Preopening expenses and construction litigation costs linked to its long-delayed Black Hawk, Colorado, casino expansion, weighed on Monarch Casino Resort’s fourth-quarter earnings. Net income fell from a year earlier and missed Wall Street forecasts, though revenue rose and topped them.
Shares sold off on the news, dropping 18.1% in regular trading.
Monarch officials said they’re monitoring the news about the spread of the coronavirus and are adapting to keep guests safe.
In a statement, Reno-based Monarch said its net income was $6.1 million, or 33 cents per diluted share, for the three months ended Dec. 31, down from net income of $7.3 million, or 39 cents per diluted share, a year earlier.
Analysts polled by Seeking Alpha had expected the company to earn 41 cents per share. Investors sent the stock down $5.83 to close at $26.47 on the Nasdaq. (Roiled by coronavirus concerns, stocks sold off broadly, as the Dow Jones industrial average fell 1,464.94 points.
Adjusted earnings before interest, taxes, depreciation, and amortization, a cash flow measure that excludes one-time costs, rose 5.2% to $14.1 million from $13.4 million.
Fourth-quarter revenue rose 3.8% to $62.1 million from $59.8 million and topped the $61.8 million estimate of Seeking Alpha-polled analysts. Casino, food and beverage, and hotel revenue all rose to spur the overall increase.
In their third-quarter earnings announcement in October, Monarch officials said they’d hoped to open a new 23-story, 500-room hotel tower, part of a $400 million-plus Black Hawk expansion, in the first quarter. Renovations on the rest of the property were supposed to open in the second quarter.
An opening for the whole expansion had been promised for 2019.
But Wednesday, Monarch postponed the tower opening again. The company said it’s working to secure a temporary certificate of occupancy for the first five floors in the building’s podium and some hotel tower floors. Monarch said it expects a “soft opening” of these features during the second quarter and a grand opening date for the hotel-casino tower project by the quarter’s end.
Monarch said that after the podium opens, work will start on converting a buffet to a specialty restaurant and adding a poker room and sports lounge. The work should finish in the 2020 fourth quarter, the company said.
On a brighter note, Monarch said it secured a master sports betting license from Colorado regulators on Feb. 20 and expected to debut its in-person sportsbook and Monarch-branded mobile sports app, on May 1, when the state legalizes sports betting.
Monarch co-Chairman and Chief Executive Officer John Farahi looked forward to the expansion’s eventual completion.
“2019 was an active and productive year for Monarch,” he said, “as we made significant progress toward completing construction in Black Hawk, thus setting the foundation for an exciting 2020 and beyond.”
Meanwhile, the company said it’s coping with construction disruptions in Colorado. PCL Construction Services, the contractor working on the Black Hawk casino renovation, sued Monarch in October, and Monarch said $3.1 in litigation expenses hurt fourth-quarter earnings. Monarch warned these delays and legal wranglings could continue and prompt more delays.
Monarch counted $1.4 million in preopening expenses and said the search for people to staff the expanded Colorado property is driving up costs.
Meanwhile, Monarch reported labor challenges in Reno, where it owns the Atlantis. A tight employment environment there, sparked by a local unemployment rate below the national average, spurred wage inflation, the company said.
“We expect this to be a recurring trend for the market and Atlantis in the years ahead,” Farahi said. “But we remain confident that our operating strategies will allow Atlantis to grow revenue and profit as our market share continues to expand.”
Farahi said the coronavirus, aka Covid-19, hadn’t hurt the company’s first-quarter results through March, although that had changed in the past several days.
“Our priorities are the health and safety of both our guests and team members, and we have taken prudent precautions throughout our facilities and workspaces,” he said. “We continue to monitor the situation and are prepared to quickly make operational changes should they be required.”
For the 12 months ended Dec. 31, Monarch said net income fell to $31.8 million, or $1.70 per diluted share, from net income of $34.1 million, or $1.83 per diluted share, in the previous year.
Twelve-month adjusted EBITDA rose 1.8% to $61.7 million from $60.6 million; 12-month revenue rose 3.7% to $249.2 million from $240.3 million.
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