Monarch Casino & Resort Reports 2023 Fourth Quarter Financial Results

RENO, Nev., Feb. 14, 2024 (GLOBE NEWSWIRE) -- Monarch Casino & Resort, Inc. (NASDAQ:MCRI) ("Monarch" or "the Company") today reported operating results for the fourth quarter ended December 31, 2023, as summarized below:

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

		Three Months Ended December 31,						Twelve Months Ended December 31,
		2023		2022		Change		2023		2022		Change
Net revenue		$128,186		$120,536		6.3%		$501,478		$477,870		4.9%
Net income (1)		$18,202		$22,433		(18.9%)		$82,448		$87,479		(5.8%)
Adjusted EBITDA (3)		$43,003		$41,588		3.4%		$170,832		$167,085		2.2%
Basic earnings per share		$0.94		$1.17		(19.7%)		$4.28		$4.60		(7.0%)
Diluted earnings per share (2)		$0.93		$1.14		(18.4%)		$4.20		$4.47		(6.0%)
(1) Net Income in the fourth quarter of 2023 was impacted by: a) the effective tax rate (28.6% in the fourth quarter of 2023 and 19.5% in the fourth quarter of 2022), which varies based on the amount of the excess tax benefit on stock compensation and drove a $2.9 million decrease in Net income; b) legal and consulting costs related to the ongoing litigation with the Monarch Black Hawk's general contractor which impacted Net income by $2.8 million and $0.8 million, respectively, in the fourth quarter of 2023 and 2022, resulting in $2.0 million decrease in Net income; and c) higher depreciation expense in the fourth quarter of 2023 compared to the fourth quarter of 2022 which resulted in a $1.0 million decrease in Net Income. (2) Diluted EPS in the fourth quarter of 2023 was impacted by: a) the effective tax rate (28.6% in the fourth quarter of 2023 and 19.5% in the fourth quarter of 2022), which varies based on the amount of the excess tax benefit on stock compensation and drove a $0.15 decrease in diluted EPS; b) legal and consulting costs related to the ongoing litigation with the Monarch Black Hawk's general contractor which impacted diluted EPS by $0.14 and $0.04, respectively, in the fourth quarter of 2023 and 2022, resulting in $0.10 decrease in diluted EPS; and c) higher depreciation expense in the fourth quarter of 2023 compared to the fourth quarter of 2022 which resulted in a $0.05 decrease in diluted EPS. (3) Definitions, disclosures and reconciliations of non-GAAP financial information are included later in the release.

CEO Comment

John Farahi, Co-Chairman and Chief Executive Officer of Monarch, commented: "Our net revenue of $128.2 million and adjusted EBITDA of $43.0 million represent 6.3% and 3.4% year-over-year growth, respectively, and were fourth quarter records, as were 2023 full year net revenue and adjusted EBITDA of $501.5 million and $170.8 million.

"Monarch Black Hawk's operation continued to ramp up as we converted ongoing revenue growth into margin expansion and double-digit property-level EBITDA growth. Revenues grew across all segments as we continue to successfully maintain our market share growth trajectory among the market's mid- and upper-tier players. We continue to face staffing challenges, driven by Colorado's low unemployment and competition with the City of Denver wage rates.

"In Reno, the Atlantis is challenged by the continued growth of California tribal gaming and an extremely competitive promotional environment. Despite these factors and ongoing construction disruptions, we grew market share in the fourth quarter of 2023. We also completed the construction on the redesign and upgrade of the oyster and sushi bar restaurant. As of January 4th, we began the redesign and upgrade of 125 rooms on the third Atlantis hotel tower and we expect to complete this project by the end of the second quarter of 2024. We intend to redesign and upgrade the remaining rooms in the third Atlantis tower at the beginning of 2025 with a goal to have all 817 hotel rooms and suites redesigned and upgraded by the end of the second quarter of 2025.

"With a strong balance sheet and no debt, we are favorably positioned to continue investing in our properties and paying cash dividends, and to consider share repurchases under our existing share repurchase authorization. While growth through acquisition is a key focus for us, doing the right transaction is far more important in the long run than simply doing a transaction."

Summary of 2023 Fourth Quarter Operating Results

In the 2023 fourth quarter, the Company generated net revenue of $128.2 million compared to $120.5 million in the corresponding prior-year quarter. Casino, and food and beverage ("F&B") revenues increased 8.3% and 4.7%, respectively. The slight decline in hotel revenue in the 2023 fourth quarter reflects increased competitive pressures in Reno.

Selling, general and administrative ("SG&A") expense for the fourth quarter of 2023 was $28.7 million compared to $24.7 million in the corresponding prior-year period, primarily driven by higher labor, advertising, and repair and maintenance expenses. As a percentage of net revenue, SG&A expense increased to 22.4% compared to 20.5% in the corresponding prior-year period. Casino operating expense as a percentage of casino revenue increased to 36.2% during the fourth quarter of 2023 from 35.6% in the corresponding prior-year period primarily due to an increase in labor and slot participation expenses as well as an increase in promotional allowances. F&B operating expense as a percentage of F&B revenue decreased to 71.8% during the fourth quarter of 2023 from 73.8% in the corresponding prior-year period as the Company continued to efficiently manage expenses and align menu prices with costs. Hotel operating expense as a percentage of hotel revenue increased to 37.6% in the fourth quarter of 2023 compared to 37.4% in the same period a year ago primarily due to the slight decline in revenue.

Net income for the fourth quarter of 2023 decreased 18.9% and diluted EPS decreased 18.4% compared to the same period last year primarily due to an increase in the effective tax rate attributable to a decrease in the excess tax benefit on stock compensation, an increase in legal and consulting costs related to the ongoing litigation with the Monarch Black Hawk general contractor, PCL Construction Services, Inc., and an increase in depreciation expense. The Company generated consolidated Adjusted EBITDA of $43.0 million in the fourth quarter of 2023, which is a $1.4 million, or 3.4%, increase compared to the same period a year ago.

Construction Litigation

On November 22, 2023, the trial in the Company's litigation against the general contractor of the Monarch Black Hawk expansion project, PCL Construction Services, Inc., concluded and the matter has been submitted to the presiding judge for the District Court for the City and County of Denver, Colorado.

Credit Facility and Liquidity

As of December 31, 2023, the Company had cash and cash equivalents of $43.4 million and an outstanding principal balance of $5.5 million under its credit facility. During the 2023 fourth quarter, the Company made $2.5 million in principal payments on its credit facility. Subsequent to the end of the fourth quarter, the Company paid down the remaining principal and currently has no outstanding long-term debt.

Capital expenditures of $16.7 million in the fourth quarter of 2023 were funded from operating cash flows and included the redesign and upgrade of the balance of hotel rooms in the second tower at Atlantis, redesign and upgrade of the oyster and sushi bar restaurant located on Atlantis' sky terrace and ongoing maintenance capital expenditures at both properties.

On December 15, 2023, the Company paid a cash dividend of $0.30 per share to its stockholders of record on December 1, 2023. The cash dividend was funded from operating cash flows.

Quarterly Dividend Declaration

The Company announced today a cash dividend of $0.30 per share of its outstanding common stock. The dividend is payable on March 15, 2024, to stockholders of record on March 1, 2024. This cash dividend is part of the previously announced annual cash dividend of $1.20 per share payable in quarterly payments and subject to quarterly review and evaluation by the Company's Board of Directors.

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "plan," "believe," "expect," "seem," "look," "look forward," "positioning," "future," "will," "confident" and similar references to future periods. Example of forward-looking statements include, among others, statements we make regarding: (i) our expected operating results; (ii) our belief that we are efficiently managing expenses; (iii) our plans regarding the redesign and upgrade of the third Atlantis hotel tower as well as the timing of such upgrade; (iv) our consideration of a full range of capital allocation options, including continued capital spending at both properties, potential share repurchases and a potential dividend distribution; (v) regarding the quality of our products and guest services in Reno and Black Hawk; (vi) our expectations regarding our guests' acceptance of the expanded casino, new hotel and enhanced amenities at Monarch Black Hawk; and (vii) our expectations regarding our future position in, and share of, the gaming market and the quality of service we provide to our guests. Actual results and future events and conditions may differ materially from those described in any forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without limitation:

• our ability to manage guest safety concerns caused by contagious diseases, including COVID-19 and its variants;
• our ability to negotiate necessary amendments to our Term Loan Facility;
• access to available and reasonable financing on a timely basis;
• our ability to maintain strong working relationships with our regulators, employees, lenders, suppliers, insurance carriers, customers, and other stakeholders;
• impacts of any uninsured losses;
• changes in guest visitation or spending patterns due to economic conditions, health or other concerns;
• construction factors, including delays, disruptions, availability of labor and materials, increased costs of labor and materials, contractor disagreements, zoning issues, environmental restrictions, soil and water conditions, weather and other hazards, site access matters, building permit issues and other regulatory approvals or issues;
• ongoing disagreements over costs of and responsibility for delays and other construction related matters with our general contractor at Monarch Casino Resort Spa Black Hawk, PCL Construction Services, Inc., including, as previously reported, the litigation against us by such contractor;
• claims for construction defects, breach of contract, breach of warranty, fraud, fraudulent inducement, negligence or other construction related claims that we may have in connection with construction and completion of Monarch Casino Resort Spa Black Hawk and any adverse impacts on operations required to correct the same;
• our litigation against the general contractor of Monarch Casino Resort Spa Black Hawk, PCL Construction Services, Inc., in the above-mentioned litigation;
• our potential need to post bonds or other forms of surety to support our legal remedies;
• risks related to development and construction activities (including disputes with and defaults by contractors and subcontractors; construction, equipment or staffing problems and delays; shortages of materials or skilled labor; environmental, health and safety issues; weather and other hazards, site access matters, and unanticipated cost increases);
• our ability to generate sufficient operating cash flow to, among other things, finance capital refurbishment, expansion plans and debt reduction;
• changes in laws mandating increases in minimum wages and employee benefits;
• changes in laws and regulations permitting expanded and other forms of gaming in our key markets;
• the effects of local and national economic, credit and capital market conditions on the economy in general and on the gaming industry and our business in particular;
• the effects of labor shortages on our market position, growth and financial results;
• the potential of increases in state and federal taxation to address budgetary and other impacts;
• the potential of increased regulatory and other burdens to address the direct and indirect impacts of COVID-19 and its variants and other contagious diseases;
• guest acceptance of our expanded facilities once completed and the resulting impact on our market position, growth and financial results;
• competition in our target market areas;
• broad-based inflation, including, but not limited to, wage, inventory, and supplies inflation;
• the impact of the events occurring in Eastern Europe and the conflict taking place in Ukraine; and
• the impact of the events occurring in the Middle East and the conflict taking place in Israel.

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

About Monarch Casino & Resort, Inc.

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

Monarch Black Hawk features approximately 60,000 square feet of casino space; approximately 1,000 slot machines; 43 table games; a live poker room; a keno; and a sports book. The resort also includes 10 bars and lounges, as well as four dining options: a twenty-four-hour full-service restaurant, a buffet-style restaurant, the Monarch Chophouse (a fine-dining steakhouse), and Bistro Mariposa (elevated Southwest cuisine). The resort offers 516 guest rooms and suites, banquet and meeting room space, a retail store, a concierge lounge and an upscale spa and enclosed year-round pool facility located on the top floor of the tower. The resort is connected to a nine-story parking structure with approximately 1,350 parking spaces, and additional valet parking, with total property capacity of approximately 1,500 spaces.

Atlantis features approximately 61,000 square feet of casino space; 817 guest rooms and suites; eight food outlets; two gourmet coffee and pastry bars; a 30,000 square foot health spa and salon with an enclosed year-round pool; retail outlet offering clothing and traditional gift shop merchandise; an 8,000 square-foot family entertainment center; and approximately 52,000 square feet of banquet, convention and meeting room space. The casino features approximately 1,200 slot and video poker machines; approximately 33 table games, including blackjack, craps, roulette, and others; a race and sports book; a 24-hour live keno lounge; and a poker room.

Contacts:

John Farahi

Chief Executive Officer

775/824-4401 or [email protected]

Joseph Jaffoni, Richard Land, James Leahy

JCIR

212/835-8500 or [email protected]

- financial tables follow -

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data; unaudited)

		Three months ended December 31,						Twelve months ended December 31,
		2023			2022			2023			2022
Revenues
Casino		$	72,714		$	67,151		$	282,292		$	270,756
Food and beverage			32,816			31,338			126,628			117,156
Hotel			16,813			16,905			70,986			71,179
Other			5,843			5,142			21,572			18,779
Net revenues			128,186			120,536			501,478			477,870
Operating expenses
Casino			26,300			23,920			102,771			95,076
Food and beverage			23,559			23,143			91,629			88,440
Hotel			6,327			6,325			26,434			25,508
Other			2,920			2,542			11,469			9,254
Selling, general and administrative			28,657			24,671			105,819			97,602
Depreciation and amortization			12,142			11,188			47,294			43,433
Other operating items, net			2,898			671			5,910			7,115
Total operating expenses			102,803			92,460			391,326			366,428
Income from operations			25,383			28,076			110,152			111,442
Interest income (expense), net			111			(200)			(1,625)			(2,420)
Income before income taxes			25,494			27,876			108,527			109,022
Provision for income taxes			(7,292)			(5,443)			(26,079)			(21,543)
Net income		$	18,202		$	22,433		$	82,448		$	87,479
Earnings per share of common stock
Basic		$	0.94		$	1.17		$	4.28		$	4.60
Diluted		$	0.93		$	1.14		$	4.20		$	4.47
Weighted average number of common shares and potential common shares outstanding
Basic			19,266			19,127			19,244			18,996
Diluted			19,595			19,628			19,618			19,578

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(In thousands, except per share data)

		December 31, 2023			December 31, 2022
ASSETS		(unaudited)
Current assets
Cash and cash equivalents		$	43,361		$	38,779
Receivables, net			11,990			9,566
Income taxes receivable			1,006			24,989
Inventories			7,614			7,558
Prepaid expenses			10,995			8,537
Total current assets			74,966			89,429
Property and equipment, net			580,497			578,050
Goodwill			25,111			25,111
Intangible assets, net			299			352
Total assets		$	680,873		$	692,942
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt		$	-		$	6,693
Accounts payable			23,092			14,418
Construction accounts payable			47,566			49,957
Accrued expenses			51,812			46,037
Short-term lease liability			897			639
Total current liabilities			123,367			117,744
Deferred income taxes			23,084			23,016
Long-term lease liability			14,021			13,228
Long-term debt			5,500			-
Other long-term liabilities			1,761			-
Total liabilities			167,733			153,988
Stockholders' equity
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued			-			-
Common stock, $.01 par value, 30,000,000 shares authorized;			191			191
19,154,031 shares issued and 19,091,497 outstanding at December 31, 2023;
19,096,300 shares issued and 19,093,676 outstanding at December 31, 2022
Additional paid-in capital			48,821			40,716
Treasury stock, 62,534 shares at December 31, 2023; 2,624 shares at December 31, 2022			(3,718)			(170)
Retained earnings			467,846			498,217
Total stockholders' equity			513,140			538,954
Total liabilities and stockholders' equity		$	680,873		$	692,942

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES

RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME

(In thousands, unaudited)

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

		Three Months Ended December 31,				Twelve Months Ended December 31,
		2023		2022		2023		2022
Net income		$18,202		$22,433		$82,448		$87,479
Expenses:
Stock based compensation		2,580		1,653		7,476		5,095
Depreciation and amortization		12,142		11,188		47,294		43,433
Provision for income taxes		7,292		5,443		26,079		21,543
Interest (income) expense		(111)		200		1,625		2,420
Construction litigation expenses (2)		2,827		783		6,946		7,261
Litigation proceeds, net (2)		-		-		-		(42)
Insurance claims proceeds, net (2)		-		-		(1,195)		-
Loss (gain) on disposition of assets (2)		71		(112)		159		(104)
Adjusted EBITDA (1)		$43,003		$41,588		$170,832		$167,085
(1) Adjusted EBITDA, a non-GAAP financial measure, consists of net income plus loss on disposal of assets, provision for income taxes, stock-based compensation expense, other one-time charges, pre-opening expenses, construction litigation expenses, acquisition expenses, interest expense, depreciation and amortization less interest income, any benefit for income taxes and gain on disposal of assets. Adjusted EBITDA should not be construed as an alternative to operating income (as determined in accordance with US Generally Accepted Accounting Principles), as an indicator of the Company's operating performance, as an alternative to cash flows from operating activities (as determined in accordance with US GAAP) or as a measure of liquidity. This measure enables comparison of the Company's performance over multiple periods, as well as against the performance of other companies in our industry that report Adjusted EBITDA, although some companies do not calculate this measure in the same manner and, therefore, the measure as presented may not be comparable to similarly titled measures presented by other companies. (2) Amount included in the "Other operating items, net" in the Consolidated Statement of Income.