board and Chief Executive Officer, and Lorenzo J. Fertitta, Vice Chairman of the Board and a vice president of the Company. No LLC Units were exchanged during the three and six months ended June 30, 2023 or 2022. During the six months ended June 30, 2023 the Company made payments on the TRA liability of $6.6 million and expects to pay $1.0 million of the TRA liability within the next twelve months.

The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the amount and timing of the taxable income the Company generates each year and the tax rate then applicable. The payment obligations under the TRA are Red Rock’s obligations and are not obligations of Station Holdco or Station LLC. Payments are generally due within a specified period of time following the filing of the Company’s annual tax return and interest on such payments will accrue from the original due date (without extensions) of the income tax return until the date paid. Payments not made within the required period after the filing of the income tax return generally accrue interest.

The TRA will remain in effect until all such tax benefits have been utilized or expired, unless the Company exercises its right to terminate the TRA. The TRA will also terminate if the Company breaches its obligations under the TRA or upon certain mergers, asset sales or other forms of business combinations, or other changes of control. If the Company exercises its right to terminate the TRA, or if the TRA is terminated early in accordance with its terms, the Company’s payment obligations would be accelerated based upon certain assumptions, including the assumption that the Company would have sufficient future taxable income to utilize such tax benefits, and may substantially exceed the actual benefits, if any, the Company realizes in respect of the tax attributes subject to the TRA.

10. Earnings Per Share

Basic earnings per share is calculated by dividing net income attributable to Red Rock by the weighted-average number of shares of Class A common stock outstanding during the period. The calculation of diluted earnings per share gives effect to all potentially dilutive shares, including shares issuable pursuant to outstanding stock options and nonvested restricted shares of Class A common stock, based on the application of the treasury stock method, and outstanding Class B common stock that is exchangeable, along with an equal number of LLC Units, for Class A common stock, based on the application of the if-

Table of Contents

RED ROCK RESORTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

converted method. Dilutive shares included in the calculation of diluted earnings per share for the three and six months ended June 30, 2023 represented outstanding shares of Class B common stock, nonvested restricted shares of Class A common stock and outstanding stock options. For the three and six months ended June 30, 2022, dilutive shares included in the calculation of diluted earnings per share represented nonvested restricted shares of Class A common stock and outstanding stock options. All other potentially dilutive securities have been excluded from the calculation of diluted earnings per share because their inclusion would have been antidilutive.

A reconciliation of the numerator and denominator used in the calculation of basic and diluted earnings per share is presented below (amounts in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	74,910	$	32,438	$	160,437	$	124,683
Less: net income attributable to noncontrolling interests	(35,397)		(16,690)		(76,248)		(60,589)
Net income attributable to Red Rock, basic	39,513		15,748		84,189		64,094
Effect of dilutive securities	27,963		264		60,236		1,114
Net income attributable to Red Rock, diluted	$	67,476	$	16,012	$	144,425	$	65,208


	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Weighted average shares of Class A common stock outstanding, basic	57,828	59,514	57,741	60,255
Effect of dilutive securities	45,501	2,054	45,519	2,452
Weighted average shares of Class A common stock outstanding, diluted	103,329	61,568	103,260	62,707

The calculation of diluted earnings per share of Class A common stock excluded the following potentially dilutive securities that were outstanding at June 30, 2023 and 2022, respectively, because their inclusion would have been antidilutive (amounts in thousands):


	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Shares of Class B common stock and LLC Units exchangeable for Class A common stock	—	45,986	—	45,986
Stock options	2,310	2,012	2,310	1,164
Unvested restricted shares of Class A common stock	153	205	153	104

Shares of Class B common stock are not entitled to share in the earnings of the Company and are not participating securities. Accordingly, earnings per share of Class B common stock under the two-class method has not been presented.

11. Commitments and Contingencies

The Company and its subsidiaries are defendants in various lawsuits relating to routine matters incidental to their business. No assurance can be provided as to the outcome of any legal matters and litigation inherently involves significant risks. The Company does not believe there are any legal matters outstanding that would have a material impact on its financial condition or results of operations.

12. Segments

The Company views each of its Las Vegas casino properties and its Native American management arrangements as individual operating segments. The Company aggregates all of its Las Vegas operating segments into one reportable segment because all of its Las Vegas properties offer similar products, cater to the same customer base, have the same regulatory and tax structure, share the same marketing techniques, are directed by a centralized management structure and have similar economic characteristics. The Company also aggregates its Native American management arrangements into one reportable segment.

Table of Contents

RED ROCK RESORTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The Company utilizes Adjusted EBITDA as its primary performance measure. The Company’s segment information and a reconciliation of net income to Adjusted EBITDA are presented below (amounts in thousands).


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net revenues
Las Vegas operations:
Casino	$	269,507	$	280,636	$	557,747	$	560,407
Food and beverage	77,623		73,756		155,770		139,455
Room	44,892		44,283		88,831		81,055
Other (a)	20,556		21,436		40,279		38,924
Las Vegas operations net revenues	412,578		420,111		842,627		819,841
Native American management:
Management fees	—		—		—		—
Reportable segment net revenues	412,578		420,111		842,627		819,841
Corporate and other	3,552		2,130		7,139		4,036
Net revenues	$	416,130	$	422,241	$	849,766	$	823,877

Net income	$	74,910	$	32,438	$	160,437	$	124,683
Adjustments
Depreciation and amortization	32,738		33,097		63,833		66,522
Share-based compensation	4,829		4,632		10,125		8,137
Write-downs and other, net	10,066		2,045		29,685		12,225
Asset impairment	—		78,992		—		78,992
Interest expense, net	44,340		28,748		86,796		55,422
Provision for income tax	8,417		8,070		18,608		20,789
Other	—		846		—		846
Adjusted EBITDA (b)	$	175,300	$	188,868	$	369,484	$	367,616

Adjusted EBITDA (c)
Las Vegas operations	$	193,051	$	207,835	$	407,140	$	406,065
Native American management	—		(1,252)		—		(3,448)
Reportable segment Adjusted EBITDA	193,051		206,583		407,140		402,617
Corporate and other	(17,751)		(17,715)		(37,656)		(35,001)
Adjusted EBITDA	$	175,300	$	188,868	$	369,484	$	367,616

_______________________________________________________________

(a)Includes tenant lease revenue of $6.8 million and $12.6 million for the three and six months ended June 30, 2023, respectively, and $5.7 million and $10.1 million for the three and six months ended June 30, 2022, respectively. Revenue from tenant leases is accounted for under the lease accounting guidance and included in Other revenues in the Company’s Condensed Consolidated Statements of Income.

(b)Adjusted EBITDA includes net income plus depreciation and amortization, share-based compensation, write-downs and other, net (including gains and losses on asset disposals, demolition costs, development, preopening, business innovation and technology enhancements, contract termination costs and non-routine items), asset impairment, interest expense, net, provision for income tax and other.

(c)In the third quarter of 2022, management changed its methodology for allocating corporate expenses to the Company’s reportable segments. Under the new methodology, only corporate costs that are primarily related to the Company’s operating properties are allocated to the properties. The new methodology was applied to all periods presented. For the three and six months ended June 30, 2022, expenses of $3.9 million and $7.5 million, respectively, were reclassified from the Las Vegas Operations segment to Corporate and other to conform with the current year presentation. The reclassifications had no impact on Adjusted EBITDA.

Table of Contents

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of the Financial Condition and Results of Operations (the “MD&A”) of Red Rock Resorts, Inc. (“we,” “our,” “us,” “Red Rock” or the “Company”) is intended to help the reader understand the Company’s financial condition and results of operations. The MD&A is provided as a supplement to and should be read in conjunction with our condensed consolidated financial statements and related notes (the “Condensed Consolidated Financial Statements”) included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2022.

Overview

Red Rock was formed as a Delaware corporation in 2015 to own an indirect equity interest in and manage Station Casinos LLC (“Station LLC”), a Nevada limited liability company. Station LLC is a gaming, development and management company established in 1976 that owns and operates six major gaming and entertainment facilities and ten smaller casino properties (three of which are 50% owned) in the Las Vegas regional market. In the first quarter of 2022, we commenced construction of Durango on our approximately 50-acre development site at the intersection of Durango Drive and Interstate 215 in the southwest Las Vegas valley. Durango is expected to open in the fourth quarter of 2023 and we currently expect to spend $780 million for the project. In June 2022, we permanently closed our Texas Station, Fiesta Henderson and Fiesta Rancho properties, which had been closed since March 2020 as a result of the COVID-19 pandemic. In addition, we permanently closed Wild Wild West in September 2022.

We own all of the outstanding voting interests in Station LLC and have an indirect equity interest in Station LLC through our ownership of limited liability company interests in Station Holdco LLC (“Station Holdco,” and such interests, “LLC Units”), which owns all of the economic interests in Station LLC. At June 30, 2023, we held 58% of the economic interests and 100% of the voting power in Station Holdco, subject to certain limited exceptions, and we are designated as the sole managing member of both Station Holdco and Station LLC. We control and operate all of the business and affairs of Station Holdco and Station LLC, and conduct all of our operations through these entities. Our only material assets are our ownership interests in Station LLC and Station Holdco, other than tax-related assets and liabilities.

Our Condensed Consolidated Financial Statements reflect the consolidation of Station LLC and its consolidated subsidiaries, and Station Holdco. The financial position and results of operations attributable to LLC Units we do not own are reported separately as noncontrolling interest.

Our principal source of revenue and operating income is gaming, and our non-gaming offerings include restaurants, hotels and other entertainment amenities. Approximately 80% to 85% of our casino revenue is generated from slot play. The majority of our revenue is cash-based and as a result, fluctuations in our revenues have a direct impact on our cash flows from operations. Because our business is capital intensive, we rely heavily on the ability of our properties to generate operating cash flow to repay debt financing and fund capital expenditures.

A significant portion of our business is dependent upon customers who live and/or work in the Las Vegas metropolitan area. In June 2023, the unemployment rate in the Las Vegas metropolitan area was 6.0% as compared to 5.7% in June 2022. Statewide, the unemployment rate for June 2023 was 5.4% as compared to 4.7% in June 2022. In June 2023, the median price of an existing single-family home in Las Vegas according to the Las Vegas Realtors® was $440,990, down 8.1% from $480,000 in June 2022. In light of uncertainty in the economic outlook stemming from rising inflation, higher interest rates and increased energy costs, we cannot predict whether the increase in unemployment or the downward trend in housing prices in the Las Vegas area will continue.

Subsequent to the reopening of most of our properties in June 2020, we have seen favorable customer trends that continued in the second quarter of 2023, including consistent visitation from our guests and strong spend per visit. These trends, in combination with our operational discipline and our focus on our core customers, as well as regional and out of town guests, continue to drive consistent operating results in 2023. Our business continues to experience the impacts of inflation, increased energy costs and rising interest rates. We cannot predict whether the impacts of macroeconomic conditions on the United States and Las Vegas economies may affect our business in the future.

Information about our results of operations is included herein and in the notes to our Condensed Consolidated Financial Statements.

Table of Contents

Key Performance Indicators

We use certain key indicators to measure our performance.

Gaming revenue measures:

•Slot handle, table game drop and race and sports write are measures of volume. Slot handle represents the dollar amount wagered in slot machines, and table game drop represents the total amount of cash and net markers issued that are deposited in table game drop boxes.

•Win represents the amount of wagers retained by us.

•Hold represents win as a percentage of slot handle or table game drop.

As our customers are primarily Las Vegas residents, our hold percentages are generally consistent from period to period. Fluctuations in our casino revenue are primarily due to the volume and spending levels of customers at our properties.

Food and beverage revenue measures:

•Average guest check is a measure of food sales volume and product offerings at our restaurants, and represents the average amount spent per customer visit.

•Number of guests served is an indicator of volume.

Room revenue measures:

•Occupancy is calculated by dividing occupied rooms, including complimentary rooms, by rooms available.

•Average daily rate (“ADR”) is calculated by dividing room revenue, which includes the retail value of complimentary rooms, by rooms occupied, including complimentary rooms.

•Revenue per available room is calculated by dividing room revenue by rooms available.

Table of Contents

Results of Operations

Information about our results of operations is presented below (amounts in thousands):


	Three Months Ended June 30,						Percent change		Six Months Ended June 30,						Percent change
	2023			2022					2023			2022
Net revenues	$	416,130		$	422,241		(1.4)	%	$	849,766		$	823,877		3.1	%
Operating income	126,913			68,244			86.0	%	264,188			199,038			32.7	%

Casino revenues	269,507			280,636			(4.0)	%	557,747			560,407			(0.5)	%
Casino expenses	69,583			69,746			(0.2)	%	141,294			138,612			1.9	%
Margin	74.2		%	75.1		%			74.7		%	75.3		%

Food and beverage revenues	77,623			73,756			5.2	%	155,770			139,455			11.7	%
Food and beverage expenses	60,883			57,839			5.3	%	120,995			111,062			8.9	%
Margin	21.6		%	21.6		%			22.3		%	20.4		%

Room revenues	44,892			44,283			1.4	%	88,831			81,055			9.6	%
Room expenses	13,473			13,293			1.4	%	27,080			25,775			5.1	%
Margin	70.0		%	70.0		%			69.5		%	68.2		%

Other revenues	24,108			23,566			2.3	%	47,418			42,960			10.4	%
Other expenses	8,994			8,792			2.3	%	16,706			15,162			10.2	%

Selling, general and administrative expenses	93,480			90,193			3.6	%	185,985			176,489			5.4	%
Percent of net revenues	22.5		%	21.4		%			21.9		%	21.4		%

Depreciation and amortization	32,738			33,097			(1.1)	%	63,833			66,522			(4.0)	%
Write-downs and other, net	10,066			2,045			n/m		29,685			12,225			n/m
Asset impairment	—			78,992			n/m		—			78,992			n/m
Interest expense, net	44,340			28,748			54.2	%	86,796			55,422			56.6	%
Net income attributable to noncontrolling interests	35,397			16,690			112.1	%	76,248			60,589			25.8	%
Provision for income tax	8,417			8,070			4.3	%	18,608			20,789			(10.5)	%
Net income attributable to Red Rock	39,513			15,748			150.9	%	84,189			64,094			31.4	%

_______________________________________________________________

n/m = Not meaningful

We view each of our Las Vegas casino properties as an individual operating segment. We aggregate all of our Las Vegas operating segments into one reportable segment because all of our Las Vegas properties offer similar products, cater to the same customer base, have the same regulatory and tax structure, share the same marketing programs, are directed by a centralized management structure and have similar economic characteristics. We also aggregate our Native American management arrangements into one reportable segment. The results of operations for our Las Vegas operations are discussed in the remaining sections below. There was no Native American management activity in the current year.

Net Revenues. Net revenues for the three months ended June 30, 2023 were $416.1 million, down 1.4%, as compared to $422.2 million for the prior year period. For the six months ended June 30, 2023, net revenues were $849.8 million, an increase of 3.1% compared to $823.9 million for the prior year period.

Table of Contents

For the three and six months ended June 30, 2023, we continued to deliver year-over-year revenue growth across our non-gaming offerings at our properties. For the three months ended June 30, 2023, our food and beverage, room and other revenue increased by 5.2%, 1.4% and 2.3%, respectively, as compared to the same quarter in 2022, and for the six months ended June 30, 2023, we achieved year over year growth of 11.7%, 9.6% and 10.4% for food and beverage, room and other revenues, respectively. Our casino revenues for the three and six months ended June 30, 2023 decreased by 4.0% and 0.5%, respectively, as compared to the same periods in the prior year.

Operating Income. For the three and six months ended June 30, 2023, our operating income was $126.9 million and $264.2 million, respectively.

For the three and six months ended June 30, 2022, our operating income was $68.2 million and $199.0 million, respectively. Our operating income for the prior year periods was negatively impacted by asset impairment charges totaling $79.0 million related to our decision to permanently close and demolish our Texas Station, Fiesta Rancho and Fiesta Henderson properties, which had remained closed since the beginning of the COVID-19 pandemic in March 2020. Additional information about factors impacting our operating income is included below.

Casino. As described at Net Revenues above, our casino revenue for the three and six months ended June 30, 2023 decreased by 4.0% and 0.5%, respectively, as compared to the same periods in the prior year. For the three months ended June 30, 2023, our casino operations experienced decreased revenue and volume as compared to the prior year period. For the six months ended June 30, 2023 as compared to the prior year period, our slot and table games revenue decreased slightly, partially offset by a 4.2% increase in race and sports revenue. In addition, for the six months ended June 30, 2023, slot handle decreased slightly and race and sports write decreased by 8.2%, while table games drop increased slightly as compared to the prior year period.

Food and Beverage. Food and beverage includes revenue and expenses from our restaurants, bars and catering. For the three and six months ended June 30, 2023, food and beverage revenue increased by 5.2% and 11.7%, respectively, and food and beverage expense increased by 5.3% and 8.9%, respectively, all as compared to the same periods in the prior year. The increases in food and beverage revenue were primarily due to an increase in catering and group business. For the three and six months ended June 30, 2023, the average guest check at our restaurants increased by 6.7% and 7.3%, respectively, while the number of restaurant guests served decreased by 10.6% and 6.6%, respectively, as compared to the prior year periods. The increase in food and beverage expense for three and six months ended June 30, 2023 was commensurate with the increased food and beverage revenue and included higher employee-related costs and costs of sales.

Room. For the three and six months ended June 30, 2023, room revenue increased by 1.4% and 9.6%, respectively, and room expense increased by 1.4% and 5.1%, respectively, as compared to the prior year periods.

Information about our hotel operations is presented below:


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Occupancy	88.6		%	85.3		%	87.8		%	81.2		%
Average daily rate	$	193.35		$	183.77		$	195.83		$	176.32
Revenue per available room	$	171.38		$	156.72		$	171.91		$	143.10

For the three and six months ended June 30, 2023, our ADR increased by 5.2% and 11.1%, respectively, our revenue per available room improved by 9.4% and 20.1%, respectively, and our occupancy rate increased by 3.3 and 6.6 percentage points, respectively, all as compared to the prior year periods due to improved demand.

Other. Other primarily represents revenues from tenant leases, retail outlets, bowling, spas, and entertainment, and their corresponding expenses. For the three and six months ended June 30, 2023, other revenues increased by 2.3% and 10.4%, respectively, primarily driven by spa, bowling and leased outlets. Other expenses increased by 2.3% and 10.2%, respectively, as compared to the prior year period, primarily due to higher employee-related costs.

Selling, General and Administrative (“SG&A”). For the three and six months ended June 30, 2023, SG&A expenses increased by 3.6% or $3.3 million and 5.4% or $9.5 million, respectively, as compared to the prior year periods. The increases in SG&A expenses were primarily due to higher employee-related costs, repairs and maintenance and utilities, offset by a decrease in legal expenses. As a percentage of net revenue, SG&A expenses increased by 1.1% and 0.5% for the three and six months ended June 30, 2023, respectively, as compared to the prior year periods.

Table of Contents

Depreciation and Amortization. For the three and six months ended June 30, 2023, depreciation and amortization expense decreased by 1.1% and 4.0%, respectively, as compared to the prior year periods as we ceased recognizing depreciation expense for the closed properties, Texas Station, Fiesta Rancho and Fiesta Henderson in June 2022 and Wild Wild West in September 2022.

Write-downs and Other, net. Write-downs and other, net includes gains and losses on asset disposals, demolition and other costs associated with our closed properties, development expenses, preopening expenses, business innovation and technology enhancements, contract termination costs and non-routine items. For the three and six months ended June 30, 2023, write-downs and other, net totaled $10.1 million and $29.7 million, respectively, primarily comprising development and preopening expenses, demolition costs associated with the closed properties and business innovation development expenses. For the three and six months ended June 30, 2022, write-downs and other, net totaled $2.0 million and $12.2 million, respectively. For the six months ended June 30, 2022 write-downs and other net included $6.7 million in artist performance agreement termination costs associated with Palms Casino Resort, which was sold in December 2021.

Asset Impairment. There were no asset impairment charges during the three and six months ended June 30, 2023. For the three and six months ended June 30, 2022, we recorded asset impairment charges totaling $79.0 million to write off the carrying amounts of the facilities and certain related assets at Texas Station, Fiesta Rancho and Fiesta Henderson.

Interest Expense, net. Interest expense, net increased to $44.3 million and $86.8 million for the three and six months ended June 30, 2023, respectively, as compared to $28.7 million and $55.4 million, respectively, for the same periods in 2022. The increase in interest expense was primarily due to higher variable interest rates applicable to our credit facility for the current year periods. In addition, interest expense for the current year period include the impact of increased borrowings under our revolving credit facility associated with the Durango development project. We expect that the interest rates on our credit facility may continue to increase in response to macroeconomic conditions. Additional information about long-term debt is included in Note 6 to the Condensed Consolidated Financial Statements.

Provision for Income Tax. For the three and six months ended June 30, 2023, we recognized a provision for income tax of $8.4 million and $18.6 million, respectively. Station Holdco is treated as a partnership for income tax reporting purposes and Station Holdco’s members are liable for federal, state and local income taxes based on their share of Station Holdco’s taxable income. We are not liable for income tax on the noncontrolling interests’ share of Station Holdco’s taxable income or benefit from a taxable loss, and therefore our effective tax rates of 10.1% and 10.4% for the three and six months ended June 30, 2023, respectively, were less than the statutory rate. We recognized income tax expense of $8.1 million and $20.8 million for the three and six months ended June 30, 2022, respectively.

Net Income Attributable to Noncontrolling Interests. Net income attributable to noncontrolling interests for the three and six months ended June 30, 2023 and 2022 represented the portion of net income attributable to the ownership interest in Station Holdco not held by us.

Table of Contents

Adjusted EBITDA

Adjusted EBITDA for the three and six months ended June 30, 2023 and 2022 for our two reportable segments and a reconciliation of net income to Adjusted EBITDA are presented below (amounts in thousands). The Las Vegas operations segment includes all of our Las Vegas casino properties and the Native American management segment includes our Native American management arrangements.


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net revenues
Las Vegas operations	$	412,578	$	420,111	$	842,627	$	819,841
Native American management	—		—		—		—
Reportable segment net revenues	412,578		420,111		842,627		819,841
Corporate and other	3,552		2,130		7,139		4,036
Net revenues	$	416,130	$	422,241	$	849,766	$	823,877

Net income	$	74,910	$	32,438	$	160,437	$	124,683
Adjustments
Depreciation and amortization	32,738		33,097		63,833		66,522
Share-based compensation	4,829		4,632		10,125		8,137
Write-downs and other, net	10,066		2,045		29,685		12,225
Asset impairment	—		78,992		—		78,992
Interest expense, net	44,340		28,748		86,796		55,422
Provision for income tax	8,417		8,070		18,608		20,789
Other	—		846		—		846
Adjusted EBITDA	$	175,300	$	188,868	$	369,484	$	367,616

Adjusted EBITDA
Las Vegas operations	$	193,051	$	207,835	$	407,140	$	406,065
Native American management	—		(1,252)		—		(3,448)
Corporate and other	(17,751)		(17,715)		(37,656)		(35,001)
Adjusted EBITDA	$	175,300	$	188,868	$	369,484	$	367,616

The year-over-year changes in Adjusted EBITDA were due to the factors described within Results of Operations above.

Adjusted EBITDA is a non-GAAP measure that is presented solely as a supplemental disclosure. We believe that Adjusted EBITDA is a widely used measure of operating performance in our industry and is a principal basis for valuation of gaming companies. We believe that in addition to net income, Adjusted EBITDA is a useful financial performance measurement for assessing our operating performance because it provides information about the performance of our ongoing core operations. Adjusted EBITDA includes net income plus depreciation and amortization, share-based compensation, write-downs and other, net (including gains and losses on asset disposals, demolition costs, development, preopening, business innovation and technology enhancements, contract termination costs and non-routine items), asset impairment, interest expense, net, provision for income tax and other.

To evaluate Adjusted EBITDA and the trends it depicts, the components should be considered. Each of these components can significantly affect our results of operations and should be considered in evaluating our operating performance, and the impact of these components cannot be determined from Adjusted EBITDA. Further, Adjusted EBITDA does not represent net income or cash flows from operating, investing or financing activities as defined by GAAP and should not be considered as an alternative to net income as an indicator of our operating performance. Additionally, Adjusted EBITDA does not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity. It should be noted that not all gaming companies that report EBITDA or adjustments to this measure may calculate EBITDA or such adjustments in the same manner as we do, and therefore, our measure of Adjusted EBITDA may not be comparable to similarly titled measures used by other gaming companies.

Table of Contents

In the third quarter of 2022, we changed our methodology for allocating corporate expenses to our reportable segments. Under the new methodology, only corporate costs that are primarily related to our operating properties are allocated to the properties. The new methodology was applied to all periods presented. For the three and six months ended June 30, 2023, expenses of $3.9 million and $7.5 million, respectively, were reclassified from the Las Vegas Operations segment to Corporate and other to conform with the current year presentation. The reclassifications had no impact on Adjusted EBITDA.

Holding Company Financial Information

The indentures governing the 4.50% Senior Notes and the 4.625% Senior Notes contain certain covenants that require Station LLC to furnish to the holders of the notes certain annual and quarterly financial information relating to Station LLC and its subsidiaries. The obligation to furnish such information may be satisfied by providing consolidated financial information of the Company along with additional disclosure explaining the differences between such information and the financial information of Station LLC and its subsidiaries on a standalone basis. The following financial information about the Company and its consolidated subsidiaries, exclusive of Station LLC and its subsidiaries (the “Holding Company”), is furnished to explain the differences between the financial information of the Holding Company and the financial information of Station LLC and its subsidiaries for the periods presented in this report. The primary differences between the financial information of the Holding Company and that of Station LLC relate to income taxes of the Holding Company and the liability relating to the tax receivable agreement (“TRA”).

At June 30, 2023, the difference between the balance sheet for Station LLC and its consolidated subsidiaries and the balance sheet for the Holding Company is that the Holding Company had cash of $2.1 million, $76.9 million of deferred tax assets, net, and a $22.6 million note receivable from Station LLC, which are solely assets of the Holding Company, and liabilities that are solely the Holding Company’s, consisting of a $22.0 million liability under the TRA, of which $1.0 million is expected to be paid in the next twelve months, income tax payable of $4.6 million, and $3.0 million of other liabilities. Station LLC’s $22.6 million intercompany note payable to Red Rock is eliminated in consolidation. At December 31, 2022, the Holding Company had cash of $15.3 million, $75.7 million of deferred tax assets, net, $0.3 million of prepaid expenses, a $28.6 million liability under the TRA, of which $6.6 million was current, $1.7 million of other current liabilities and $1.8 million of other long-term liabilities.

The Holding Company recognized net losses of $8.1 million and $18.3 million for the three and six months ended June 30, 2023, respectively, and $8.1 million and $20.8 million for the three and six months ended June 30, 2022, respectively, primarily representing provision for income taxes.

Liquidity and Capital Resources

The following liquidity and capital resources discussion contains certain forward-looking statements with respect to our business, financial condition, results of operations, dispositions, acquisitions, investments and subsidiaries, which involve risks and uncertainties that cannot be predicted or quantified, and consequently, actual results may differ materially from those expressed or implied herein. Such risks and uncertainties include, but are not limited to, the risks described in Item 1A—Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022.

At June 30, 2023, we had $100.9 million in cash and cash equivalents. Station LLC maintains its borrowing availability under its revolving credit facility, subject to continued compliance with the terms of the credit facility. At June 30, 2023, Station LLC’s borrowing availability under the revolving credit facility was $613.0 million, which was net of $384.5 million in outstanding borrowings and $33.5 million in outstanding letters of credit and similar obligations.

Our primary capital requirements for the near term are expected to be related to the operation and maintenance of our properties, debt service payments and construction costs for Durango. Our anticipated uses of cash for the remainder of 2023 include (i) approximately $290 million to $360 million for capital expenditures, including the development of Durango, (ii) required principal and interest payments on Station LLC’s indebtedness totaling $13.0 million and $102.6 million, respectively, (iii) dividends to our Class A common stockholders, including approximately $14.6 million to be paid in September 2023, and (iv) distributions to noncontrolling interest holders of Station Holdco, including approximately $11.5 million to be paid in September 2023 and any “tax distributions” that may be made quarterly when required and in amounts that may vary from quarter to quarter. Other payment obligations include salaries, wages and employee benefits, service contracts, property taxes, insurance and other obligations.

Our board of directors has authorized $600 million for repurchases of Class A common stock under our equity repurchase program through June 30, 2024. We are not obligated to repurchase any shares under the program. Subject to applicable laws and the provisions of any agreements restricting our ability to do so, repurchases may be made at our discretion

Table of Contents

from time to time through open market purchases, negotiated transactions or tender offers, depending on market conditions and other factors. We made no repurchases of Class A common stock during the six months ended June 30, 2023 under the program. At June 30, 2023, we had $312.9 million of remaining repurchases authorized under the program. From time to time, we may also seek to repurchase our outstanding indebtedness. Any such purchases may be funded by existing cash balances or the incurrence of debt, including borrowings under our credit facility. The amount and timing of any repurchases will be based on business and market conditions, capital availability, compliance with debt covenants and other considerations.

We expect that cash on hand, cash generated from operations and borrowings available under the credit facility will be sufficient to fund our operations and capital requirements and service our outstanding indebtedness for the next twelve months. We regularly assess our projected cash requirements for capital expenditures, repayment of debt obligations, and payment of other general corporate and operational needs. In the long term, we expect that we will fund our capital requirements with a combination of cash generated from operations, borrowings under the credit facility and the issuance of debt or equity as market conditions may permit. However, our cash flow and ability to obtain debt or equity financing on terms that are satisfactory to us, or at all, may be affected by a variety of factors, including competition, general economic and business conditions and financial markets. As a result, we cannot provide any assurance that we will generate sufficient income and liquidity to meet all of our liquidity requirements or other obligations.

Following is a summary of our cash flow information (amounts in thousands):


	Six Months Ended June 30,
	2023		2022
Net cash provided by (used in):
Operating activities	$	235,181	$	277,660
Investing activities	(384,134)		(104,614)
Financing activities	132,613		(224,033)

Cash Flows from Operations

Our operating cash flows primarily consist of operating income or loss generated by our properties (excluding depreciation and other non-cash charges), interest and income tax payments, and changes in working capital accounts such as inventories, prepaid expenses, receivables and payables. The majority of our revenue is generated from our slot machine and table game play, which is conducted primarily on a cash basis. Our food and beverage, room and other revenues are also primarily cash-based. As a result, fluctuations in our revenues have a direct impact on our cash flow from operations.

For the six months ended June 30, 2023, net cash provided by operating activities was $235.2 million as compared to $277.7 million for the prior year period. Cash flows from operating activities for the six months ended June 30, 2023 included $82.3 million in interest payments and $14.8 million cash paid for income taxes, as compared to $50.9 million and $17.8 million, respectively, for the prior year period. Information about our operating activities is presented within Results of Operations above.

Cash Flows from Investing Activities

For the six months ended June 30, 2023 and 2022, cash paid for capital expenditures totaled $377.1 million and $101.4 million, respectively. Capital expenditures for the current year were primarily related to the Durango project.

Cash Flows from Financing Activities

During the six months ended June 30, 2023, we paid $29.5 million in dividends to Class A common stockholders and $44.3 million in cash distributions to the noncontrolling interest holders of Station Holdco. We also paid $8.9 million related to tax withholding on share-based compensation. In addition, we borrowed $270.0 million under the Revolving Credit Facility.

During the six months ended June 30, 2022, we paid $30.3 million in dividends to Class A common stockholders and $54.9 million in cash distributions to noncontrolling interest holders of Station Holdco. We also paid $122.5 million to repurchase 3.2 million shares of our Class A common stock pursuant to our equity repurchase program.

The agreements governing our credit facility and the indentures governing our senior notes impose significant operating and financial restrictions on us, including certain limitations on our and our subsidiaries’ ability to, among other things, obtain additional debt or equity financing due to applicable financial and restrictive covenants in our debt agreements. In addition, our credit agreement contains certain financial covenants, including maintenance of a minimum interest coverage ratio

Table of Contents

and adherence to a maximum total leverage ratio. During the six months ended June 30, 2023, there were no changes made to the covenants included in the credit facility or the indentures governing the senior notes as described in Financial Condition, Capital Resources and Liquidity in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022. We believe that as of June 30, 2023, Station LLC was in compliance with the covenants contained in the credit facility and the indentures governing the senior notes.

As a result of these covenants and restrictions, we are limited in how we conduct our business and we may be unable to raise additional debt or equity financing to provide liquidity if changes in the economy, discretionary spending, consumer confidence or other external factors negatively affect our business. In addition, such covenants and restrictions may limit our ability to compete effectively or to take advantage of new business opportunities. Further, our ability to comply with covenants and restrictions contained in the agreements governing our indebtedness may be adversely affected by general economic conditions and industry conditions.

Failure to satisfy the covenants contained in the credit agreements, indentures or other agreements governing our indebtedness would require us to seek waivers or amendments of such covenants. There can be no assurance that we would be able to obtain required waivers or amendments, as such matters depend, in part, on factors outside of our control. If we fail to satisfy our covenants and are unable to obtain such waivers or amendments, our creditors could exercise remedies under the applicable documents governing such indebtedness, including acceleration of such indebtedness.

Off-Balance Sheet Arrangements

At June 30, 2023, we had no variable interests in unconsolidated entities that provide off-balance sheet financing, liquidity, market risk or credit risk support, or that engage in leasing, hedging or research and development arrangements with us, nor did we have retained or contingent interests in assets transferred to an unconsolidated entity. At June 30, 2023, we had outstanding letters of credit and similar obligations totaling $33.5 million.

Inflation

Our business continues to experience the impact of inflation and rising interest rates and we expect the impact to continue through the remainder of 2023. Commodity prices have increased and become more volatile, and we are experiencing price inflation in ordinary goods and services such as food costs, supplies, energy costs and construction costs. In addition, we have been impacted by a shortage of qualified workers which places additional upward pressure on wages and benefit costs as we seek to attract and retain qualified workers. We attempt to minimize the impact of inflation on our business by implementing cost controls, adjusting prices and optimizing our procurement strategy.

Native American Development

We have development and management agreements with the North Fork Rancheria of Mono Indians, a federally recognized Native American tribe located near Fresno, California, pursuant to which we will assist the tribe in developing, financing and operating a gaming and entertainment facility to be located on Highway 99 north of the city of Madera, California. See Note 4 to the Condensed Consolidated Financial Statements for information about this project.

Regulation and Taxes

We are subject to extensive regulation by Nevada gaming authorities as well as the National Indian Gaming Commission and the California Gambling Control Commission. In addition, we will be subject to regulation, which may or may not be similar to that in Nevada, by any other jurisdiction in which we may conduct gaming activities in the future.

The gaming industry represents a significant source of tax revenue, particularly to the State of Nevada and its counties and municipalities. From time to time, various state and federal legislators and officials have proposed changes in tax law, or in the administration of such law, affecting the gaming industry. The Nevada legislature meets every two years for 120 days and when special sessions are called by the Governor. The most recent special legislative session ended on June 14, 2023. There are currently no specific legislative proposals to increase taxes on gaming revenue, but there are no assurances that an increase in taxes on gaming or other revenue will not be proposed and passed by the Nevada legislature in the future.

Description of Certain Indebtedness

A description of our indebtedness is included in Note 8 to the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 and Note 6 to the Condensed Consolidated Financial Statements. Other than the replacement of LIBOR interest rates with SOFR effective on July 1, 2023, as described at Note 6, there were no material changes to the terms of our indebtedness during the six months ended June 30, 2023.

Table of Contents

Critical Accounting Policies and Estimates

A description of our critical accounting policies and estimates is included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022. There were no material changes to our critical accounting policies and estimates during the six months ended June 30, 2023.

Forward-looking Statements

When used in this report and elsewhere by management from time to time, the words “may,” “might,” “could,” “believes,” “anticipates,” “expects” and similar expressions are intended to identify forward-looking statements with respect to our financial condition, results of operations and our business including our expansions, development and acquisition projects, legal proceedings and employee matters. Certain important factors, including but not limited to, financial market risks, could cause our actual results to differ materially from those expressed in our forward-looking statements. Potential factors which could affect our financial condition, results of operations and business include, without limitation, the impact of rising inflation, higher interest rates, increased energy costs and pandemics on consumer demand and our business and results of operations, financial results and liquidity; the impact of our substantial indebtedness; the effects of local and national economic, credit and capital market conditions on consumer spending and the economy in general, and on the gaming and hotel industries in particular; the effects of competition, including locations of competitors and operating and market competition; changes in laws, including increased tax rates, regulations or accounting standards, third-party relations and approvals, and decisions of courts, regulators and governmental bodies; risks associated with construction projects, including disruption of our operations, shortages of materials or labor, unexpected costs, unforeseen permitting or regulatory issues and weather; litigation outcomes and judicial actions, including gaming legislative action, referenda and taxation; acts of war or terrorist incidents, pandemics, natural disasters or civil unrest; risks associated with the collection and retention of data about our customers, employees, suppliers and business partners; and other risks described in our filings with the Securities and Exchange Commission. All forward-looking statements are based on our current expectations and projections about future events. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date thereof. We undertake no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date hereof.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our long-term debt. There have been no material changes in our market risks from those disclosed in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2022. We do not expect the replacement of LIBOR interest rates with SOFR under our Credit Facility to have a material impact on our market risks.

Item 4. Controls and Procedures

The Company’s management conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of June 30, 2023. In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, the principal executive officer and principal financial officer concluded that, as of June 30, 2023, the Company’s disclosure controls and procedures were effective, at the reasonable assurance level, and are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

There was no change in the Company’s internal control over financial reporting during the Company’s most recently completed fiscal quarter that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Table of Contents

Part II. Other Information

Item 1. Legal Proceedings

The Company and its subsidiaries are defendants in various lawsuits relating to routine matters incidental to their business. No assurance can be provided as to the outcome of such matters and litigation inherently involves significant risks.

Item 1A. Risk Factors

There have been no material changes in the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Our board of directors has authorized $600 million for repurchases of Class A common stock under our equity repurchase program through June 30, 2024. The Company made no repurchases during the three months ended June 30, 2023 under the program. At June 30, 2023, the remaining amount authorized for repurchases under the program was $312.9 million.

Item 3. Defaults Upon Senior Securities—None.

Item 4. Mine Safety Disclosures—None.

Item 5. Other Information—None.

Item 6. Exhibits

(a)Exhibits

No. 3.1—Composite Amended and Restated Certificate of Incorporation of Red Rock Resorts, Inc.

No. 1 0.1 —Seventh Amendment to Credit Agreement dated as of June 6, 2023 among Station Casinos LLC, the guarantor subsidiaries party thereto, Red Rock Resorts, Inc., Station Holdco LLC, Deutsche Bank AG Cayman Islands Branch, as administrative agent, and the lenders party thereto.

No. 31.1—Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

No. 31.2—Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

No. 32.1—Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

No. 32.2—Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

No. 101.INS—XBRL Instance Document — the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

No. 101.SCH—XBRL Taxonomy Extension Schema Document

No. 101.CAL—XBRL Taxonomy Extension Calculation Linkbase Document

No. 101.DEF—XBRL Taxonomy Extension Definition Linkbase Document

No. 101.LAB—XBRL Taxonomy Extension Label Linkbase Document

No. 101.PRE—XBRL Taxonomy Extension Presentation Linkbase Document

No. 104—Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		RED ROCK RESORTS, INC., Registrant

Date:	August 7, 2023	/s/ STEPHEN L. COOTEY
		Stephen L. Cootey Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)