Daniel Foley - VP of Finance and IR Frank Fertitta - Chairman and CEO Rich Haskins - President Steve Cootey - EVP, CFO, and Treasurer Joe Hasson - EVP and Chief Operating Officer

Joe Greff - JPMorgan Carlo Santarelli - Deutsche Bank Shaun Kelley - Bank of America Stephen Grambling - Goldman Sachs

Thank you, Nova. Good afternoon, and welcome to Red Rock Resorts' third quarter 2017 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. The risks and uncertainties related to these statements 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 of these figures to GAAP, please refer to the financial tables in our earnings press release and Form 8-K, which were 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 Steve Cootey.

Thank you, Dan, and good afternoon, everyone. Prior to getting into our third quarter numbers, we would like to take a moment to touch upon the terrible events of October 1.

Like everyone in our community, we are all deeply saddened by the tragedy and our thoughts are with the victims and their families, as well as the countless others both inside and outside of Las Vegas whose lives were affected by this horrific [insane] act. Response following the tragedy was nothing short of remarkable.

From the incredible bravery, cities first responders to those concertgoers who risked their lives to help out complete strangers. A list of heroes goes on and on.

In addition approximately $21 million has been raised to-date to assist those impacted by this devastating event which included a $1 million commitment from our company. This outpouring of support has only served to demonstrate what we already knew that Las Vegas is a strong resilient city that will rise to overcome this adversity and we are extremely proud to be a member of such a community.

Now let’s take a look at our third-quarter results. Continued strength to Las Vegas economy, as well as the initial impact of our ongoing revenue efficiency initiatives were both evident in the third quarter as we experience a very solid revenue and EBITDA growth as the company.

For the quarter consolidated net revenues inclusive of the Palms increased 15.3% to $400.4 million and our adjusted EBITDA increased 8.5% to $118.3 million. Margins for the quarter were 29.6% on a consolidated basis and 27.5% for Las Vegas operations.

Notably, when viewing our performance on a same-store basis excluding the Palms, we recorded our highest third quarter consolidated net revenue, highest adjusted EBITDA and highest adjusted EBITDA margins since 2008 even while experiencing significant construction disruption at Palace Station. In Las Vegas net revenues including the Palms increased 16.1% to $369.5 million and adjusted EBITDA increased 7.9% to $101.8 million.

These results continue to be negatively impacted by the significant construction disruption at both Palace Station and the Palms, as well as the cost related to enhance our food and beverage offerings and investments made in our team members. As discussed in our last call, $3.5 million of those costs will anniversary in the fourth quarter.

In addition with our operating and strategic initiatives continue to gain traction, we expect to return to expanded margins and historical flow-through levels of 50% to 70% on a same-store basis excluding disrupted properties. From an ongoing construction disruption standpoint, we expect Palace Station to experience disruption at the high-end of our previously estimated 10 million to 15 million annual disruption range through the completion of the project.

With respect to Palms, the construction disruption is very expensive right now and is expected to continue to the completion of the plan redevelopment property. Even with those negative impacts, we are pleased to report that we saw growth across almost every segment of our business.

Of particular in our same-store gaming revenues were about 6.2% driven by strong volumes across every gaming category. As we look for the Las Vegas economic story continues to be an extremely compelling one.

The population in Las Vegas is an all-time high and climbing as Nevada was the second fastest growing state in the nation last year. Moreover nearly one-third of the new residents arriving here every month are retirees which is a key demographic for our business.

On the employment front, the number of jobs are also an all-time high in Las Vegas is forecasted to be the third fastest growing job market in the United States through 2019. Wage growth also remains very solid with average weekly earnings up 4% on year-over-year basis for the trailing 12 months.

As for housing, September home prices were up 14% year-over-year and now up 135% from the trough. Despite all our cities economic success, Las Vegas is still one of the most affordable and tax friendly Sunbelt cities attracting both new residents and businesses alike.

In addition, there is over $14 billion of development planned or underway in Las Vegas which will further fuel this economic expansion. And with our best-in-class assets, market-leading distribution scale, strong development pipeline, and favorable supply demand dynamics we are uniquely positioned to take advantage of this continued growth and what we believe it is the best and fastest growing gaming market in United States.

In our Native American segment, we reported yet another strong quarter with management fees of $25.3 million up 17.2% from prior year as both Graton and Gun Lake continue to deliver very strong results. As a reminder, our management agreement with the Gun Lake Drive will be expiring in February 2018.

At the same time we would like to remind you that our management fee under the Graton management agreement will increase this from 24% to 27% this month. We want to take a moment to address the wildfire tragedy in Northern California that catastrophe affected many of our colleagues, guests and friends.

While we remain heartbroken over all those who are impacted by this tragedy, we also remain encouraged by the strength of the talented team of the people at Graton, as well as the resiliency of the Bay Area gaming market and it's ability to quickly rebound. Lastly regarding the North Fork project and as previously reported, the California Supreme Court has granted the trial's petition for review but before taking any further action until it's ruled on a very similar case before involving the enterprise tribe which received a favorable rulings at the appellate court level.

We continue to be hopeful that the court will schedule a hearing on the enterprise case in the first quarter of 2018. Turning now to some of our key strategic initiatives.

On the innovation technology front, we are extremely pleased with the progress we're making on our new IGT slot system upgrade. As previously noted, the upgrade has now been installed in over 20,000 slot machines located at our 20 properties across Las Vegas valley.

Although we are still in the early stages of rolling out and testing a new system, we are very encouraged by the initial metrics and guest feedback as we continue to evolve and refine the on device bonusing capabilities we are seeing increases in carded play which allow us to better understand communicate with and reward our guests. We are extremely pleased with these primarily results and can believe that over time this technology could prove to be a game changer from a player perspective.

Now let’s talk about our two development projects Palace Station and Palms. We remain very bullish on both of these opportunities as we are big believers in Las Vegas market and think we have very significant upside of both of these properties once the redevelopment project are concluded.

With their appeal to both Las Vegas locals and out-of-town visitors, we believe these hybrid properties extremely well-positioned to benefit from a strong economic and tourism trends in Southern Nevada. First an update on the Palace Station renovation as you may recall from our last call highlights of the previously announced project include a complete renovation of the casino floor which will include an expanded number of slot machines, as well as a fully renovated poker room, a refreshed exterior look including a new low rise side for Sahara and poker share and casino Valley area, a state-of-the-art bingo room which is already yielding positive returns to our property.

We will bring San Francisco-based Boathouse Asian Eatery will be making its Vegas debut offering an collected mix of Japanese and East Asian cuisine, chef Ralph Perrazzo, New York-based BBD’s restaurant will also making be his initial foray into Las Vegas with award-winning burgers and innovative approach to the neighborhood burger bar concept. Real entertainment will be bringing premium center of our concept to Vegas for the first time which will include a boutique nine screen multiplex featuring all luxury planners seating and food and beverage offerings delivered right to your seat and other property enhancements will include a new 14,000 square foot what they experience new resort style pool, two new bar concept and additional 300 parking spaces.

The Palace development project remains on time and on budget and is scheduled be completed in late 2018. Turning now to the Palms, we are very excited to announce today the second phase of our planned reemission and repositioning of the property and provide some key highlights with respect to both phases one and two of our plans.

The Palms is an iconic resort and was always known as the place to see and be seen in Las Vegas. Through our redevelopment of the property we intend to not only restore to that memorable status but take it to the next level of excitement by crafting the perfect mix of classic Vegas hospitality and extraordinary new experiences deliver through world-class partnerships.

Based on our experience of developing and operating high-end hybrid properties at Green Valley Ranch in Red Rock Resorts, as well as our deep experience with the Palms and as potential having been a part owner of the property for nearly a decade, we expect to generate a double-digit EBITDA return on our overall investment in the property going to mid teens return after an appropriate ramping period. Highlights of the previously announced Phase 1 of the Palms redevelopment include a complete renovation of the casino floor with an expanded number of table games and upgraded slot product, as well as an additional new high limit room for both slots and table games.

Our vibrant the Lucky Penny Café which opened in July to stellar reviews and all new take on the all-you-can-eat buffet concert which is currently scheduled to open this December, a new stylish and sophisticated stakeout that will reset the standard for Las Vegas steak houses. An intimate and authentic new bar restaurant, a new rooftop social club offered by Clique Hospitality Group a leader in Las Vegas nightlife which will offer unparalleled views of the city, an exclusive high-end casino logic experience also managed by Clique Hospitality Group, a new iconic center bar 18,000 net square feet of completely renovated meeting and convention space, a new hotel front desk registration and VIP registration reception areas, a fully upgraded 14 screen movie plex featuring luxury acquired tilt state sitting in every theater and an all new exterior look including the new marquee modernized poker share and new exterior façade and lush landscaping.

Phase 1 remains on schedule and to be fully completed in the second quarter of 2018, and today we are pleased to provide for the first time highlight of Phase 2 of the Palms redevelopment plan. These highlights will include 282 fully redesigned and renovated hotel rooms and luxury suites in fantasy tower, as well as the construction of 60 new hotel rooms and what was previously unfinished basement tower.

A spectacular 29,000 square foot nightclub developed in partnership with TAO Group, one of most successful night life and restaurant companies in the world. A new world-class 73,000 square foot pool pub also developed in partnership with the TAO Group which will redefine a day club experience in Las Vegas and it will come up to 5000 guests at a time and will be opened on a year-round basis.

The highly acclaimed Vento brought [indiscernible] from New York City by the TAO Group and new high-energy restaurant with James Beard award-winning celebrity chefs Bobby Flay featuring seafood and rockfish preparation in a style that he has become internationally known for. Michael Symon, James Beard and The Chew and Co-Host of ABC's of Chew making his Vegas debut with his special take on American barbecue.

Another James Beard award-winning chef Marc Vetri, the founder of the same Vetri restaurant in Philadelphia will also bring his inaugural restaurant to Las Vegas which will feature his critically acclaimed Italian fill. Writing additional 15,000 net square feet of completely renovated premium meeting and convention space with premier views of the strip, a new 20,000 square foot wellness spa and salon with 16 treatment rooms and state-of-the-art fitness facilities, a complete refresh of the 2600 seat Pearl theater which will be operated in partnership with Live Nation, the country's preeminent provider of live entertainment and additional 525 covered parking space.

Phase 2 is expected to be completed in late 2018 and early 2019. As you can see this transformation will touch virtually every aspect of the property and once complete we're confident that Palms will become the ultimate gaming and entertainment destination for both locals and tourists alike.

The total budget for Phases 1 and 2 of our redevelopment financial Palms including construction costs, capitalized interest and preopening expenses is now expected to be approximately $485 million. Notably our plant invest in the Palms including the original purchase price paid for the property will have us position right where we want to be with the asset at approximately 50% of replacement costs.

I will now cover some balance sheet and capital items. The company's cash and cash equivalents at September 30, 2017 was $222.4 million and total principal amount of debt outstanding at the end of third quarter was $2.69 billion excluding $250 million in aggregate principal amount of 7.5% senior notes that were redeemed in October 2017 with restricted cash consisting of a portion of the proceeds from the issuance of the $550 million in principal amount of the 5% senior notes in September 2017.

At September 30, debt to EBITDA and interest covered ratios net of excess cash and the 250 million principal amount of 7.5% net senior notes that were redeemed was 5 times and 4.6 times respectively. Capital spend in the third quarter was $66 million which included the Palace station expansion and previously discussed projects at Palms.

For 2017, we estimate the total capital expenditures will between 250 million and 275 million inclusive of the Palace Station and Palms projects. In 2018 we anticipate capital expenditures will be between 550 million and 570 million inclusive of the Palace Station and Palms projects.

Lastly on November 3, the company announced that its Board of Directors declared a cash dividend of $0.10 per Class A common share for the third quarter to be payable December 30 to shareholders of record as of November 15. Operator this concludes the prepared remarks for today and we are now ready to take questions from participants on the call.

Obviously the first question is with respect to the Palms obviously the Phase 2 CapEx sort of higher than maybe where we are expected. When you look at the 800 million plus of all-in investment, they'll have at that property and you look at a stabilized mid-teens return that you refer to before Steve, what property in the Las Vegas market do you look at as legitimate benchmark and does this property have to be significantly more resort Las Vegas strip type of patients versus Las Vegas local patients?

Joe this is Frank I mean, they sure we’re partners in this property for nearly 10 years. We have a history of understanding what the property is capable of doing.

Its last a lot tendering loving care, it’s going to basically be a completely new property with all these new amenities and offerings and we know with our experience at Queen Valley Ranch at the Palms and the Red Rock how to triangulate what we believe our returns were going to be given the location of this property.

And it sounds like you're likely going to experience significant disruption at the Palms so that disruption accelerate from here before it levels out, in other words are we looking at any EBITDA contribution over the next few quarters in the Palms and was there much EBITDA contribution in the third quarter that you just reported and that’s it for me.

I’ll take the second part and then I’ll hand it off to Joe. I mean from a EBITDA disruptions we actually given you the numbers you can fairly - you can pretty easily triangulate on what the Palms contribute this quarter to the press release.

But it was a diminimus amount - it was a diminimus amount of positive EBITDA.

Also from a disruption point of view we've now reached the point where from this point forward it should get better. We've got seen a pretty much torn apart at this point about 50% of the floor is disrupted.

From this point forward we are in the final stretch of turning it back on by Q2 2018 and that should put us in a terrific place to both add table games capacity and to yield the slot floor in a way that we've not had the opportunity to do it up to yet.

To follow up just a little bit on Joe's question obviously the 485 for the redevelopment I think as Joe mentioned maybe a little bit bigger number but clearly you guys have better sidelines then most of us and how to make the return on that project overall look like a low double-digit moving to mid teens but I guess I’ll ask the question a little bit differently when you look around at some of the opportunities that maybe present for you just in terms of Greenfield and some of the land that you own. Are you comfortable that the 800 million-ish investment in the Palms return is better than maybe what you could do or what you could conceivably do down the road from a Greenfield perspective with some of your other Vegas land?

Look I think we’re very confident with what we’re doing at both Palace Station and the Palms given their location on the I15 corridor in the middle of Las Vegas with what’s going on at the Las Vegas convention center the new Raider Stadium I mean Las Vegas tourism is outperforming almost every domestic gaming market there is same with the locals market and these properties are going to be able cater to both to tourist market and the locals market. And we feel good about the capital commitment we’re making there, there is a lot of properties in Las Vegas that have not been reinvested in.

And these two properties are basically going to be redone from head to toe going into 2019 with greater economy growing population. And guess what we still own and control the Durango site the Wild Wild West site we have four entitle development sites here in the Las Vegas market two in Reno, a Native American opportunity and the pipeline in Fresno California.

So I think the companies will position that going into 2019 we have these two fully renovated properties in the center of Las Vegas and still control our own destiny in terms of great both our opportunities.

And then on a slightly different topic obviously the topline story and clearly the Las Vegas macro story are very strong backdrop for you guys to continue to drive topline growth. As you look out to 2018 and 2019 is there anything kind of on the cost side that gives you concern and/or pause obviously labor and certainly competition in the market for labor is one thing I would kind of highlight.

But is there anything that you guys are concerned about from that perspective in terms of cost inflation.

I mean I think you hit the nail on the head in terms of the largest cost of the business is obviously labor and we’re doing our best to manage that cost but other than labor I think it's our average cost is running about $2.5 million a day with a 3% increase we probably expect something very similar next year.

Thank you very much guys.

Remember I was just going to say we’re super encouraged to see the same-store growth at our properties given the disruption at Palace Station and I think that the combination of both what we’re seeing in the population growth in Las Vegas, the demographics, the economic activity in the Valley. But I think it's also this new technologies that we deployed on these 20,000 slot machines we’re feeling really good about we’re seeing with that today and we’re in the early stages of being able to rollout I think other phases of this that should give us further benefit.

Frank let me piggyback on that just a little bit again you're correct we’re in the very early stages of developing and deploying new technology and there's a pipeline of it. The good news is already we are very confident that some of our topline growth demonstrated in Q3 is coming from that pipeline right now with far more to come.

Maybe just touch on the last point about the progress that you’re seeing in Vegas could just help us break that down little further in terms of the initiatives and if I million reading it correctly is this something that we could actually pull forward or extrapolate for the next couple of quarters here meaning this is really the first quarter that we’ve seen some of the initiatives you’ve underway actually starting to play out on the top line?

This is Joe Hasson again as I mentioned just a moment ago we’re very confident that Q3 demonstrated top line growth in part stemming from some of the technological initiatives that we've rolled out and we see a full pipeline of that on a go forward basis. It's also fair for me to say much like I said a quarter ago that we see good volume and velocity strength in our slot business across all work segments of our business.

It’s not isolated in one particular place it permeates all segments of our business. And I think that speaks ultimately not only to our technological capabilities and our operating expertise I think it also speaks to the strength of the locals Las Vegas market and the terrific destination called Las Vegas that’s enjoying the benefit of the economy.

I think to add to that Shaun the idea of actually including the disruption of the Palace we’re still carrying a 4.2% same-store sales growth which is huge.

And I’m very pleased on the operating side of the business to reiterate that we have some of the best maintained property certainly in the locals market and for anyone seeking a destination opportunity with us we know how to operate destination resorts you look at the Green Valley Ranch you look to Red Rock and in the very near future will be very proud of what with do with the Palms paralleling what we've done in the past at those destination style hybrid properties.

And maybe just to follow up or to dig a little deeper just to be clear was there any like hold impact last year there was some sports book hold dancing around in the latter part of the year that benefit or neutral or anything that we should be aware of just did I get too excited about extrapolating these forward in our models?

No we actually held normal.

Great thanks Steve

Yeah couple basis lower than last quarter actually.

And last one from me it will just as I was looking through the different that you announced for the Phase 2 a lot of these center around night life and celebrity chefs type things that can you probably drawn up a lot of excitement. Just kind of curious could just explain to us at least strategically you know was there any design here in terms of trying to pull people knowing that the palms location is a little bit off strip that you need to have some attraction of power people here how did you kind of pick the partners that you chose and type of features that your really spending the capital on because it seems like it was well thought out but I’m just curious for your thoughts on some of that?

We took the better part of I guess we closed on Palms about a year ago really trying to go through them fully put together a curetted experience of different amenities that were attract to broad demographic of both locals and tourist to the property and we believe the moment we get done this if you look at the Palms when it opened in 2001 and for a very good run before downturn in the economy around 2008 it was a place that was all about not only locals on the West end of the building and movie theatres and parking and the buffet and the café but it was really well known around the world as an entertainment destination for great life entertainment acts, for great restaurants, for nightlife for pool and the day pub and we’re basically go looking at what made the Palms successful when it originally opened and we’re making it better then it every was. And I think people will be very surprised to see when they see - it’s gone through a lot of pain right where about four quarters from now or a little bit over year from now the properties is going to be completely redone as a brand new facility and I think it's going to be must-see place when people come to Vegas and that's what the idea was give people a lot of reasons to come over to Palms.

I guess another follow-up on the Palms you mentioned this ramp period for returns are there any expectations you can provide for that timeline based on the types of changes you are planning. And at the end of that investment cycle what would you characterize is kind of the maintenance CapEx levels?

We still anticipate maintenance CapEx for the entire company be around $100 million I don’t think that has changed arguably the ramp up period is very typical to an integrated resort or the ultimate bones are actually built here. So we’re thinking yes probably do couple of years before we get fully ramped.

And I may have missed this, I think you mentioned that you’re touching virtually every aspect of the property is there going to be any change in the room count or any color you can provide on what's being done on a room basis?

As we added we actually added 60 new rooms so the new room count is roughly 776 rooms excluding Palms place it will give us the access to another 600.

Also for clarity those new 60 rooms came from pre-existing space that was unfinished space as part of the original design and development of Palms so we’re simply finishing that out to take it advantage of the extra lodging.

Well thank you everyone for joining us on call and we look forward to seeing you in about 90 days. Thank you.