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Item 2. Management’s Discussion and Analysis

2025-07-29 compared with 2025-05-02 · 52 added, 34 removed, 98 unchanged (47% of the section changed)

76 unchanged sentences

RESULTS OF OPERATIONS

Comparison of Operating Results for the Three-Month Periods Ended March 31, 2025 and 2024

For the three months ended March 31, 2025, our net income totaled $19.9 million, or $1.05 per diluted share, compared to net income of $18.3 million, or $0.93 per diluted share, for the same period in 2024, reflecting a 8.7% and 12.9% increase in net income and diluted earnings per share, respectively.

Net revenues in the three months ended March 31, 2025, totaled $125.4 million, an increase of $3.7 million, or 3.1%, compared to the three months ended March 31, 2024.

Income from operations for the three months ended March 31, 2025, totaled $25.3 million compared to income from operations of $23.8 million for the same period in 2024.

Casino revenue increased 5.0% in the first quarter of 2025 compared to the first quarter of 2024.

Comparison of Operating Results for the Three-Month Periods Ended June 30, 2025 and 2024

For the three months ended June 30, 2025, our net income totaled $27.0 million, or $1.44 per diluted share, compared to net income of $22.7 million, or $1.19 per diluted share, for the same period in 2024, reflecting a 19.1% and 21.0% increase in net income and diluted earnings per share, respectively.

Net revenues in the three months ended June 30, 2025, totaled $136.9 million, an increase of $8.8 million, or 6.8%, compared to the three months ended June 30, 2024.

Income from operations for the three months ended June 30, 2025, totaled $34.9 million compared to income from operations of $29.5 million for the same period in 2024.

Casino revenue increased 12.1% in the second quarter of 2025 compared to the second quarter of 2024.

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 37.7% for the three months ended March 31, 2025, compared to 38.0% for the three months ended March 31, 2024, primarily due to better labor management and operational efficiency.

Food and beverage revenue for the first quarter of 2025 decreased 0.5% compared to the first quarter of 2024 due to 0.7% decrease in covers, resulting from the calendar (one less day in first quarter of 2025 than the first quarter of 2024).

Food and beverage revenue per cover increased 0.2%.

Food and beverage operating expense as a percentage of food and beverage revenue in the first quarter of 2025 decreased to 74.3% compared to 74.8% in the first quarter of 2024 due primarily to the increase in revenue per cover.

Hotel revenue decreased 0.4% in the first quarter of 2025 compared to the same quarter of 2024 primarily as a result of lower number of available rooms as a result of the calendar (one less day in first quarter of 2025 than the first quarter of 2024) and more rooms in the current year out of availability due to the ongoing renovation.

ADR increased by $10.83 ($192.32 in the first quarter of 2025 and $181.49 in the first quarter of 2024).

Hotel occupancy increased to 80.9% during the first quarter of 2025 compared to 78.7% during the first quarter of 2024.

RevPAR was $167.67 and $153.42 for the three months ended March 31, 2025 and 2024, respectively.

Hotel operating expense as a percentage of hotel revenue decreased to 37.7% in the first quarter of 2025 compared to 35.6% for the comparable prior year period primarily due to lower available rooms.

Other revenue increased 9.2% in the first quarter of 2025 compared to the same prior year period primarily due to an increase in spa and commission revenues at both properties.

SG&A expense increased to $27.2 million in the first quarter of 2025 from $27.1 million in the first quarter of 2024.

As a percentage of net revenue, SG&A expense decreased to 21.7% in the first quarter of 2025 compared to 22.3% in the same period in 2024.

Depreciation and amortization expense increased to $13.2 million for the three months ended March 31, 2025, compared to $12.5 million for the same prior year period, due to new assets placed into service with the ongoing renovation at Atlantis.

We recognized $0.4 million and $0.5 million for the three months ended March 31, 2025 and 2024, respectively in professional service fees relating to our construction litigation.

In the first quarter of 2025, we recognized $0.3 million of interest expense, net of interest income, related to the amortization of debt issuance costs.

Casino operating expense as a percentage of casino revenue decreased to 35.7% for the three months ended June 30, 2025, compared to 37.7% for the three months ended June 30, 2024, primarily due to better labor management and operational efficiency.

Food and beverage revenue for the second quarter of 2025 increased 1.1% compared to the second quarter of 2024 due to 4.0% increase in food and beverage revenue per cover, partially offset by a decrease in food and beverage covers by 2.8%.

Food and beverage operating expense as a percentage of food and beverage revenue in the second quarter of 2025 decreased to 70.3% compared to 73.8% in the second quarter of 2024 due primarily to decrease in labor expense and increase in revenue per cover.

Hotel revenue decreased 3.1% in the second quarter of 2025 compared to the same quarter of 2024 primarily as a result of decrease in occupancy percentage to 79.6% during the second quarter of 2025 compared to 85.5% during the second quarter of 2024 resulting from lower convention group business in the current year than in the prior year.

ADR increased by $4.08 ($189.42 in the second quarter of 2025 and $185.34 in the second quarter of 2024).

Hotel RevPAR was $162.57 and $172.06 for the three months ended June 30, 2025 and 2024, respectively.

Hotel operating expense as a percentage of hotel revenue increased to 34.3% in the second quarter of 2025 compared to 33.5% for the comparable prior year period primarily due to lower revenue.

Other revenue increased 7.7% in the second quarter of 2025 compared to the same prior year period primarily due to increases in spa and commission revenues at both properties.

SG&A expense increased to $26.8 million in the second quarter of 2025 from $26.2 million in the second quarter of 2024.

As a percentage of net revenue, SG&A expense decreased to 19.6% in the second quarter of 2025 compared to 20.4% in the same period in 2024.

Depreciation and amortization expense increased to $13.6 million for the three months ended June 30, 2025, compared to $12.4 million for the same prior year period, due to new assets placed into service with the ongoing renovation at Atlantis.

We recognized $0.9 million and $0.1 million for the three months ended June 30, 2025 and 2024, respectively, in professional service fees relating to our construction litigation.

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

In the second quarter of 2024, we recognized $0.2 million of interest expense, net of interest income.

See further discussion of our Amended Credit Facility in the LIQUIDITY AND CAPITAL RESOURCES section below.

Comparison of Operating Results for the Six-Month Periods Ended June 30, 2025 and 2024

For the six months ended June 30, 2025, we had a net income of $46.9 million, or $2.50 per diluted share, compared to net income of $41.0 million, or $2.12 per diluted share for the same period in 2024, reflecting a 14.4% and 17.9% increase in net income and diluted earnings per share, respectively.

Net revenues in the six months ended June 30, 2025, totaled $262.3 million, an increase of 5.0%, compared to the six months ended June 30, 2024.

Income from operations for the six months ended June 30, 2025 totaled $60.2 million compared to $53.3 million income from operations for the same period in 2024.

Casino revenue increased 8.6% in the first six months of 2025 compared to the first six months of 2024 and was driven by an increase in market share at both properties.

Casino operating expense as a percentage of casino revenue decreased to 36.7% for the six months ended June 30, 2025 compared to 37.8% for the six months ended June 30, 2024 primarily as a result of decrease in labor expense as a percentage of revenue and decrease in promotional allowances.

Food and beverage revenue for the first six months of 2025 increased 0.3% compared to the 2024 same period due to a 2.1% increase in food and beverage revenue per cover, partially offset by a decrease of food and beverage covers by 1.8%.

Food and beverage operating expense as a percentage of food and beverage revenue decreased in the first six months of 2025 to 72.2% from 74.3% for the same period in 2024 primarily as a result of operational improvenents and eficiancies.

Hotel revenue decreased 1.9% in the first six months of 2025 compared to the first six months of 2024 primarily due to a decrease in occupancy from 82.2% during the first six months of 2024 to 80.2% during the same period of 2025 partially offset by an increase in ADR by $7.22, from $183.54 in the first six months of 2024 to $190.76 in the first six months of 2025.

RevPAR was $164.91 for the first six months of 2025 and $162.96 for the first six months of 2024.

Hotel operating expense as a percentage of hotel revenue increased to 35.9% in the first six months of 2025 compared to 34.5% for the comparable prior year period primarily as a result of lower revenue.

Other revenue increased 8.4% in the first six months of 2025 compared to the same prior year period.

SG&A expense increased to $54.0 million in the first six months of 2025 from $53.3 million in the first six months of 2024 primarily due to:

$1.1 million increase in labor expense, partially offset by $0.4 million decrease in advertising and marketing expense.

As a percentage of net revenue, SG&A expense decreased to 20.6% in the first six months of 2025 compared to 21.3% in the same period in 2024.

Depreciation and amortization expense increased to $26.8 million for the six months ended June 30, 2025 compared to $24.9 million for the same prior year period, due to new assets placed into service with the ongoing renovation at Atlantis.

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 2024, we recognized $0.6 million in professional services fees relating to our construction litigation and $0.1 million in loss on disposal of assets.

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

During the first six months of 2024, we expensed $0.2 million of interest, net of interest income.

See further discussion of our Amended Credit Facility in the LIQUIDITY AND CAPITAL RESOURCES section below.

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, 2025 and 2024 totaled $16.0 million and $17.9 million, respectively.

During the three-month period ended March 31, 2025, our capital expenditures related primarily to the redesign and upgrade of hotel rooms in the third tower at Atlantis, and the acquisition of gaming, and other equipment to upgrade and replace existing equipment at Atlantis and Monarch Black Hawk.

During the three-month period ended March 31, 2024, our capital expenditures related primarily to the redesign and upgrade of hotel rooms in the third tower at Atlantis, and the acquisition of gaming, and other equipment to upgrade and replace existing equipment at Atlantis and Monarch Black Hawk.

Cash paid for capital expenditures for the six-month periods ended June 30, 2025 and 2024 totaled $28.4 million and $30.7 million, respectively.

During each of the six-month periods ended June 30, 2025 and 2024, our capital expenditures related primarily to the redesign and upgrade of hotel rooms in the third tower at Atlantis, and the acquisition of gaming, and other equipment to upgrade and replace existing equipment at Atlantis and Monarch Black Hawk.

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, 2025, net cash provided by operating activities totaled $36.5 million, compared to net cash provided by operating activities of $38.3 million in the same prior year period.

This decrease was primarily a result of the change in working capital, offset by an increase in depreciation expense, net income, and stock options expense.

Net cash used in investing activities totaled $16.0 million and $17.9 million during the three months ended March 31, 2025 and 2024, respectively.

Net cash used in investing activities during the first three months of 2025 consisted primarily of cash used for the redesign and upgrade of hotel rooms in the third tower at Atlantis and the acquisition of gaming and other equipment at both properties.

Net cash used in investing activities during the first three months of 2024 consisted primarily of cash used for the redesign and upgrade of hotel rooms in the third tower at Atlantis and the acquisition of gaming and other equipment at both properties.

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.

Net cash used in financing activities in the first three months of 2024 totaled $24.3 million and consisted of $19.6 million in cash used for payment of dividends, partially offset by $1.0 million of net proceeds from stock options exercise.

For the six months ended June 30, 2025, net cash provided by operating activities totaled $70.6 million, compared to net cash provided by operating activities of $62.6 million in the same prior year period.

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

Net cash used in investing activities totaled $28.4 million and $30.7 million during each of the six months ended June 30, 2025 and 2024, respectively.

Net cash used in investing activities during each of the first six months of 2025 and 2024 consisted primarily of cash used for the redesign and upgrade of hotel rooms in the third tower at Atlantis and the acquisition of gaming and other equipment at both properties.

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.

Net cash used in financing activities in the first six months of 2024 totaled $41.8 million and consisted of $50.4 million cash used for purchase of Company stock under the Repurchase Plan and $11.2 million used for payment of dividends, partially offset by $17.5 million of borrowings under the Amended Credit Facility, net of the payments to the lender under the Amended Credit Facility, and $2.3 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, 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 March 31, 2025, 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, 2025, our Total Leverage Ratio and Fixed Charge Coverage Ratio were 0.0:1.0 and 49.2:1.0, 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, 2025, 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, 2025, our Total Leverage Ratio and Fixed Charge Coverage Ratio were 0.0:1.0 and 77.0:1.0, respectively.

On February 24, 2025, Wells Fargo Bank agreed to waive its right to declaring an event of default under the Amended Credit Facility arising out of the February 14, 2025 judgment on the litigation between Monarch and PCL, so long as we strictly comply with each and every other provision of the Amended Credit Facility.

2 unchanged sentences

The Commitment Fee Percentage (as defined in the Amended Credit Facility) was revised to be 0.25% per annum.

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, 2025 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, 2025 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.

6 unchanged sentences

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