Monarch reaffirms M&A stance despite indifferent third quarter

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Monarch Casino and Resort has once again reaffirmed that potential purchases are firmly on the group’s radar, but that these will only be pursued in instances that permit the deployment of “operating expertise in a financially prudent manner”.

In addition, John Farahi, Co-Chair Chief Executive Officer, also noted a commitment to returning capital to the company’s stockholders. 

“Our strong balance sheet and free cash flow position us to invest in our existing properties, pay cash dividends and consider potential share repurchases under our existing share repurchase authorisation,” he noted.

These comments came as the group, which owns and operates the Atlantis Casino Resort Spa in Reno, Nevada, and Colorado’s Monarch Casino Resort Spa Black Hawk, reported a third quarter revenue drop to $133m (2022: $133.7m).

An increase across the food and beverage (5.3 per cent) was offset by decreases across the casino (four per cent) and hotel (0.9 per cent) segments. 

These revenue declines were aligned to increased competitive pressures in Reno, as well as a softening in the overall economic environment.

Selling, general and administrative expenses for the third quarter stood at $27.1m compared to $25.7m in the prior-year period, driven by higher labour, utility and promotional expenses.

Net income decreased 12.1 per cent to $24.16m (2022: $27.49m), while adjusted EBITDA closed at $49.22m, down 4.8 per cent from $51.69m year-on-year.

For the year-to-date, revenue is 4.5 per cent ahead YoY after closing at $373.29m (2022: $357.33m), net income dropped 1.2 per cento to close at $64.24m (2022: $65m) and AEBITDA finished the nine month period at $127.82m, up 1.9 per cent from $125.49m.

“Our 2023 third quarter results were strong as we continued to grow revenue and EBITDA in Black Hawk, and companywide, employed operational efficiencies and expense management,” Farahi commented. 

“During the third quarter our operating results were negatively impacted by competitive pressure in Reno and the current macroeconomic environment. Third quarter net revenue and adjusted EBITDA were $133m and $49.2m, respectively, leading to an adjusted EBITDA margin of 37 per cent.

“At Monarch Black Hawk, we are working to further expand market share among mid-to-upper tier players. We remain confident that our market-leading casino resort amenities position Monarch Black Hawk for further growth and market share gains.

“At Atlantis, third quarter results were impacted by, what we believe to be, an irrational promotional environment driven by our competitors. Our primary focus remains the ongoing enhancement of the property and we expect to begin a redesign and upgrade of the third Atlantis hotel tower in early 2024.”