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Item 2. Management’s Discussion and Analysis

2026-07-28 compared with 2026-04-30 · 60 added, 35 removed, 92 unchanged (51% of the section changed)

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In managing the food and beverage operation, we use Cost Of Goods Sold (“COGS”) percentage, which represents a percentage of product cost to the food and beverage revenue and is a measurement of commodity prices and menu sales prices.

Our management evaluates the KPI as compared to prior periods, our peer group, or market, as well as for any trends.

Our management evaluates the KPI as compared to prior periods, the peer group, or market, as well as for any trends.

RESULTS OF OPERATIONS

Comparison of Operating Results for the Three-Month Periods Ended March 31, 2026 and 2025

For the three months ended March 31, 2026, our net income totaled $27.6 million, or $1.52 per diluted share, compared to net income of $19.9 million, or $1.05 per diluted share, for the same period in 2025, reflecting a 38.9% and 44.8% increase in net income and diluted earnings per share, respectively.

Net revenues in the three months ended March 31, 2026, totaled $136.6 million, an increase of $11.2 million, or 8.9%, compared to the three months ended March 31, 2025.

Income from operations for the three months ended March 31, 2026, totaled $34.9 million compared to income from operations of $25.3 million for the same period in 2025.

Casino revenue increased 9.4% in the first quarter of 2026 compared to the first quarter of 2025.

The increase in casino revenue was driven primarily by the continued increase in market share at our properties.

Casino operating expense as a percentage of casino revenue decreased to 36.0% for the three months ended March 31, 2026, compared to 37.7% for the three months ended March 31, 2025, primarily due to better labor management and operational efficiency.

Food and beverage revenue for the first quarter of 2026 increased 5.6% compared to the first quarter of 2025 due to 4.5% increase in food and beverage revenue per cover, combined with an increase in food and beverage covers of 1.1%.

Food and beverage operating expense as a percentage of food and beverage revenue in the first quarter of 2026 decreased to 72.7% compared to 74.3% in the first quarter of 2025 due primarily to an increase in revenue per cover.

Hotel revenue increased 13.5% in the first quarter of 2026 compared to the same quarter of 2025 primarily as a result of an increase in available rooms.

ADR decreased by $7.49 ($184.83 in the first quarter of 2026 and $192.32 in the first quarter of 2025).

Hotel occupancy percentage decreased to 79.6% during the first quarter of 2026 compared to 80.9% during the first quarter of 2025.

Hotel RevPAR was $158.01 and $167.67 for the three months ended March 31, 2026 and 2025, respectively.

Hotel operating expense as a percentage of hotel revenue decreased to 36.0% in the first quarter of 2026 compared to 37.7% for the comparable prior year period primarily due to lower expenses per occupied room.

Other revenue increased 6.6% in the first quarter of 2026 compared to the same prior year period primarily due to an increases in spa and commission revenues.

SG&A expense increased to $27.8 million in the first quarter of 2026 from $27.2 million in the first quarter of 2025.

As a percentage of net revenue, SG&A expense decreased to 20.3% in the first quarter of 2026 compared to 21.7% in the same period in 2025.

Depreciation and amortization expense decreased to $10.5 million for the three months ended March 31, 2026, compared to $13.2 million for the same prior year period, due to assets placed into service in the fourth quarter of 2020, with the opening of the hotel tower at Monarch Black Hawk, becoming fully depreciated by the fourth quarter of 2025.

We recognized $0.3 million and $0.4 million for the three months ended March 31, 2026 and 2025, respectively, in professional service fees relating to our construction litigation.

In the first quarter of 2026, we accrued $1.1 million in interest on the PCL judgment that we are disputing.

In the first quarter of 2026 and 2025, we recognized $0.6 million and $0.3 million, respectively, of interest income, net of interest expense.

Comparison of Operating Results for the Three-Month Periods Ended June 30, 2026 and 2025

For the three months ended June 30, 2026, our net income totaled $32.5 million, or $1.78 per diluted share, compared to net income of $27.0 million, or $1.44 per diluted share, for the same period in 2025, reflecting a 20.4% and 23.6% increase in net income and diluted earnings per share, respectively.

Net revenues in the three months ended June 30, 2026, totaled $142.6 million, an increase of $5.7 million, or 4.2%, compared to the three months ended June 30, 2025.

Income from operations for the three months ended June 30, 2026, totaled $38.6 million compared to income from operations of $34.9 million for the same period in 2025.

Casino revenue increased 2.5% in the second quarter of 2026 compared to the second quarter of 2025.

The increase in casino revenue was driven primarily by the continued increase in visitation and gaming volume.

Casino operating expense as a percentage of casino revenue slightly decreased to 35.5% for the three months ended June 30, 2026, compared to 35.7% for the three months ended June 30, 2025, primarily due to improved labor management and operational efficiency.

Food and beverage revenue for the second quarter of 2026 increased 3.1% compared to the second quarter of 2025 due to 2.0% increase in food and beverage revenue per cover, combined with a 1.1% increase in food and beverage covers.

Food and beverage operating expense as a percentage of food and beverage revenue in the second quarter of 2026 increased to 72.9% compared to 70.3% in the second quarter of 2025 due primarily to increase in labor and product cost per cover.

Hotel revenue increased 13.0% in the second quarter of 2026 compared to the same quarter of 2025 as a result of increase in occupancy percentage to 83.7% during the second quarter of 2026 compared to 79.6% during the second quarter of 2025 resulting from improved convention group business in the current year and increase in ADR by $7.01 ($196.43 in the second quarter of 2026 and $189.42 in the second quarter of 2025).

Hotel RevPAR was $177.94 and $162.57 for the three months ended June 30, 2026 and 2025, respectively.

Hotel operating expense as a percentage of hotel revenue decreased to 32.1% in the second quarter of 2026 compared to 34.3% for the comparable prior year period primarily due to increase in the ADR and decrease in expenses per occupied room.

Other revenue increased 4.5% in the second quarter of 2026 compared to the same prior year period primarily due to increases in commission revenues at both properties and spa revenue at Monarch Black Hawk.

SG&A expense increased to $28.6 million in the second quarter of 2026 from $26.8 million in the second quarter of 2025.

As a percentage of net revenue, SG&A expense increased to 20.0% in the second quarter of 2026 compared to 19.6% in the same period in 2025.

The increase in SG&A expenses is primarily result of increase in payroll tax as a result of stock option exercises, legal expenses, property taxes and repair and maintenance expenses.

Depreciation and amortization expense decreased to $10.7 million for the three months ended June 30, 2026, compared to $13.6 million for the same prior year period, due to assets placed into service in the fourth quarter of 2020, with the opening of the hotel tower at Monarch Black Hawk, becoming fully depreciated by the fourth quarter of 2025.

We recognized $0.4 million and $0.9 million for the three months ended June 30, 2026, and 2025, respectively, in professional service fees relating to our construction litigation.

In the second quarter of 2026, we accrued $1.1 million in interest on the PCL judgment that we are disputing.

In the second quarter of 2026 and 2025, we recognized $07 million and $0.4 million, respectively, of interest income, net of interest expense.

Comparison of Operating Results for the Six-Month Periods Ended June 30, 2026 and 2025

For the six months ended June 30, 2026, we had a net income of $60.1 million, or $3.30 per diluted share, compared to net income of $46.9 million, or $2.50 per diluted share for the same period in 2025, reflecting a 28.3% and 32.0% increase in net income and diluted earnings per share, respectively.

Net revenues in the six months ended June 30, 2026, totaled $279.1 million, an increase of 6.4%, compared to the six months ended June 30, 2025.

Income from operations for the six months ended June 30, 2026 totaled $73.6 million compared to $60.2 million income from operations for the same period in 2025.

Casino revenue increased 5.8% in the first six months of 2026 compared to the first six months of 2025 and was driven by an increase in visitation and gaming volume.

Casino operating expense as a percentage of casino revenue decreased to 35.7% for the six months ended June 30, 2026 compared to 36.7% for the six months ended June 30, 2025 primarily as a result of operational improvements and efficiencies.

Food and beverage revenue for the first six months of 2026 increased 4.3% compared to the 2025 same period due to a 3.2% increase in food and beverage revenue per cover, combined with an increase of food and beverage covers by 1.1%.

Food and beverage operating expense as a percentage of food and beverage revenue increased in the first six months of 2026 to 72.8% from 72.2% for the same period in 2025 primarily to increase in labor and product cost per cover.

Hotel revenue increased 13.2% in the first six months of 2026 compared to the first six months of 2025 primarily due to an increase in occupancy from 80.2% during the first six months of 2025 to 81.7% during the same period of 2026.

ADR slightly increased by $0.04, from $190.76 in the first six months of 2025 to $190.80 in the first six months of 2026.

RevPAR was $168.03 for the first six months of 2026 and $164.91 for the first six months of 2025.

Hotel operating expense as a percentage of hotel revenue decreased to 33.9% in the first six months of 2026 compared to 35.9% for the comparable prior year period primarily as a result of decrease in labor and other operating expenses per occupied room.

Other revenue increased 5.5% in the first six months of 2026 compared to the same prior year period.

SG&A expense increased to $56.3 million in the first six months of 2026 from $54.0 million in the first six months of 2025 primarily.

The increase in SG&A expenses is primarily result of increase in payroll tax as a result of stock option exercises, legal expenses, repair and maintenance and property taxes expenses.

As a percentage of net revenue, SG&A expense decreased to 20.2% in the first six months of 2026 compared to 20.6% in the same period in 2025.

Depreciation and amortization expense increased to $21.1 million for the six months ended June 30, 2026 compared to $26.8 million for the same prior year period, due to assets placed into service in the fourth quarter of 2020, with the opening of the hotel tower at Monarch Black Hawk, becoming fully depreciated by the fourth quarter of 2025.

During the first six months of 2026 we recognized $0.8 million in professional services fees relating to our construction litigation.

During the first six months of 2025, we recognized $1.4 million in professional services fees relating to our construction litigation.

During the first six months of 2026, we accrued $2.2 million in interest on the PCL judgment that we are disputing.

During the first six months of 2026, we recognized $1.3 million of interest income, net of interest expense.

During the first six months of 2025, we recognized $0.7 million of interest income, net of interest expense.

CAPITAL SPENDING AND DEVELOPMENT

We seek to continually upgrade and maintain our facilities in order to present a fresh, high quality product to our guests.

Cash paid for capital expenditures for the three-month periods ended March 31, 2026 and 2025 totaled $7.5 million and $16.0 million, respectively.

During each of the three-month periods ended March 31, 2026 and 2025, our capital expenditures related primarily to the acquisition of gaming, and other equipment to upgrade and replace existing equipment at Atlantis and Monarch Black Hawk and property upgrades capital projects.

Cash paid for capital expenditures for the six-month periods ended June 30, 2026 and 2025 totaled $12.6 million and $28.4 million, respectively.

During the six-month periods ended June 30, 2025 capital expenditures related primarily to the redesign and upgrade of hotel rooms in the third tower at Atlantis.

During each of the six-month periods ended June 30, 2026 and 2025, capital expenditures also included acquisition of gaming, and other equipment to upgrade and replace existing equipment at Atlantis and Monarch Black Hawk and for properties enhancements.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity have been cash provided by operations and, for capital expansion projects, borrowings available under our Amended Credit Facility.

For the three months ended March 31, 2026, net cash provided by operating activities totaled $48.5 million, compared to net cash provided by operating activities of $36.5 million in the same prior year period.

This increase was primarily a result of an increase in net income, as well as change in working capital due to normal business fluctuations in Account receivable, Income tax receivable and Accrued expenses.

Net cash used in investing activities totaled $7.5 million and $16.0 million during each of the three months ended March 31, 2026 and 2025, respectively and consisted primarily of cash used for the acquisition of gaming and other equipment and ongoing maintenance capital expenditures at both properties.

Net cash used in financing activities in the first three months of 2026 totaled $17.4 million and consisted of $17.7 million cash used for the repurchase of Company stock under the Repurchase Plan and $5.4 million used for payment of dividends, partially offset by $5.7 million of net proceeds from stock options exercise.

Net cash used in financing activities in the first three months of 2025 totaled $4.1 million and consisted of $5.5 million used for payment of dividends, partially offset by $1.4 million of net proceeds from stock options exercise.

For the six months ended June 30, 2026, net cash provided by operating activities totaled $79.2 million, compared to net cash provided by operating activities of $70.6 million in the same prior year period.

This increase was primarily a result of an increase in net income.

Net cash used in investing activities totaled $12.4 million and $28.4 million during each of the six months ended June 30, 2026 and 2025, respectively.

Net cash used in investing activities during the first six months of 2025 consisted primarily of cash used for the redesign and upgrade of hotel rooms in the third tower at Atlantis.

Net cash used in investing activities during each of the first six months of 2026 and 2025 also included cash used for acquisition of gaming, and other equipment to upgrade and replace existing equipment at Atlantis and Monarch Black Hawk and for properties enhancements.

Net cash used in financing activities in the first six months of 2026 totaled $25.1 million and consisted of $17.5 million cash used for purchase of Company stock under the Repurchase Plan and $10.7 million used for payment of dividends, partially offset by $3.1 million of net proceeds from stock options exercise.

Net cash used in financing activities in the first six months of 2025 totaled $29.4 million and consisted of $20.0 million cash used for purchase of Company stock under the Repurchase Plan and $11.0 million used for payment of dividends, partially offset by $1.6 million of net proceeds from stock options exercise.

Sixth Amended Credit Facility

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The Amended Credit Facility extends the maturity date to January 1, 2028 and removes the lien on real property under the Prior Facility.

As of March 31, 2026, the Company had no outstanding principal balance under the Amended Credit Facility, a $0.6 million standby letter of credit and $99.4 million remained available for borrowing.

In addition to other customary covenants for a facility of this nature, as of March 31, 2026, we were required to maintain a Total Leverage Ratio (as defined in the Amended Credit Facility) of no more than 1.5:1 and Fixed Charge Coverage Ratio (as defined in the Amended Credit Facility) of at least 1.1:1.0.

As of March 31, 2026, our Total Leverage Ratio and Fixed Charge Coverage Ratio were 0.0:1.0 and 144.9:1.0, respectively.

As of June 30, 2025, the Company had no outstanding principal balance under the Amended Credit Facility, a $0.6 million standby letter of credit and $99.4 million remained available for borrowing.

In addition to other customary covenants for a facility of this nature, as of June 30, 2026, we were required to maintain a Total Leverage Ratio (as defined in the Amended Credit Facility) of no more than 1.5:1 and Fixed Charge Coverage Ratio (as defined in the Amended Credit Facility) of at least 1.1:1.0.

As of June 30, 2026, our Total Leverage Ratio and Fixed Charge Coverage Ratio were 0.0:1.0 and 257.5:1.0, respectively.

The interest rate under the Amended Credit Facility is either SOFR (the Secured Overnight Financing Rate) plus a margin of 1.25%, or a base rate (as defined in the Amended Credit Facility) plus a margin ranging of 0.25% per annum.

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We believe that we are in full compliance.

We believe that our anticipated operating cash flows will be sufficient to sustain operations for the twelve months from the filing of this Form 10-Q for the quarter ended March 31, 2026 and fulfill our capital expenditure plans and authorized dividend distributions.

We believe that our anticipated operating cash flows will be sufficient to sustain operations for the twelve months from the filing of this Form 10-Q for the quarter ended June 30, 2026 and fulfill our capital expenditure plans and authorized dividend distributions.

However financial, economic, competitive, regulatory, and other factors, many of which are beyond our control, could negatively impact our operations.

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CRITICAL ACCOUNTING POLICIES

A description of our critical accounting policies and estimates can be found in Part II Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2025 Form 10-K.

For a more extensive discussion of our accounting policies, see Note 1, “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in our 2025 Form 10-K filed with the SEC on February 24, 2026.

A description of our critical accounting policies and estimates can be found in Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2025 Form 10-K.

For a more extensive discussion of our accounting policies, see Note 1.

“Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in our 2025 Form 10-K filed with the SEC on February 24, 2026.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis