Monarch Casino Resort on Wednesday sang what’s likely to be a common first-quarter earnings season refrain. Earnings were up, revenue was climbing, and everything looked rosy pink.
But then the novel coronavirus rolled in like a thundercloud, followed by state-mandated casino shutdowns. Everything quickly grew darker.
The Reno-based casino operator reported per-share earnings and revenue that missed Wall Street forecasts, although the company tried its level best to draw a pre- and post-coronavirus line. January and February results were partitioned into a separate column from the March results, then recombined further to the right.
In a statement, the company said its net income was $2.1 million, or 11 cents per diluted share, for the three months ended March 31, down from net income of $7.1 million, or 38 cents per diluted share, a year earlier. Analysts polled by Seeking Alpha had, on average, forecast 18 cents per share in earnings.
Adjusted earnings before interest, depreciation, and amortization, a cash flow measure that excludes one-time costs, were $8.1 million for the quarter, down from $13.7 million, a year earlier.
Revenue fell 13.2% to $51 million from $58.7 million. Seeking Alpha-polled analysts had, on average, forecast $54.3 million in revenue for the quarter.
Wall Street may have expected worse. Monarch shares rose 35 cents, or 1.39%, Wednesday to close at $25.52 on the Nasdaq.
Zeroing in on just the January-February, unsurprisingly, paints a sunnier picture for Monarch. Two-month earnings were $4.8 million, or 26 cents per diluted share, up from net income of $3.5 million, or 19 cents per share, a year earlier. Two-month revenue rose 14.1% to $42.2 million from $37 million.
In his comments, Monarch CEO John Farahi delivered a massive understatement, calling the quarter “a study in contrasts.”
Colorado Governor Jared Polis’ March 16 shelter-in-place edict temporarily shuttered the Monarch Black Hawk. A day later, Nevada Governor Steve Sisolak’s similar edict temporarily closed the Atlantis in Reno. Neither state, Monarch noted, has provided clear dates or guidelines for when casinos may reopen.
“Since closing our properties, our main concern has been the safety and health of our team members,” Farahi said in the statement. “We are also working diligently to preserve our liquidity and to best position the company and our properties for renewed long-term success once the COVID-19 threat passes to the point where reopening will be allowed and ultimately when more ‘normal’ operations are permitted and are prudent.”
Monarch said its full team received two weeks of regular pay after operations were suspended, but that all team members pushed from jobs by the closure had since been placed on unpaid furlough while keeping employee health benefits.
Farahi said he had forgone his salary since March 30, the board had foregone directors’ fees as of April 1 and its working executive management team had taken a 50% salary cut.
Waxing optimistic, Farahi said past performance and its banking relationships helped the company land limited covenant amended credit line breaks, including a waiving of a mandatory principal $5 million payment due March 31. Monarch continues to negotiate with its bank, presumably for concessions, as the pandemic unfolds.
“We believe these actions, the company’s solid cash position, and our modest leverage give us the financial flexibility to manage through the COVID-19 impact,” Farahi said, “and prepare our properties for re-opening and a return to normalized operations.
“While the pandemic has presented serious challenges and setbacks for the entire gaming and hospitality industry, we believe the actions we’ve taken and the quality of our properties in the markets we serve will be key factors in Monarch’s long-term success,” he added.
Beyond the coronavirus news, Monarch sounded familiar notes. Construction on a new 23-story, 500-room hotel tower, part of a $400 million-plus Black Hawk expansion continues, as it has for several quarters.
The company said it’s working with the general contractor and Black Hawk city officials to secure a temporary occupancy certificate for the first five floors in the building’s podium and some hotel tower floors. Monarch said the COVID-19 outbreak has slowed efforts, and the company so far lacks a definitive timeline for the opening.
Last month, in fourth-quarter earnings documents, Monarch said it expected a “soft opening” of these features and a grand opening date for the hotel-casino tower project during the second quarter.
An opening for the whole expansion had been promised for 2019.
Monarch had previously said that once the podium opens, work would start on converting a buffet to a specialty restaurant and adding a poker room and sports lounge. Monarch had it expected the work to finish in the fourth quarter.
On Wednesday, Monarch said it will update the timetable for the soft opening of the resort portions, the expansion’s grand opening, and the remaining makeover work “as it becomes available.”
Follow Matthew Crowley on Twitter @copyjockey
