Good afternoon, and welcome to Red Rock Resorts Second Quarter 2018 Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Daniel Foley, Vice President of Finance and Investor Relations. Please go ahead.

Thank you, Andrea. Good afternoon, and welcome to Red Rock Resorts' Second Quarter 2018 Earnings Conference Call. Joining me on the call today from Red Rock Resorts are Frank Fertitta, Chairman and Chief Executive Officer; Rich Haskins, President; Steve Cootey, Executive Vice President, Chief Financial Officer and Treasurer; and Joe Hasson, Executive Vice President and Chief Operating Officer. Our call today will include forward-looking statements under the safe harbor provisions of the United States Federal Securities Laws. Developments and results may differ from those projected or implied due to a variety of factors. The risks and uncertainties related to these statements, company's future operating results, and financial conditions are detailed in our filings with the SEC. During this call, we will also discuss non-GAAP financial measures. For definitions and a complete reconciliation [indiscernible] to GAAP, please refer to the financial tables in our press release and Form 8-K, which we filed this afternoon prior to the call. Also, please note that this call is being recorded. I would now like to turn the call over to Stephen Cootey.

Thank you, Dan, and good afternoon, everyone. As you can see from our earnings release, the second quarter was another outstanding one for Red Rock Resort. For the quarter consolidated net revenues increased 1.5% to $416.2 million adjusted EBITDA increased 3.9% to $124.6 million and margins increased approximately 70 basis points to 29.9%. With respect to our Las Vegas operation, net revenues for the quarter increased 4.1% to $393.7 million adjusted EBITDA increased 7.1% to $112.6 million and margins increased 80 basis points to 28.6% all this by the impact of substantial ongoing construction disruption at both Palace Station and the Palms. This marks our highest same-store second quarter net revenue and adjusted EBITDA since 2008. Excluding the impact of the two disrupted properties and performance of our Las Vegas operations was even more impressive as net revenues increased nearly 7% adjusted EBITDA increased nearly 14%, margins expanded by over 200 basis points over 33% and flow through was solid within our targeted 50% to 70% range. This stellar top-line and bottom-line performance was once again driven by solid growth across every major gaming category together with a constant focus on revenue and cost initiatives. Notably, we have now seen gaming revenues increase by an average of 6.5% and our non-disrupted Las Vegas properties over the last four quarters far outpacing the growth rate of the overall market and not to be outdone are non-gaming amenities also saw solid growth during the quarter. The second quarter results are powerful illustration of the strength of our irreplaceable Las Vegas platform as our best-in-class assets and locations and unparalleled distribution scale consistently allow us to outperform the market particularly in an up economy such as the one we are experiencing now. With respect to the future outlook, Las Vegas remains one of…

We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Joe Greff of JPMorgan. Please go ahead.

Good afternoon everybody.

Hi Joe.

Steve, in the second quarter I know you are not going to give us as much as detail you can visualize. But when you look at the contribution in the second quarter from both Palace and Palm relative to their contribution or impact in the 1Q was the revenue and EBITDA in the 2Q meaningfully better than the 1Q?

We generally don't comment on property by property. Yes, I could say that from a Palace perspective you're seeing some meaningful contribution on the EBITDA side more so than Q1.

Okay. And then well we're going to leave this topic. Unless you want to talk about it in a qualitative way or a quantitative way. Maybe you can talk about the early results in the performance in phase one The Palm tree development project, I just want to talk about it in terms or presentation or occupancy or I know it's been early and opened up in mid-late May but because I'm curious some early commentary there.

No, sure. No problem. As I mentioned in the comments, the Palms. The elements of The Palms that have opened up in May have had received rave reviews. It's now turned in, I think I believe it's now turned the corner as they have before. People never wanted to go down Flamingo, past Bellagio and now people actually want to come and eat and hang out at The Palms. If you look at our gaming revenue, our food and beverage revenue all have trended up since our May 17 opening. Again, while this is still early those are very positive trends. I think if there was one thing that we're behind on is hotel and catering but that's not surprising because we've had over 200 rooms our of pockets we're redeveloping. So that's almost 18,000 room nights. So, the property does continue to be very disruptive but we're very happy with the progress.

Okay great. And then a final question and that to Palace Station. Would you expect that the renovation disruption in the 3Q is less than whatever you experienced in 2Q or how are you seeing that impact your balance sheet?

I think the disruption in the casino will be waning in Q3. In fact, I think this week we get the racing sports book in the poker room, turned over those have been disrupted but they're nearing completion and should be turned over this week. Primarily, the disruption in Q3 is going to be the hotel and suite renovation that we have going on there. So, we have quite a few rooms out of service at Palace Station right now. But we definitely see the light at the end of the tunnel. It definitely feels like it's getting traction week-to-week and it's had great results are feedback since we've opened the new feast buffet and the new section of the casino down there. So, working on very good right now.

Great. Thanks guys. Congrats of the good results.

Thanks Joe.

Our next question comes from Carlo Santarelli of Deutsche Bank. Please go ahead.

Hi everybody. Good afternoon. Thanks for taking my question. Steve, thanks for the color on kind of the same-store performance. I was just wondering within obviously the 200-basis points margin expansion and obviously you mentioned that the flow through within the 50% to 70% range. Could you talk a little bit about what you're seeing with respect to the competitive environment in terms of marketing and promotional dollars in the Las Vegas locals market maybe relative to this time last year?

Carlo, thanks for the question. I mean the promotional environment in Las Vegas continues to feel extremely rational.

Great. And how much would you say in terms of the – it's going to be kind of tough I would imagine to answer, but just in terms of what you're seeing from the IGT systems upgrade how much would you kind of attribute to the overall market strength and the more team promotional market to the 6% plus gaming revenue growth that you guys have seen here over the past year and how much of it would you say amounts to some of the technology changes that you guys have made in general?

I think it's a combination of a lot of different factors. I think if you look historically at the company's performance since we went public in 1993 other than downturn and 2008 through 2011 we've always outperformed the market. And I think if you look recently at our performance over the last year or so, we've nearly grown at double the rate of the market to get back our company out of the market, which we think is pretty strong and there's several factors. One is best location in market, best assets in the market and I think the innovative technology that we've rolled out with the IGT system has been really good for us over the last year. We're very excited about what we have in the pipeline to roll out late this year and through the remainder of 2019. But I think it's a combination of all those factors together.

Great. Thank you very much guys.

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

Hi. Good afternoon everyone. Steve, just to kind of go back to the ramp up of Palms. I know it's hard when you're not giving property specific numbers, but just from a sort of expectation perspective I mean can we expect like some -- at least on a year-on-year basis that there is a modest improvement from what we were seeing kind of last year at this time as we start to move through the third and fourth quarter or what's the rate baseline or cadence given seasonality just to think about for the balance of the year there?

Well, it's not so much a seasonality question. When the property is undergoing some significant disruptions, as I mentioned in the comments and some of the commentary here one of the biggest drags on really activating that property is getting the hotel room suites online.

So, right now I mean we are missing pretty much the entire Fantasy Tower and suites which is undergoing renovation, which will start to come online floor by floor at the end of the third quarter and throughout the fourth quarter. By the end of the fourth quarter, we should have all the renovated rooms and suites online. And that will be a big-big plus for us. And then towards the end of this year, late in the year we should get two brand new restaurants one from Michael Symon, one from Marc Vetri those will help having more amenities in the facility. And then as we come around through the spring of 2019, we will have all the assets including 500 more parking garage spots and additional amenities. The only thing will be missing is the phase three casino expansion with the new Tim Ho Wan restaurant from Hong Kong. But the majority of it will be done within the spring of 19. I can tell you though, if you just go over the property and walk around the pool, theatre has been completely renovated. All new sound system, all new LED electronics for the show to go on in there. We had [indiscernible] last Saturday night, the place was packed, it felt very good. And so, from the assets that are currently online we're feeling very good week-to-week. But we still know we have a lot of disruption to work through, but the reviews that we're getting from is that people want to be at the property and we're excited about that.

That's great. And just maybe to add a little bit more, I mean I was looking at the website earlier and some of the renovation that's done it doesn't look like you are super actively marketing them yet. So, when do you kind of make the big marketing push or splash to try and really ramp this thing as it relates to kind of destination or is that not until at least middle of next year. Do you hope to have it at least by summertime or how do you think about it?

Fine. So, look it's way easier to open a casino resort all at once right and when you go through a renovation like this where things are opening in a phase, it becomes a little bit more difficult to communicate. But we have rolled out an all new image campaign with AKQA both locally, digitally, socially. That campaign has had a lot of positive feedback on repositioning The Palms as a place that people want to be seen in Las Vegas and we have also started to activate our database marketing here locally to get trial through the facility. But as you can imagine, I mean we still are disrupted with parking right now as the parking garage is under expansion. We're lacking the pool, day club, the night club, the spa and multiple restaurants. And so, it will be a ramped effort say during the third, fourth, and a big push as we near the end of the first quarter.

Great. Thank you very much.

Our next question comes from Chad Beynon of Macquarie. Please go ahead.

Hi. Good afternoon. Congrats on the nice quarter. Can you guys talk about what you're seeing within your card and slot segments any additional data within the boarding pass program that you can communicate in terms of different tiers? And then also related to the 4Q technology investment could you just ballpark roughly what we're talking about in terms of CapEx is this de minimus amount or is it something that needs to be noted within our model at this time? Thanks.

Can you repeat the last part of your question?

Sure. Just with respect to the I think you noted some investment in data analytics and some enhancements that you were planning to roll out in the fourth quarter, I didn't know if that was a big CapEx number if that was already kind of included in terms of in the guidance that you laid out.

Let me take the segment portion of that. This is Joe Hasson speaking. What we saw in the second quarter was solid growth in every segment across which we measure. Now that includes top end, middle of the pack so to speak and the retail end of our business. There's also growth in the destination portion of our business coming from regional and national market. So, a very comfortable and an uptrend that really drove the kind of results that Steve spoke to a few minutes ago. When it comes to ongoing enhancements to the platforms and the slot systems that we have in the pipeline, we see that again we're in the early innings and that is fuel in some of our growth and we see it as a view to the future as how do we continue to resonate with both local guests and also destination traveler's. Our ability to use data analytics and to create attractive marketing campaigns and campaigns that I would also call sticky once the guest is engaged with us longer time on device a more rewarding experience, a more personalized experience. All of that is contributing to what we see currently, as well as how we see the future.

I'll now take the other, the second CapEx question. So, the initiatives that we're talking about data analytics HRA system that should add, I know that's probably going to be about $1 million to $2 million plus or minus.

Okay. Thank you. My follow-up is related to the repeal of PASPA, so obviously you guys are currently in a market that has had sports gaming for a while and you guys do a really good job. With that is there an opportunity to maybe partner with another operator in another market or kind of tap in to what could be growth in United States. Just given your knowledge and your history and your experience in sports betting. Thanks.

We've definitely seen a flurry of activity and announcements over the last couple of days. And I agree with you, I think there is an opportunity for us to take advantage of this and we're still evaluating those opportunities to take our expertise outside of Nevada.

Okay. Thank you very much.

And our next question comes from Stephen Grambling of Goldman Sachs. Please go ahead.

Okay. Thanks. I guess a follow-up to Shaun's question on The Palms ramp. I guess how do you generally think about initial pricing on the room's post renovation and specifically how you maybe benchmark that property versus others and what kind of uplift you might expect kind of pre to post if that's too specific how would you just characterize the ramp here and magnitude for that property versus maybe Palace Station?

Certainly, as we look at Palms it's a premier product and as we renovate rooms we see an upwards ramp in terms of the kind of dollars that we can look for from the concerning consumer to simply pay for great quality and a terrific experience as the rest of the assets will have. So, nothing but an up ramp going forward.

And we believe that once we have the whole amenity package that we'll bring online at The Plams then we'll be able to significantly ramp the pricing of rooms, because people going to want to be there for a lot of reasons other than -- they're going to be fabulous rooms. I think some of the nicest suites in the entire city. But once we have the pool, the day club, the night club, the spa the other restaurants and amenities I think we're going to have a lot more pricing leverage.

And just, as you know there is only 770 of these. So, we'll be able to yield the rooms properly.

And I guess one follow-up on that. Have you already effectively booked rooms and rates, I guess booked the meeting space in kind of advance or is that still an ongoing discussion?

Certainly, underway in terms of future bookings. With lots more to come. I think Steve you mentioned that there is more finished square footage coming in the form of future developments and redevelopment. Our process to sell that is underway now, so that we can get out in front of that curve and take good advantage of terrific assets.

And I guess last one looks like FNB turned the corner to growth this quarter. And maybe I missed this, but how would same-store non-casino revenue have grown this quarter and if you can just elaborate on maybe the puts and takes I think are from here?

Are you saying same-store – I mean basically if you exclude the non-disruptive I mean all factors, I mean I think you're referring to is hotel because if you look at their press release that's the one that looks like it's down. You have to factor in the 439 rooms or almost 39,000 room lights we took out of The Palms in the palace and other 18,000 rooms that we took out of The Palms. So, if we actually take those out our hotel revenue is up approximately 5% on an undisruptive basis. And the same could be said on food beverage which is up high single-digits on a non-disruptive basis. So, that really kind of leaves the non-gaming amenities.

That's great. Thanks so much.

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

Well, thank you everyone for joining and we all look forward to talking in about 90 days. Take care.